10-K

UNITED STATES 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, 2010

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: 001-34263

Impax Laboratories, Inc.

(Exact name of registrant as specified in its charter)

Delaware	65-0403311
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
30831 Huntwood Avenue, Hayward, CA	94544
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:
(510) 476-2000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered:
Common Stock, par value $0.01 per share Series A Junior Participating Preferred Stock Purchase Rights	The NASDAQ Stock Market LLC The NASDAQ Stock Market LLC

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation of S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of 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. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

The aggregate market value of the registrant’s outstanding shares of common stock, other than shares held by persons who may be deemed affiliates of the registrant, computed by reference to the price at which the registrant’s common stock was last sold on The NASDAQ Stock Market LLC as of the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2010), was approximately $1,008,664,000.

As of February 15, 2011, there were 64,818,645 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the definitive proxy statement for the registrant’s Annual Meeting of Stockholders to be held on May 10, 2011 have been incorporated by reference into Part III of this Annual Report on Form 10-K.

TABLE OF CONTENTS

Forward-Looking Statements	ii
PART I	1
Item 1. Business	1
Item 1A. Risk Factors	16
Item 1B. Unresolved Staff Comments	38
Item 2. Properties	38
Item 3. Legal Proceedings	39
Item 4. (Removed and Reserved)	44
PART II	45
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	45
Item 6. Selected Financial Data	48
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	49
Item 7A. Quantitative and Qualitative Disclosures about Market Risk	86
Item 8. Financial Statements and Supplementary Data	86
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	86
Item 9A. Controls and Procedures	87
Item 9B. Other Information	90
PART III	91
Item 10. Directors, Executive Officers and Corporate Governance	91
Item 11. Executive Compensation	91
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	91
Item 13. Certain Relationships and Related Transactions, and Director Independence	91
Item 14. Principal Accounting Fees and Services	91
PART IV	92
Item 15. Exhibits and Financial Statement Schedules	92
SIGNATURES
EXHIBIT INDEX
Exhibit 10.1.8
Exhibit 10.14
Exhibit 10.15
Exhibit 21.1
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

i

Forward-Looking Statements

Statements included in this Annual Report on Form 10-K that do not relate to present or historical conditions are “forward-looking statements.” Additional oral or written forward-looking statements may be made by us from time to time. Such forward-looking statements involve risks and uncertainties that could cause results or outcomes to differ materially from those expressed in the forward-looking statements. Forward-looking statements may include statements relating to our plans, strategies, objectives, expectations and intentions. Words such as “believes,” “forecasts,” “intends,” “possible,” “estimates,” “anticipates,” and “plans” and similar expressions are intended to identify forward-looking statements. Our ability to predict results or the effect of events on our operating results is inherently uncertain. Forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those discussed in this Annual Report on Form 10-K. Such risks and uncertainties include the effect of current economic conditions on our industry, business, financial position and results of operations, our ability to maintain an effective system of internal control over financial reporting, fluctuations in our revenues and operating income, our ability to successfully develop and commercialize pharmaceutical products, reductions or loss of business with any significant customer, the impact of competition, our ability to sustain profitability and positive cash flows, any delays or unanticipated expenses in connection with the operation of our Taiwan facility, the effect of foreign economic, political, legal and other risks on our operations abroad, the uncertainty of patent litigation, consumer acceptance and demand for new pharmaceutical products, the difficulty of predicting Food and Drug Administration filings and approvals, our inexperience in conducting clinical trials and submitting new drug applications, our ability to successfully conduct clinical trials, our reliance on alliance and collaboration agreements, the availability of raw materials, our ability to comply with legal and regulatory requirements governing the healthcare industry, the regulatory environment, our ability to protect our intellectual property, exposure to product liability claims and other risks described below in “Item 1A Risk Factors.” You should not place undue reliance on forward-looking statements. Such statements speak only as to the date on which they are made, and we undertake no obligation to update or revise any forward-looking statement, regardless of future developments or availability of new information.

ii

PART I

Item 1. Business

Overview

We are a technology-based, specialty pharmaceutical company applying formulation and development expertise, as well as our drug delivery technology, to the development, manufacture and marketing of bioequivalent pharmaceutical products, commonly referred to as “generics,” in addition to the development of branded products. We operate in two segments, referred to as the “Global Pharmaceuticals Division” (“Global Division”) and the “Impax Pharmaceuticals Division” (“Impax Division”). The Global Division concentrates its efforts on the development, manufacture, sale and distribution of our bioequivalent pharmaceutical products, commonly referred to as “generics,” which are the pharmaceutical and therapeutic equivalents of brand-name drug products and are usually marketed under their established nonproprietary drug names rather than by a brand name. The Impax Division is currently focused on the development of proprietary brand pharmaceutical products for the treatment of central nervous system (“CNS”) disorders and the promotion of third-party branded pharmaceutical products through our direct sales force. Each of the Global Division and the Impax Division also generates revenue from research and development services provided to unrelated third-party pharmaceutical entities. See “Item 15. Exhibits and Financial Statement Schedules — Note 18 to Consolidated Financial Statements,” for financial information about our segments for the years ended December 31, 2010, 2009 and 2008.

The following information summarizes our generic pharmaceutical product development activities since inception through February 4, 2011:

• 62 ANDAs approved by the Food and Drug Administration (“FDA”), which include generic versions of brand name pharmaceuticals such as Brethine^®, Florinef^®, Minocin^®, Claritin-D^® 12-hour, Claritin-D^® 24-hour, Wellbutrin SR^®, Wellbutrin XL^®, Ditropan XL^®, Depakote ER^® and Prilosec^®.

• 38 applications pending at the FDA, including 2 tentatively approved (i.e., satisfying substantive FDA requirements but remaining subject to statutory pre-approval restrictions), that address approximately $19.7 billion in recent 12 month U.S. product sales.

• 61 products in various stages of development for which applications have not yet been filed.

In addition, we have one branded pharmaceutical product for which we have completed two Phase III clinical studies and other programs in the early exploratory phase.

1

Our Strategy

We plan to continue to expand our Global Division through targeted ANDAs and a first-to-file and first-to-market strategy. Our products and product candidates are generally difficult to formulate and manufacture, providing certain barriers to entry for potential competitors. In addition to our product pipeline of 38 pending applications at the FDA, we are pursuing external growth initiatives including acquisitions and partnerships.

A core component of our strategy includes our ongoing focus in our Impax Division on proprietary brand-name pharmaceutical products to treat CNS disorders. We believe that we have the research, development and formulation expertise to develop branded products that will deliver significant improvements over existing therapies. We plan to continue investing in our development pipeline, which consists of one product currently in Phase III clinical trials and other additional products which are in the exploratory stage.

Global Division

In the generic pharmaceutical market, we focus our efforts on developing, manufacturing, selling and distributing controlled-release generic versions of selected brand-name pharmaceuticals covering a broad range of therapeutic areas and having technically challenging drug-delivery mechanisms or limited competition. We employ our technologies and formulation expertise to develop generic products that reproduce brand-name products’ physiological characteristics but do not infringe any valid patents relating to such brand-name products. Generic products contain the same active ingredient and are of the same route of administration, dosage form, strength and indication(s) as brand-name products already approved for use in the United States by the FDA. We generally focus our generic product development on brand-name products as to which the patents covering the active pharmaceutical ingredient have expired or are near expiration, and we employ our proprietary formulation expertise to develop controlled-release technologies that do not infringe patents covering the brand-name products’ controlled-release technologies. We also develop, manufacture, sell and distribute specialty generic pharmaceuticals that we believe present one or more barriers to entry by competitors, such as difficulty in raw materials sourcing, complex formulation or development characteristics or special handling requirements. Revenue is also generated by the Global Division from research and development services provided under a joint development agreement with an unrelated third-party pharmaceutical entity.

We sell and distribute generic pharmaceutical products primarily through four sales channels:

• the “Global Product” sales channel: generic pharmaceutical prescription products we sell directly to wholesalers, large retail drug chains, and others;

• the “Private Label” sales channel: generic pharmaceutical over-the-counter (“OTC”) and prescription products we sell to unrelated third parties who in-turn sell the product under their own label,

• the “Rx Partner” sales channel: generic prescription products sold through unrelated third-party pharmaceutical entities pursuant to alliance and collaboration agreements; and

• the “OTC Partner” sales channel: sales of generic pharmaceutical OTC products sold through unrelated third-party pharmaceutical entities pursuant to alliance and collaboration agreements.

As of February 4, 2011, we marketed 99 generic pharmaceutical products representing dosage variations of 29 different pharmaceutical compounds through our Global Division, and 10 other generic pharmaceutical products, representing dosage variations of 4 different pharmaceutical compounds, through our alliance and collaboration agreement partners.

2

The following table lists our 40 products, representing 41 ANDAs that have been approved by the FDA, and are currently marketed by our Global Division:

Product	Generic of
2004 OR EARLIER
Methytestosterone 10mg	Android®
Orphenadrine 100 mg Tablets	Norflex®
Minocycline 50, 75 and 100 mg Capsules	Minocin®
Terbutaline 2.5 and 5 mg Tablets	Brethine®
Fludrocortisone 0.1 mg Tablets	Florinef®
Rimantadine 100 mg Tablets	Flumadine®
Pyridostigmine 60 mg Tablets	Mestinon®
Chloroquine 250 mg Tablets	N/A
Chloroquine 500 mg Tablets	Aralen®
Flavoxate 100 mg Tablets	Urispas®
Fenofibrate 67, 134 and 200 mg Capsules	Lofibra®
Loratadine and Pseudoephedrine Sulfate 5/120 mg ER Tablets	Claritin-D 12-hr®
Bupropion Hydrochloride 100 and 150 mg ER Tablets (twice daily)	Wellbutrin SR®
Bupropion Hydrochloride 150 mg ER Tablets (twice daily)	Zyban®
Loratadine and Pseudoephedrine Sulfate 10/240 mg ER Tablets	Claritin-D® 24-Hour
Demeclocycline Hydrochloride 150 and 300 mg Tablets	Declomycin®
Carbidopa/Levodopa 25/100 & 50/200 mg ER Tablets	SinemetCR®
Midodrine Hydrochloride 2.5, 5 and 10 mg Tablets	ProAmatine®
Bupropion Hydrochloride 200 mg ER Tablets (twice daily)	Wellbutrin SR®
2005
Dantrolene Sodium 25, 50 and 100 mg Capsules	Dantrium®
Carprofen 25, 75 and 100 mg Caplets (a veterinary product)	Rimadyl®
2006
Pilocarpine Hydrochloride 5 and 7.5 mg Tablets	Salagen®
Colestipol Hydrochloride 5 g Packet and 5 g Scoopful	Colestid®
Colestipol Hydrochloride 1 g Tablets	Colestid®
Bethanechol Chloride 5, 10, 25 and 50 mg Tablets (4 separate ANDAs)	Urecholine®
Oxybutynin Chloride 15 mg ER Tablets (1a)	Ditropan XL®
Bupropion Hydrochloride 300 mg ER Tablets (1b) (once daily)	Wellbutrin XL®
2007
Nadolol /Bendroflumethiazide 40/5 and 80/5 mg Tablets	Corzide®
Oxybutynin Chloride 5 and 10 mg ER Tablets (1a)	Ditropan XL®
Dipyridamole 25, 50, 75 mg Tablets USP	Persantine®
2008
Primidone 50 and 250 mg Tablets	Mysoline®
Promethazine 12.5, 25 and 50 mg Tablets (2 separate ANDAs)	Phenergan®
Fenofibrate 54 and 160 mg Tablets	Lofibra®
Bupropion Hydrochloride 150 mg ER Tablets (1b) (once daily)	Wellbutrin XL®
2009
Acarbose 25, 50 and 100 mg Tablets	Precose®
Divalproex Sodium ER 250 and 500 mg Tablets	Depakote® ER
Galantamine 8, 16 and 24 mg Capsules	Razadyne® ER
2010
Tamsulosin Hydrochloride 0.4 mg Capsules	Flomax®
Doxycycline Hyclate DR 75, and 100 mg Tablets	Doryx®
Digoxin 125 and 250 mcg Tablets	Lanoxin®

(1) Multiple products filed under same ANDA, including (i) 1a: Oxybutynin Chloride products, (ii) 1b: Bupropion Hydrochloride products, and (iii) 1c: Omeprazole products.

3

As of February 4 2011, we had 38 applications pending at the FDA, of which 21 products, representing 21 ANDAs, had been publicly identified. The following table lists our 21 publicly identified products pending at the FDA:

Product	Generic of
Colesevelam 625 mg Tablets	Welchol®
Colesevelam Powder 3.75 g	Welchol®
Cyclobenzaprine CD 15 and 30 mg Capsules	Amrix®
Doxycycline Hyclate DR 150 mg Tablets	Doryx®
Doxycycline USP 40 mg Capsules	Oracea®
Duloxetine HCI 20, 30 and 60 mg DR Capsules	Cymbalta®
Ezetimibe Simvastatin 10mg / 10, 20, 40, 80 mg	Vytorin®
Fenofibrate 48 and 145mg Tablets	Tricor®
Fenofibrate Tab 40, 120mg	Fenoglide®
Fenofibric Acid 45, 135 mg	Trilipix®
Guanfacine ER 1, 2, 3, 4mg	Intuniv®
Methylphenidate HCI 18, 27, 36 and 54 mg ER Tablets	Concerta®
Niacin ER / Simvastatin 1000/20mg Tab	Simcor®
Ropinirole ER 2, 3, 4, 6, 8, 12mg Tablets	Requip XL®
Sevelamer Carbonate 800mg Tablets	Renvela®
Sevelamer HCI 400 and 800 mg Tablets	Renagel®

4

Impax Division

The Impax Division is currently focused on the development of proprietary branded pharmaceutical products for the treatment of CNS disorders, which include Alzheimer’s disease, attention deficit hyperactivity disorder, depression, epilepsy, migraines, multiple sclerosis, Parkinson’s disease, and schizophrenia, and the promotion of third-party branded pharmaceutical products through our 66-person direct sales force. We estimate there are approximately 11,000 neurologists, of which, historically, a concentrated number are responsible for writing the majority of neurological CNS prescriptions. CNS is the largest therapeutic category in the United States with 2010 sales of $77 billion, or 21% of the $367 billion U.S. drug market. CNS prescription volume grew 5% in 2010, consistent with the overall pharmaceutical industry growth rate.

Our branded pharmaceutical product portfolio consists of development stage projects to which we are applying our formulation and development expertise to develop differentiated, modified, or controlled-release versions of drug substances that are currently marketed either in the United States or outside the United States. We currently have one branded pharmaceutical product candidate, IPX066, for which we have completed two Phase III clinical trials and a second branded pharmaceutical candidate, IPX159, for which we plan to file an Investigational New Drug Application in the first half of 2011. We intend to expand our portfolio of branded pharmaceutical products through internal development and through licensing and acquisition.

Our Phase III clinical program for IPX066 includes an APEX-PD clinical trial, completed in September 2010, the recently completed ADVANCE-PD clinical trial, and a comparative study of IPX066 and carbidopa-levodopa and entacapone, which is currently enrolling. The IPX066 product is an extended release carbidopa-levodopa therapy for the treatment of symptoms related to Parkinson’s disease, or PD, and is formulated to produce a fast and sustained concentration of levodopa, potentially improving PD clinical symptom management. IPX066 has the potential to offer improved and more reliable control of PD symptoms, leading to clinically meaningful reductions in off-time, a key objective in the management of PD. Off-time is the functional state when patients’ medication effect has worn off and there is a return of Parkinson symptoms. In addition, IPX066 extended release formulation is designed to reduce dosing frequency, enhancing patient convenience.

The completed APEX-PD clinical trial was a Phase III randomized, double blind, placebo-controlled study designed to evaluate the safety and efficacy of IPX066 in subjects with early PD. The results of the APEX-PD clinical trial demonstrate that IPX066 is safe and efficacious when used in patients with early PD. The ADVANCE-PD clinical trial was a randomized, double blind, active-control study to evaluate the safety and efficacy of IPX066 in subjects with advanced PD. The ADVANCE-PD study was a parallel group comparison of IPX066 versus immediate release carbidopa-levodopa in subjects with advanced PD patients with motor fluctuations. We continue to target filing an NDA in the fourth quarter of 2011 for IPX066. In addition, for the European application, we are conducting the ASCEND-PD comparative study of IPX066 and carbidopa-levodopa and entacapone, which is currently enrolling subjects.

5

Alliance and Collaboration Agreements

We have entered into several alliance and collaboration agreements with respect to certain of our products and services and may enter into similar agreements in the future. These agreements typically obligate us to deliver multiple goods and/or services over extended periods. Such deliverables include manufactured pharmaceutical products, exclusive and semi-exclusive marketing rights, distribution licenses, and research and development services.

Global Division — Alliance and Collaboration Agreements

License and Distribution Agreement with Shire

In January 2006, we entered into a license and distribution agreement with an affiliate of Shire Laboratories, Inc. (“Shire License and Distribution Agreement”), under which we received a non-exclusive license to market and sell an authorized generic of Shire’s Adderall XR^® product (“AG Product”) subject to certain conditions, but in any event by no later than January 1, 2010. We commenced sales of the AG Product in October 2009. Under the terms of the Shire License and Distribution Agreement, Shire is responsible for manufacturing the AG Product, and we are responsible for marketing and sales of the AG Product. We are required to pay a profit share to Shire on sales of the AG Product, of which we accrued a profit share payable to Shire of $100,611,000 and $53,292,000 on sales of the AG Product during the years ended December 31, 2010 and 2009, respectively, with a corresponding charge included in the cost of revenues line on the consolidated statement of operations.

Rx Partner and OTC Partner Alliance Agreements

We have entered into alliance agreements with unrelated third-party pharmaceutical companies pursuant to which our partner distributes a specified product or products developed and, in some cases, manufactured by us, and we either receive payment on delivery of the product, share in the resulting profits, or receive royalty or other payments from our partners. Our alliance agreements are separated into two sales channels, the “Rx Partner” sales channel, for generic prescription products sold through our partners under their own label, and the “OTC Partner” sales channel, for sales of generic pharmaceutical OTC products sold through our partners under their own label. The revenue recognized and the percentage of gross revenue for each of the periods noted, for the Rx Partner and the OTC Partner alliance agreements, is as follows:

					Year Ended December 31,
$’s in 000’s	2010				2009				2008
Gross Revenue and % Gross Revenue
Rx Partner	$	217,277	18	%	$	33,835	6	%	$	81,778	28	%
OTC Partner	$	8,888	1	%	$	6,842	1	%	$	15,946	5	%

Rx Partner Alliance Agreement with Teva

We entered into a strategic alliance agreement with Teva Pharmaceuticals Curacao N.V., a subsidiary of Teva Pharmaceutical Industries Limited, in June 2001 (“Teva Agreement”). The Teva Agreement covers generic versions of the following 9 controlled-release generic pharmaceutical branded and OTC products and a 10th product we have not yet publicly identified, as follows:

• Wellbutrin SR^® 100 and 150 mg extended release tablets

• Zyban^® 150 mg extended release tablets

• Claritin-D^® 12-hour 120 mg 12-hour extended release tablets

• Claritin-D^® 24-hour 240 mg 24-hour extended release tablets

• Claritin Reditabs^® 10 mg orally disintegrating tablets

• Ditropan XL^® 5, 10 and 15 mg extended release tablets

6

• Glucophage XR^® 500 mg extended release tablets

• Concerta^® 18, 27, 36 and 54 mg extended release tablets

• Wellbutrin XL^® 150 and 300 mg extended release tablets

The 10 covered products under the Teva Agreement represent 18 different product/strength combinations, of which, as of February 4, 2011, 12 have been approved by the FDA, 11 of which are currently being marketed, 4 are awaiting FDA approval and 2 are under development. With the exception of Glucophage XR^® , which Teva elected to develop and manufacture itself; Wellbutrin XL^® 150 mg , for which product rights have been returned to us; and the Claritin^® products noted above, we manufacture and supply each of these products to Teva. Teva pays us a fixed percentage of defined profits on its sales of products, except for the Claritin^® products noted above, and reimburses us for our manufacturing costs, for a term of 10 years from the initial commercialization of each product. Additionally, under the Teva Agreement, we share with Teva the profits (up to a maximum of 50%) from the sale of the generic pharmaceutical OTC versions of the Claritin^® products noted above, sold through our OTC Partners’ alliance agreements.

The Teva Agreement also included a number of additional obligations, terms, and conditions. Under the Teva Agreement, Teva provided us with an interest-bearing advance deposit payable of $22 million for the purchase of exclusive marketing rights to the products, contingent upon our achievement of specified product development milestones. To the extent the milestones were not met, we were required to repay the advance deposit, except to the extent Teva elected to purchase market exclusivity for particular products in exchange for forgiveness of specified amounts of the deposit. Ultimately, none of the milestones were met by us, and Teva elected to purchase market exclusivity for two of the products, forgiving $6 million of the advance deposit payable. We also had the option to repay the remaining $16 million of the advance deposit payable in shares of our common stock and did so in 2003 and 2004 with approximately 1.05 million shares of our common stock. Also pursuant to the Teva Agreement, Teva in 2001 and 2002 purchased approximately 1.46 million of our common shares for $15 million. The Teva Agreement gave us the right to repurchase one-sixth of the shares for nominal consideration upon the first commercial sale of specified products, which we achieved and exercised in 2006. These and other provisions of the Teva Agreement are discussed in detail in “Item 15. Exhibits and Financial Statement Schedules — Note 13 to Consolidated Financial Statements.”

Our remaining obligations under the Teva Agreement are to complete development of the covered products still under development, continue our efforts to obtain FDA approval of those not yet approved, and manufacture and supply the approved products to Teva. Our obligation to manufacture and supply each product extends for 10 years following the commercialization of the product.

OTC Partner Alliance Agreements

We have a development, license and supply agreement with Pfizer Inc. (formerly Wyeth) relating to our generic Claritin-D^® 12-hour extended release product. Under the agreement, which was entered into in 2002 and included an upfront payment and product development milestone payments, we receive quarterly royalty payments consisting of a percentage (less than 10%) of Pfizer’s sales. Pfizer launched the 12-hour product in May 2003 as its OTC Alavert D-12 Hour^®. The Pfizer agreement terminates in April 2018.

We also entered into a non-exclusive licensing, contract manufacturing and supply agreement with Merck & Co., Inc. (formerly Schering-Plough) relating to our generic Claritin-D^® 12-hour extended release product in 2002. Under the agreement, which included an upfront payment and milestone payments by Merck, Merck agreed to purchase the product from us at a fixed price. Merck launched our product as its Claritin-D^® 12-hour in March 2003. Our product supply obligations under the agreement ended on December 31, 2008, after which Merck has manufactured the product. The agreement terminated on December 31, 2010, two years after our product supply obligations concluded. During the two year period from January 1, 2009 to December 31, 2010, Merck paid us a royalty on sales of their manufactured product.

7

The upfront payments and potential milestone payments provided for by these agreements, together with the upfront and milestone payments received under each as of December 31, 2010, were as follows:

						Upfront and
				Aggregate		Milestone
		Upfront		Milestone		Payments
OTC Partner	Initial Date	Payment		Payments		Received
	(unaudited and $ in 000s)
Merck	June 2002	$	2,250	$	2,250	$	4,500
Pfizer	June 2002	$	350	$	4,050	$	2,000

Research Partner Alliance Agreement

In November 2008, we entered into a joint development agreement with Medicis Pharmaceutical Corporation providing for collaboration in the development of five dermatological products, including an advanced form SOLODYN^® product. Medicis paid us an upfront fee of $40.0 million in December 2008. We have also received an aggregate of $12.0 million in milestone payments composed of two $5.0 million milestone payments, paid by Medicis in March 2009 and September 2009, and a $2.0 million milestone payment received in December 2009. We have the potential to receive up to $11.0 million of contingent additional payments upon achievement of certain specified clinical and regulatory milestones. To the extent the products are commercialized, Medicis will pay us royalties based on its sales of the advanced form SOLODYN^® product and we will share in the profits on the sales of the four additional products.

Impax Division — Alliance and Collaboration Agreements

License, Development and Commercialization Agreement with Glaxo Group Limited

In December 2010, we entered into a license, development and commercialization agreement with Glaxo Group Limited (“GSK”). Under the terms of the agreement with GSK, GSK received an exclusive license to develop and commercialize IPX066 throughout the world, except in the U.S. and Taiwan, and certain follow on products at the option of GSK. GSK paid an $11.5 million up-front payment to us in December 2010, and we are eligible to receive potential additional payments of up to $175.0 million upon the successful achievement of development and commercialization milestones. We are also eligible to receive royalty payments on GSK sales of IPX066. We and GSK will generally bear our own development costs associated with activities under the License, Development and Commercialization Agreement, except that certain development costs, including with respect to follow on products, will be shared, as set forth in the agreement. The agreement will continue until GSK no longer has any royalty payment obligations or, if earlier, the agreement is terminated in accordance with its terms. The agreement may be terminated by GSK for convenience upon 90 days prior written notice, and may also be terminated under certain other circumstances, including material breach, as set forth in the agreement.

Co-Promotion Agreement with Pfizer Inc.

In March 2010, we entered into a first amendment to our co-promotion agreement (“Pfizer Co-Promotion Agreement”) with Pfizer, Inc., as successor to Wyeth. Under the terms of the Pfizer Co-Promotion Agreement, effective April 1, 2010, we provide physician detailing sales call services for Pfizer’s Lyrica^® (pregablin) product to neurologists. We receive a fixed fee, effective January 1, 2010, subject to annual cost adjustment, for providing such physician detailing sales calls within a contractually defined range of an aggregate number of physician detailing sales calls rendered, determined on a quarterly basis. Pfizer is responsible for providing sales training to our physician detailing sales force personnel. Pfizer owns the product and is responsible for all pricing and marketing literature as well as product manufacture and fulfillment. We recognized $14,073,000 and $6,940,000 in the years ended December 31, 2010 and 2009, respectively, under the Pfizer Co-Promotion Agreement. As noted, we previously entered into a three year co-promotion agreement with Wyeth, prior to Wyeth becoming a wholly-owned subsidiary of Pfizer, under which we performed physician detailing sales calls for the Wyeth Pristiq^® product to neurologists, with such physician detailing sales calls commencing on July 1, 2009 and ending in connection with the amendment of the co-promotion agreement described above.

8

Development and Co-Promotion Agreement with Endo Pharmaceuticals Inc.

In June 2010, we entered into a development and co-promotion agreement (“Endo Agreement”) with Endo Pharmaceuticals, Inc. (“Endo”) under which we have agreed to collaborate in the development and commercialization of a next-generation advanced form of IPX066 (“Endo Agreement Product”). Under the provisions of the Endo Agreement, in June 2010, Endo paid to us a $10.0 million up-front payment. We have the potential to receive up to an additional $30.0 million of contingent payments upon achievement of certain specified clinical and regulatory milestones. Upon commercialization of the Endo Agreement Product in the United States, Endo will have the right to co-promote such product to non-neurologists, which will require us to pay Endo a co-promotion service fee of up to 100% of the gross profits attributable to prescriptions for the Endo Agreement Product which are written by the non-neurologists. Upon FDA approval of an NDA for the Endo Agreement Product, we will have the right (but not the obligation) to begin manufacture and sale of such product.

Our Controlled-Release Technology

We have developed a number of different controlled-release delivery technologies which may be utilized with a variety of oral dosage forms and drugs. Controlled-release drug delivery technologies are designed to release drug dosages at specific times and in specific locations in the body and generally provide more consistent and appropriate drug levels in the bloodstream than immediate-release dosage forms. Controlled-release pharmaceuticals may improve drug efficacy, ensure greater patient compliance with the treatment regimen, reduce side effects or increase drug stability and be more patient friendly by reducing the number of times a drug must be taken.

We believe our controlled-release drug delivery technologies are flexible and can be applied to develop a variety of pharmaceutical products, both generic and branded. Our technologies utilize a variety of polymers and other materials to encapsulate or entrap the active pharmaceutical ingredients and to release them at varying rates or at predetermined locations in the gastrointestinal tract.

Competition

The pharmaceutical industry is highly competitive and is affected by new technologies, new developments, government regulations, health care legislation, availability of financing, and other factors. Many of our competitors have longer operating histories and substantially greater financial, research and development, marketing, and other resources than we have. We compete with numerous other companies that currently operate, or intend to operate, in the pharmaceutical industry, including companies that are engaged in the development of controlled-release drug delivery technologies and products, and other manufacturers that may decide to undertake development of such products. Our principal competitors are Teva Pharmaceutical Industries Ltd., Mylan Inc., Lannett Company, Inc., Zydus Pharmaceuticals USA Inc. and Watson Pharmaceuticals, Inc.

Due to our focus on relatively hard to replicate controlled-release products, competition in the generic pharmaceutical market is sometimes limited to those competitors who possess the appropriate drug delivery technology. The principal competitive factors in the generic pharmaceutical market are:

• the ability to introduce generic versions of products promptly after a patent expires;

• price;

• product quality;

• customer service (including maintenance of inventories for timely delivery);

• the ability to identify and market niche products.

In the brand-name pharmaceutical market, we are not currently marketing our internally-developed products. However, if we obtain the FDA approval for, and start marketing, our own CNS brand-name pharmaceuticals, we expect that competition will be limited to large pharmaceutical companies, other drug delivery companies, and other specialty pharmaceutical companies that have focused on CNS disorders.

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Sales and Marketing

We market and sell our generic pharmaceutical prescription drug products within the continental United States and the Commonwealth of Puerto Rico. We have not made sales in any other jurisdictions over the last three fiscal years. We derive a substantial portion of our revenue from sales to a limited number of customers. The customer base for our products consists primarily of drug wholesalers, warehousing chain drug stores, mass merchandisers, and mail-order pharmacies. We market our products both directly, through our Global Division, and indirectly through our Rx Partner and OTC Partner alliance and collaboration agreements. Our five major customers, McKesson Corporation, Cardinal Health, Amerisource-Bergen, Walgreens and Medco, accounted for 58% of our gross revenue for the year ended December 31, 2010. These five customers individually accounted for 20%, 14%, 14%, 7% and 3%, respectively, of our gross revenue for the year ended December 31, 2010. We do not have long-term contracts in effect with our five major customers. A reduction in or loss of business with any one of these customers, or any failure of a customer to pay us on a timely basis, would adversely affect our business.

Manufacturing and Distribution

We manufacture our finished dosage form products at our Hayward, California facility and use our larger and lower operating cost Philadelphia and New Britain, Pennsylvania facilities to package, warehouse and distribute the products. We began full scale manufacturing in the Hayward facility in June 2002. During 2010 we operated at about 92% of the facility’s estimated annual production capacity of up to approximately 1.5 billion tablets and capsules.

We initiated commercial manufacturing operations at our facility in Taiwan in 2010, and produced approximately 50 million tablets and capsules for sale in the United States. We plan to continue to increase the aggregate total tablet and capsule production, as well as the number of different products manufactured, at our facility in Taiwan during 2011. In addition, we plan to initiate construction of an expansion to our manufacturing facility in Taiwan during 2011. We will expand the Taiwan manufacturing facility in stages, and we estimate the facility will have an annual production capacity of approximately 1.5 billion tablets and capsules once all stages of the expansion are complete. The first stage of the expansion of the Taiwan manufacturing facility is planned to be completed in late 2012, and will provide an additional production capacity of approximately 250 million tablets and capsules. Additional expansion of the Taiwan facility will be staged as necessary in order to support our production requirements. See “— Item 1A. Risk Factors — Our business is subject to the economic, political and other risks of maintaining facilities and conducting clinical trials in foreign countries,” for a discussion of risks attendant to our operations in Taiwan.

We believe we have sufficient capacity to produce our products for the immediate future. If the planned expansion of the Taiwan facility is not completed by late 2012, we will, based upon current projections, reach full production capacity at our Hayward, California and Taiwan manufacturing facilities.

We maintain an inventory of our products in connection with our obligations under our alliance and collaboration agreements. In addition, for products pending approval, we may produce batches of inventory to be used in anticipation of the launch of the products. In the event that FDA approval is denied or delayed, we could be exposed to the risk of this inventory becoming obsolete.

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Raw Materials

The active chemical raw materials, essential to our business, are generally readily available from multiple sources in the U.S. and throughout the world. Certain raw materials used in the manufacture of our products are, however, available from limited sources and, in some cases, a single source. Although we have not experienced any material delays in receipt of raw materials to date, any curtailment in the availability of such raw materials could result in production or other delays or, in the case of products for which only one raw material supplier exists or has been approved by the FDA, a material loss of sales with consequent adverse effects on our business and results of operations. Also, because raw material sources for pharmaceutical products must generally be identified and approved by regulatory authorities, changes in raw material suppliers may result in production delays, higher raw material costs, and loss of sales and customers. We obtain a portion of our raw materials from foreign suppliers, and our arrangements with such suppliers are subject to, among other risks, FDA approval, governmental clearances, export duties, political instability, and restrictions on the transfers of funds.

Those of our raw materials that are available from a limited number of suppliers are Bendroflumethiazide, Chloroquine, Colestipol, Demeclocycline, Digoxin, Flavoxate, Methyltestosterone, Nadolol, Orphenadrine, Terbutaline and Klucel^® , all of which are active pharmaceutical ingredients except Klucel^® , which is an excipient used in several product formulations. The manufacturers of two of these products, Formosa Laboratories, Ltd. and a division of Ashland, Inc., are sole-source suppliers. While none of the active ingredients is individually significant to our business, the excipient, while not covered by a supply agreement, is utilized in a number of significant products, it is manufactured for a number of industrial applications and supplies have been readily available. Only one of the active ingredients is covered by a long-term supply agreement and, while we have experienced occasional interruptions in supplies, none has had a material effect on our operations.

Any inability to obtain raw materials on a timely basis, or any significant price increases not passed on to customers, could have a material adverse effect on us. We may experience delays from the lack of raw material availability in the future, which could have a material adverse effect on us.

Quality Control

In connection with the manufacture of drugs, the FDA requires testing procedures to monitor the quality of the product, as well as the consistency of its formulation. We maintain a quality control laboratory that performs, among other things, analytical tests and measurements required to control and release raw materials, in-process materials, and finished products, and to routinely test marketed products to ensure they remain within specifications.

Quality monitoring and testing programs and procedures have been established by us in our effort to assure that all critical activities associated with the production, control, and distribution of our drug products will be carefully controlled and evaluated throughout the process. By following a series of systematically organized steps and procedures, we seek to assure that established quality standards will be achieved and built into the product.

Our policy is to continually seek to meet the highest quality standards, with the goal of thereby assuring the quality, purity, safety and efficacy of each of our drug products. We believe that adherence to high operational quality standards will also promote more efficient utilization of personnel, materials and production capacity.

Research and Development

We conduct most of our research and development activities at our facilities in Hayward, California, with a staff of 179 employees as of December 31, 2010. In addition, we have outsourced a number of research and development projects to offshore laboratories.

We spent approximately $86.2 million, $63.3 million and $59.2 million on research and development activities during the years ended December 31, 2010, 2009 and 2008, respectively.

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Regulation

The manufacturing and distribution of pharmaceutical products are subject to extensive regulation by the federal government, primarily through the FDA and the Drug Enforcement Administration (“DEA”), and to a lesser extent by state and local governments. The Food, Drug, and Cosmetic Act, Controlled Substances Act and other federal statutes and regulations govern or influence the manufacture, labeling, testing, storage, record keeping, approval, advertising and promotion of our products. Facilities used in the manufacture, packaging, labeling and repackaging of pharmaceutical products must be registered with the FDA and are subject to FDA inspection to ensure that drug products are manufactured in accordance with current Good Manufacturing Practices. Noncompliance with applicable requirements can result in product recalls, seizure of products, injunctions, suspension of production, refusal of the government to enter into supply contracts or to approve drug applications, civil penalties and criminal fines, and disgorgement of profits.

FDA approval is required before any “new drug” may be marketed, including new formulations, strengths, dosage forms and generic versions of previously approved drugs. Generally, the following two types of applications are used to obtain FDA approval of a “new drug.”

New Drug Application (“NDA”). For a drug product containing an active ingredient not previously approved by the FDA, a prospective manufacturer must submit a complete application containing the results of clinical studies supporting the drug product’s safety and efficacy. An Investigational New Drug application must be submitted before the clinical studies may begin, and the required clinical studies can take two to five years or more to complete. An NDA is also required for a drug with a previously approved active ingredient if the drug will be used to treat an indication for which the drug was not previously approved or if the dosage form, strength or method of delivery is changed.

Abbreviated New Drug Application (“ANDA”). For a generic version of an approved drug — a drug product that contains the same active ingredient as a drug previously approved by the FDA and is in the same dosage form and strength, utilizes the same method of delivery and will be used to treat the same indications as the approved product — the FDA ordinarily requires only an abbreviated application that need not include clinical studies demonstrating safety and efficacy. An ANDA requires only bioavailability data demonstrating that the generic formulation is bioequivalent to the previously approved “reference listed drug,” indicating that the rate of absorption and levels of concentration of the generic drug in the body do not show a significant difference from those of the reference listed drug. The FDA currently takes an average of approximately 27 months to approve an ANDA.

Under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the “Hatch-Waxman Act”, which established the procedures for obtaining approval of generic drugs, an ANDA filer must make certain patent certifications that can result in significant delays in obtaining FDA approval. If the applicant intends to challenge the validity or enforceability of an existing patent covering the reference listed drug or asserts that its drug does not infringe such patent, the applicant files a so called “Paragraph IV” certification and notifies the patent holder that it has done so, explaining the basis for its belief that the patent is not infringed or is invalid or unenforceable. If the patent holder initiates a patent infringement suit within 45 days after receipt of the Paragraph IV Certification, the FDA is automatically prevented from approving an ANDA until the earlier of 30 months after the date the Paragraph IV Certification is given to the patent holder, expiration of the patents involved in the certification, or when the infringement case is decided in our favor. In addition, the first company to file an ANDA for a given drug containing a Paragraph IV certification can be awarded 180 days of market exclusivity following approval of its ANDA, during which the FDA may not approve any other ANDAs for that drug product.

During any period in which the FDA is required to withhold its approval of an ANDA due to a statutorily imposed non-approval period, the FDA may grant tentative approval to an applicant’s ANDA. A tentative approval reflects the FDA’s preliminary determination that a generic product satisfies the substantive requirements for approval, subject to the expiration of all statutorily imposed non-approval periods. A tentative approval does not allow the applicant to market the generic drug product.

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The Hatch-Waxman Act contains additional provisions that can delay the launch of generic products. A five year marketing exclusivity period is provided for new chemical compounds, and a three year marketing exclusivity period is provided for approved applications containing new clinical investigations essential to an approval, such as a new indication for use, or new delivery technologies, or new dosage forms. The three year marketing exclusivity period applies to, among other things, the development of a novel drug delivery system, as well as a new use. In addition, companies can obtain six additional months of exclusivity if they perform pediatric studies of a reference listed drug product. The marketing exclusivity provisions apply to both patented and non-patented drug products. The Act also provides for patent term extensions to compensate for patent protection lost due to time taken in conducting FDA required clinical studies and during FDA review of NDAs.

The Generic Drug Enforcement Act of 1992 establishes penalties for wrongdoing in connection with the development or submission of an ANDA. In general, the FDA is authorized to temporarily bar companies, or temporarily or permanently bar individuals, from submitting or assisting in the submission of an ANDA, and to temporarily deny approval and suspend applications to market generic drugs under certain circumstances. In addition to debarment, the FDA has numerous discretionary disciplinary powers, including the authority to withdraw approval of an ANDA or to approve an ANDA under certain circumstances and to suspend the distribution of all drugs approved or developed in connection with certain wrongful conduct.

We are subject to the Maximum Allowable Cost Regulations, which limit reimbursements for certain generic prescription drugs under Medicare, Medicaid, and other programs to the lowest price at which these drugs are generally available. In many instances, only generic prescription drugs fall within the regulations’ limits. Generally, the pricing and promotion of, method of reimbursement and fixing of reimbursement levels for, and the reporting to federal and state agencies relating to drug products is under active review by federal, state and local governmental entities, as well as by private third-party reimbursers and individuals under whistleblower statutes. At present, the Justice Department and U.S. Attorneys Offices and State Attorneys General have initiated investigations, reviews, and litigation into industry-wide pharmaceutical pricing and promotional practices, and whistleblowers have filed qui tam suits. We cannot predict the results of those reviews, investigations, and litigation, or their impact on our business.

Virtually every state, as well as the District of Columbia, has enacted legislation permitting the substitution of equivalent generic prescription drugs for brand-name drugs where authorized or not prohibited by the prescribing physician, and some states mandate generic substitution in Medicaid programs.

In addition, numerous state and federal requirements exist for a variety of controlled substances, such as narcotics, that may be part of our product formulations. The DEA, which has authority similar to the FDA’s and may also pursue monetary penalties, and other federal and state regulatory agencies have far reaching authority.

The State of California requires that any manufacturer, wholesaler, retailer or other entity in California that sells, transfers, or otherwise furnishes certain so called precursor substances must have a permit issued by the California Department of Justice, Bureau of Narcotic Enforcement. The substances covered by this requirement include ephedrine, pseudoephedrine, norpseudoephedrine, and phenylpropanolamine, among others. The Bureau has authority to issue, suspend and revoke precursor permits, and a permit may be denied, revoked or suspended for various reasons, including (i) failure to maintain effective controls against diversion of precursors to unauthorized persons or entities; (ii) failure to comply with the Health and Safety Code provisions relating to precursor substances, or any regulations adopted thereunder; (iii) commission of any act which would demonstrate actual or potential unfitness to hold a permit in light of the public safety and welfare, which act is substantially related to the qualifications, functions or duties of the permit holder; or (iv) if any individual owner, manager, agent, representative or employee of the permit applicant/permit holder willfully violates any federal, state or local criminal statute, rule, or ordinance relating to the manufacture, maintenance, disposal, sale, transfer or furnishing of any precursor substances.

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Environmental Laws

We are subject to comprehensive federal, state and local environmental laws and regulations that govern, among other things, air polluting emissions, waste water discharges, solid and hazardous waste disposal, and the remediation of contamination associated with current or past generation handling and disposal activities. We are subject periodically to environmental compliance reviews by various environmental regulatory agencies.

Available Information

We maintain an Internet website at the following address: www.impaxlabs.com. We make available on or through our Internet website certain reports and amendments to those reports, as applicable, that we file with or furnish to the Securities and Exchange Commission (the “SEC”) in accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These include our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K. We make this information available on our website free of charge, as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC. The contents of our website are not incorporated by reference in this Annual Report on Form 10-K and shall not be deemed “filed” under the Exchange Act.

Corporate and Other Information

We were incorporated in the State of Delaware in 1995. Our corporate headquarters are located at 30831 Huntwood Avenue, Hayward, California, 94544. We were formerly known as Global Pharmaceutical Corporation until December 14, 1999, when Impax Pharmaceuticals, Inc., a privately held drug delivery company, merged into Global Pharmaceutical Corporation and the name of the resulting entity was changed to Impax Laboratories, Inc.

Unless otherwise indicated, all product sales data and U.S. market size data in this Annual Report on Form 10-K are based on information obtained from Wolters Kluwer Health, an unrelated third-party provider of prescription market data. We did not independently engage Wolters Kluwer Health to provide this information.

Employees

As of December 31, 2010, we had 918 full-time employees, of which 455 were in operations, 186 in research and development, 166 in the quality area, 82 in legal and administration, and 29 in sales and marketing. None of our employees are subject to collective bargaining agreements with labor unions, and we believe our employee relations are good.

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Executive Officers

Set forth below are the names of our executive officers who are not also directors, their ages as of February 4, 2011, and their principal occupations or employment for the past five years.

Name	Age		Positions with Impax
Arthur A. Koch, Jr.		57	Senior Vice President, Finance, and Chief Financial Officer
Charles V. Hildenbrand		59	Senior Vice President, Operations
Michael J. Nestor		58	President, Impax Pharmaceuticals Division

Arthur A. Koch, Jr. has served as our Senior Vice President, Finance, and Chief Financial Officer since March 2005. Prior to joining Impax, Mr. Koch was employed by Strategic Diagnostics Inc., a company which develops, manufactures and markets immunoassay-based diagnostic test kits. While at Strategic Diagnostics Inc., Mr. Koch served as Chief Operating Officer for six years, interim Chief Executive Officer for five months and Chief Financial Officer and Vice President for five years. In addition, Mr. Koch has previously held Chief Financial Officer positions at Paracelsian Inc., IBAH Inc., Liberty Fish Company, and Premier Solutions Ltd. Mr. Koch holds a Bachelor of Business Administration from Temple University and has been a Certified Public Accountant since 1977.

Charles V. Hildenbrand is our Senior Vice President, Operations, a position he has held since he joined Impax in August 2004. From 1996 until September 2004, Mr. Hildenbrand worked for PF Laboratories, Inc. as Plant Manager until 2001 and then as Executive Director of Engineering and Technical Services until his departure from the company. From 1983 until 1996, Mr. Hildenbrand worked at Lederle Laboratories/Wyeth as Section Head of Biochemical Production, Manager of Filing and Packaging, and Production Director of Consumer Health Products. Mr. Hildenbrand holds a B.S. in Chemical Engineering from Villanova University and an MBA from Lehigh University.

Michael J. Nestor has served as President of our branded products division, Impax Pharmaceuticals since March 2008. Before joining us he was Chief Operating Officer of Piedmont Pharmaceuticals a specialty pharmaceutical company. Prior to Piedmont, Mr. Nestor was CEO of NanoBio, a startup biopharmaceutical company, prior to which he was employed by Alpharma, initially as President of its generic pharmaceutical business and later as President of its branded pharmaceutical business. Before this he was President, International business at Banner Inc, a global contract manufacturing concern. Mr. Nestor spent 16 years at Lederle Laboratories / Wyeth holding increasing positions of responsibility including Vice President, Cardiovascular business, Vice President / General Manager of Lederle-Praxis Biologics, and Vice President of Wyeth-Lederle Vaccines and Pediatrics. Mr. Nestor has experience in a number of pharmaceutical therapeutic areas including vaccines, anti-infectives, dermatologics, CNS, generics, and analgesics. Mr. Nestor has a Bachelor of Business Administration degree from Middle Tennessee State University and a MBA from Pepperdine University.

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Item 1A. Risk Factors

An investment in our common stock involves a high degree of risk. In deciding whether to invest in our common stock, you should consider carefully the following risk factors, as well as the other information included in this Annual Report on Form 10-K. The materialization of any of these risks could have a material adverse effect on our business, financial position and results of operations. This Annual Report on Form 10-K contains forward looking statements that involve risks and uncertainties. Our actual results could differ materially from the results discussed in the forward looking statements. Factors that could cause or contribute to these differences include those discussed in this “Risk Factors” section. See “Forward-Looking Statements” on page 1 of this Annual Report on Form 10-K.

Risks Related to Our Business

Unstable economic conditions may adversely affect our industry, business, financial position and results of operations.

The global economy has undergone a period of significant volatility which has lead to diminished credit availability, declines in consumer confidence and increases in unemployment rates. There remains caution about the stability of the U.S. economy due to the global financial crisis, and there can be no assurances further deterioration in the financial markets will not occur. These economic conditions have resulted in, and could lead to further, reduced consumer spending related to healthcare in general and pharmaceutical products in particular.

In addition, we have exposure to many different industries and counterparties, including our partners under our alliance and collaboration agreements, suppliers of raw chemical materials, drug wholesalers and other customers that may be affected by an unstable economic environment. Any economic instability may affect these parties’ ability to fulfill their respective contractual obligations to us or cause them to limit or place burdensome conditions upon future transactions with us which could adversely affect our business, financial position and results of operations.

Furthermore, the capital and credit markets have experienced extreme volatility. Disruptions in the credit markets make it harder and more expensive to obtain funding. In the event current resources do not satisfy our needs, we may have to seek additional financing. The availability of additional financing will depend on a variety of factors such as market conditions and the general availability of credit. Future debt financing may not be available to us when required or may not be available on acceptable terms, and as a result we may be unable to grow our business, take advantage of business opportunities, or respond to competitive pressures.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results, timely file our periodic reports, maintain our reporting status or prevent fraud.

Our management or our independent registered public accounting firm may identify material weaknesses in our internal control over financial reporting in the future. The existence of internal control material weaknesses may result in current and potential stockholders and alliance and collaboration agreements’ partners losing confidence in our financial reporting, which could harm our business, the market price of our common stock, and our ability to retain our current, or obtain new, alliance and collaboration agreements’ partners.

In addition, the existence of material weaknesses in our internal control over financial reporting may affect our ability to timely file periodic reports under the Exchange Act. Although we remedied any past accounting issues and do not believe similar accounting problems are likely to recur, an internal control material weakness may develop in the future and affect our ability to timely file our periodic reports. The inability to timely file periodic reports under the Exchange Act could result in the SEC revoking the registration of our common stock, which would prohibit us from listing or having our stock quoted on any public market. This would have an adverse effect on our business and stock price by limiting the publicly available information regarding us and greatly reducing the ability of our stockholders to sell or trade our common stock.

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Our revenues and operating income could fluctuate significantly.

Our revenues and operating results may vary significantly from year-to-year and quarter to quarter as well as in comparison to the corresponding quarter of the preceding year. Variations may result from, among other factors:

• the timing of FDA approvals we receive;

• the timing of process validation for particular drug products;

• the timing of product launches, and market acceptance of such products launched;

• changes in the amount we spend to research, develop, acquire, license or promote new products;

• the outcome of our clinical trial programs;

• serious or unexpected health or safety concerns with our products, the brand products we have genericized, or our product candidates;

• the introduction of new products by others that render our products obsolete or noncompetitive;

• the ability to maintain selling prices and gross margins on our products;

• the outcome of our patent infringement litigation, and other litigation matters, and expenditures as a result of such litigation;

• the ability to comply with complex governmental regulations which deal with many aspects of our business;

• changes in coverage and reimbursement policies of health plans and other health insurers, including changes to Medicare, Medicaid and similar state programs;

• increases in the cost of raw materials used to manufacture our products;

• manufacturing and supply interruptions, including failure to comply with manufacturing specifications;

• the ability of our brand license partner(s) to secure regulatory approval, gain market share, sales volume, and sales milestone levels;

• timing of revenue recognition related to our alliance and collaboration agreements;

• the ability to protect our intellectual property and avoid infringing the intellectual property of others; and

• the addition or loss of customers.

As an illustration, when we amended the Teva Agreement in July 2010, we applied the updated guidance of FASB ASC 605-25 “Multiple Element Arrangements” (“ASC 605-25”), and recognized previously deferred revenue which would otherwise have been recognized, under the previous accounting standards, over the remaining life of the Teva Agreement. The change in the revenue recognition for the Teva Agreement had the short-term effect of increasing revenue for the year ended December 31, 2010, but removed a source of revenue for the years ended December 31, 2011 through December 31, 2024. The loss of such revenue may have a material adverse effect on our future results of operations. Additionally, we earned significant revenues and gross profit from sales of our tamsulosin, an authorized generic of Adderall XR^®, and fenofibrate products during the year ended December 31, 2010. With respect to our authorized generic of Adderall XR^® products, we are dependent on another unrelated third-party pharmaceutical company to supply us with such products we market and sell through our Global Division. Any delay or interruption in the supply of our authorized generic of Adderall XR^® products from the unrelated third-party pharmaceutical company could curtail or delay our product shipments and adversely affect our revenues, as well as jeopardize our relationships with our customers. Any significant diminution of our authorized generic of Adderall XR^® and fenofibrate product sales revenue and /or gross profit due to competition and /or product supply or any other reasons in future periods may materially and adversely affect our results of operations in such periods. We commenced sales of our tamsulosin product on March 2, 2010 and had contractual market exclusivity for this generic product for the succeeding eight week period, during which we were able to achieve high market-share penetration. Our tamsulosin product sales, however, did not remain at this level, as additional competing generic versions of the product entered the market in late April 2010, at the conclusion of our contractual exclusivity period, and have resulted in both price erosion and reduction of our market share.

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Our continued growth is dependent on our ability to continue to successfully introduce new products to the market.

Sales of a limited number of our products often represent a significant portion of our revenues in a given period. Revenue from newly launched products that we are the first to market is typically relatively high during the period immediately following launch and can be expected generally to decline over time. Revenue from generic drugs in general can also be expected to decline over time. Our continued growth is therefore dependent upon our ability to continue to successfully introduce new products. As of February 4, 2011, we had 38 applications pending at the FDA for generic versions of brand-name pharmaceuticals. The FDA and the regulatory authorities may not approve our products submitted to them or our other products under development. Additionally, we may not successfully complete our development efforts. Even if the FDA approves our products, we may not be able to market them if we do not prevail in the patent infringement litigation in which we are involved. Our future results of operations will depend significantly upon our ability to develop, receive FDA approval for, and market new pharmaceutical products or otherwise acquire new products.

A substantial portion of our total revenues is derived from sales to a limited number of customers.

We derive a substantial portion of our revenue from sales to a limited number of customers. In 2010, our five major customers, McKesson Corporation, Cardinal Health, Amerisource-Bergen, Walgreens and Medco accounted for 20%, 14%, 14%, 7% and 3%, respectively, or an aggregate of 58%, of our gross revenue.

A reduction in, or loss of business with, any one of these customers, or any failure of a customer to pay us on a timely basis, would adversely affect our business.

A substantial portion of our total revenues is derived from sales of a limited number of products.

We derive a substantial portion of our revenue from sales of a limited number of products. In 2010 our top five products, accounted for 33%, 10%, 9%, 9% and 5%, respectively, or an aggregate of 66%, of Global Product sales, net. The sale of our products can be significantly influenced by market conditions, as well as regulatory actions. We may experience decreases in the sale of our products in the future as a result of actions taken by our competitors, such as price reductions, or as a result of regulatory actions related to our products or to competing products, which could have a material impact on our results of operations. Actions which could be taken by our competitors, which may materially impact our results of operations, may include, without limitation, pricing changes and entering or exiting the market for specific products.

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We face intense competition from both brand-name and generic manufacturers.

The pharmaceutical industry is highly competitive and many of our competitors have longer operating histories and substantially greater financial, research and development, marketing, and other resources than we have. In addition, pharmaceutical manufacturers’ customer base consists of an increasingly limited number of large pharmaceutical wholesalers, chain drug stores that warehouse products, mass merchandisers, mail order pharmacies. Our competitors may be able to develop products and delivery technologies competitive with or more effective or less expensive than our own for many reasons, including that they may have:

• proprietary processes or delivery systems;

• larger research and development and marketing staffs;

• larger production capabilities in a particular therapeutic area;

• more experience in preclinical testing and human clinical trials;

• more experience in obtaining required regulatory approvals, including FDA approval;

• more products; or

• more experience in developing new drugs and financial resources, particularly with regard to brand manufacturers.

The FDA approval process often results in the FDA granting final approval to a number of ANDAs for a given product at the time a patent claim for a corresponding brand product or other market exclusivity expires. This often forces us to face immediate competition when we introduce a generic product into the market. As competition from other manufacturers intensifies, selling prices and gross profit margins often decline, which has been our experience with our existing products. Moreover, with respect to products for which we file a Paragraph IV certification, if we are not the first ANDA filer challenging a listed patent for a product, we are at a significant disadvantage to the competitor that first filed an ANDA for that product containing such a challenge, which is awarded 180 days of market exclusivity for the product. With respect to our 21 disclosed products pending FDA approval for which we have filed Paragraph IV certifications, we believe: (i) unrelated third parties are the first to file with respect to products with which 14 of our products can be expected to compete; (ii) we are the first to file for 6 products; and (iii) we share first to file status with other filers for one product. Accordingly, the level of market share, revenue and gross profit attributable to a particular generic product that we develop is generally related to the number of competitors in that product’s market and the timing of that product’s regulatory approval and launch, in relation to competing approvals and launches. Although there is no assurance, we strive to develop and introduce new products in a timely and cost effective manner to be competitive in our industry (see “Item 1 Business — Regulation”). Additionally, ANDA approvals often continue to be granted for a given product subsequent to the initial launch of the generic product. These circumstances generally result in significantly lower prices and reduced margins for generic products compared to brand products. New generic market entrants generally cause continued price and margin erosion over the generic product life cycle.

In addition to the competition we face from other generic manufacturers, our competition from brand-name manufacturers related to our generic products involves intensive efforts to thwart generic competition, including sales of their branded products as “authorized generics” (an industry term that describes instances when a brand-name manufacturer licenses a generic manufacturer to market either the brand product under the licensee’s name and registration number or the generic manufacturer’s own approved generic product marketed at typical generic discounts), obtaining new patents on drugs whose original patent protection is about to expire, filing patent infringement suits that automatically delay FDA approval of generics, filing “citizen petitions” contesting FDA approvals of generics on alleged health and safety grounds, developing “next generation” versions of products that reduce demand for generic versions we are developing, changing product claims and labeling, and marketing as OTC branded products.

Our principal competitors are Teva Pharmaceutical Industries Limited, Mylan Inc., Lannett Company, Inc., Zydus Pharmaceuticals USA Inc. and Watson Pharmaceuticals, Inc.

In the brand-name pharmaceutical market, we are not currently marketing our internally-developed products. However, if we obtain the FDA approval for, and start marketing, our own CNS brand-name pharmaceuticals, we expect that we will be competing with large pharmaceutical companies, other drug delivery companies, and other specialty pharmaceutical companies that have focused on CNS disorders.

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We have experienced operating losses and negative cash flow from operations in the past, and our future profitability is uncertain.

Although 2007 was our first profitable year, and we continued to record net income through and including 2010, we do not know whether our business will continue to be profitable or generate positive cash flow, and our ability to remain profitable or obtain positive cash flow is uncertain. To remain operational, we must, among other things:

• obtain FDA approval of our products;

• successfully launch new products;

• prevail in patent infringement litigation in which we are involved;

• continue to generate or obtain sufficient capital on acceptable terms to fund our operations; and

• comply with the many complex governmental regulations that deal with virtually every aspect of our business activities.

Any delays or unanticipated expenses in connection with the operation of our Taiwan facility could have a material adverse effect on our results of operations, liquidity and financial condition.

We completed construction of a new manufacturing facility in Taiwan, installed equipment, and received FDA approval during 2009 at an aggregate cost of approximately $24.5 million. We estimate this facility has an annual production capacity of approximately 450 million tablets and capsules. We initiated commercial manufacturing operations in 2010, and produced approximately 50 million tablets and capsules for sale in the United States. We plan to continue to increase the aggregate total tablet and capsule production, as well as the number of different products manufactured, at our facility in Taiwan during 2011.

In addition, we plan to initiate construction of an expansion to our manufacturing facility in Taiwan during 2011. We will expand the Taiwan manufacturing facility in stages, and we estimate the facility will have an annual production capacity of approximately 1.5 billion tablets and capsules once all stages of the expansion are complete. The first stage of the expansion of the Taiwan manufacturing facility is planned to be completed in late 2012, and will provide an additional production capacity of approximately 250 million tablets and capsules. Additional expansion of the Taiwan facility will be staged as necessary in order to support our production requirements.

While we have thus far not suffered any material delays, increases in estimated expenses or other material setbacks associated with the construction and operation of the manufacturing facility in Taiwan, no assurance can be given that we will be able to successfully manufacture process validation batches, or that costs of production will be within our projections. During any potential delays in scale-up of commercial operations, changing market conditions could render projections relating to our investment in the new facility inaccurate or unreliable. While the facility was approved by the FDA in 2009, there can also be no assurance that the facility will continue to receive FDA approval in future inspections. In addition, there can be no assurance that the planned expansion of the facility will become operational as anticipated or will ultimately result in profitable operations. If the first stage of our planned expansion of the Taiwan facility is not completed by late 2012, we will, based upon current projections, reach full production capacity at our Hayward, California manufacturing facility. If our manufacturing capacity were to be exceeded by our production requirements, we could lose customers and market share to competing products, and otherwise suffer adverse effects to our results of operations, liquidity and financial condition.

20

Our business is subject to the economic, political, legal and other risks of maintaining facilities and conducting clinical trials in foreign countries.

In 2010, we commenced shipment of commercial product from our new manufacturing facility in Taiwan, and we plan to increase our commercial manufacturing operations in Taiwan in the future. In addition, certain clinical trials for our product candidates are conducted at multiple sites in Europe. These foreign operations are subject to risks inherent in maintaining operations and doing business abroad, such as economic and political destabilization, international conflicts, restrictive actions by foreign governments, expropriation or nationalization of property, changes in laws and regulations, changes in regulatory requirements, the difficulty of effectively managing diverse global operations, adverse foreign tax laws and the threat posed by potential international disease pandemics in countries that do not have the resources necessary to deal with such outbreaks. Further, as our global operations require compliance with a complex set of foreign and U.S. laws and regulations, including data privacy requirements, labor relations laws, tax laws, anti-competition regulations, import and trade restrictions, and export requirements, U.S. laws such as the Foreign Corrupt Practices Act of 1977, as amended, and local laws which also prohibit corrupt payments to governmental officials or certain payments or remunerations to customers, there is a risk that some provisions may be inadvertently breached. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, and prohibitions on the conduct of our business. These foreign economic, political, legal and other risks could impact our operations and have an adverse effect on our business, financial condition and results of operations.

We are routinely subject to patent litigation that can delay or prevent our commercialization of products, force us to incur substantial expense to defend, and expose us to substantial liability.

Brand-name pharmaceutical manufacturers routinely bring patent infringement litigation against ANDA applicants seeking FDA approval to manufacture and market generic forms of their branded products. Likewise, patent holders may bring patent infringement suits against companies that are currently marketing and selling their approved generic products. Patent infringement litigation involves many complex technical and legal issues and its outcome is often difficult to predict, and the risk involved in doing so can be substantial, because the remedies available to the owner of a patent in the event of an unfavorable outcome include damages measured by the profits lost by the patent owner rather than the profits earned by the infringer. Such litigation usually involves significant expense and can delay or prevent introduction or sale of our products.

As of February 4, 2011, we were involved in patent infringement suits involving the following 17 products: (i) Fexofenadine/Pseudoephedrine Tablets (generic to Allegra-D^®); (ii) Tolterodine Tartrate ER Capsules, 2 mg and 4 mg (generic to Detrol LA^®); (iii) Duloxetine Hydrochloride DR Capsules 20 mg, 30 mg, and 60 mg (generic to Cymbalta^®); (iv) Doxycycline Hyclate DR Tablets 75 mg, 100 mg and 150 mg (generic to DORYX^®); (v) Sevelamer Hydrochloride Tablets, 400 mg and 800 mg (generic to Renagel^®); (vi) Sevelamer Carbonate Tablets, 800 mg (generic to Renvela^®); (vii) Doxycycline Monohydrate DR Capsules, 40 mg (generic to Oracea^®); (viii) Fenofibrate Tablets, 48 mg and 145 mg (generic to Tricor^®); (ix) Colesevelam Hydrochloride Tablets, 625 mg (generic to Welchol^®); (x) Choline Fenofibrate DR Capsules, 45 mg and 135 mg (generic to Trilipix^®); (xi) Fenofibrate Tablets, 40 mg and 120 mg (generic to Fenoglide^®); (xii) Sevelamer Carbonate Powder, 0.8 g/packets and 2.4 g/packets (generic to Renvela^® power); (xiii) Ezetimibe-Simvistatin Tablets, 10/80 mg (generic to Vytorin^®); (xiv) Niacin-Simvastatin Tablets, 1000/20mg (generic to Simcor^®); (xv) Methylphenidate Hydrochloride Tablets, 54 mg (generic to Concerta^®); (xvi) Colesevelam Hydrochloride Powder, 1.875 g/packets and 3.75 g/packets (generic to Welchol^®); and (xvii) Guanfacine Hydrochloride Tablets 1 mg, 2 mg, 3 mg, and 4 mg (generic to Intuniv^®). For the year ended December 31, 2010, we incurred costs of approximately $3.8 million in connection with our participation in these matters, which are in varying stages of litigation. If any of these patent litigation matters are resolved unfavorably, we or any alliance or collaboration partners may be enjoined from manufacturing or selling the product that is the subject of such litigation without a license from the other party. In addition, if we decide to market and sell products prior to the resolution of patent infringement suits, we could be held liable for lost profits if we are found to have infringed a valid patent, or liable for treble damages if we are found to have willfully infringed a valid patent. As a result, any patent litigation could have a material adverse effect on our results of operations, financial condition and growth prospects, although it is not possible to quantify the liability we could incur if any of these suits are decided against us.

21

Our ability to develop or license, or otherwise acquire, and introduce new products on a timely basis in relation to our competitors’ product introductions involves inherent risks and uncertainties.

Product development is inherently risky, especially for new drugs for which safety and efficacy have not been established and the market is not yet proven. Likewise, product licensing involves inherent risks including uncertainties due to matters that may affect the achievement of milestones, as well as the possibility of contractual disagreements with regard to terms such as license scope or termination rights. The development and commercialization process, particularly with regard to new drugs, also requires substantial time, effort and financial resources. The process of obtaining FDA approval to manufacture and market new and generic pharmaceutical products is rigorous, time consuming, costly and largely unpredictable. We, or a partner, may not be successful in obtaining FDA approval or in commercializing any of the products that we are developing or licensing.

Our approved products may not achieve expected levels of market acceptance.

Even if we are able to obtain regulatory approvals for our new products, the success of those products is dependent upon market acceptance. Levels of market acceptance for our new products could be affected by several factors, including:

• the availability of alternative products from our competitors;

• the prices of our products relative to those of our competitors;

• the timing of our market entry;

• the ability to market our products effectively at the retail level;

• the perception of patients and the healthcare community, including third-party payors, regarding the safety, efficacy and benefits of our drug products compared to those of competing products; and

• the acceptance of our products by government and private formularies.

Some of these factors are not within our control, and our products may not achieve expected levels of market acceptance. Additionally, continuing and increasingly sophisticated studies of the proper utilization, safety and efficacy of pharmaceutical products are being conducted by the industry, government agencies and others which can call into question the utilization, safety and efficacy of previously marketed products. In some cases, studies have resulted, and may in the future result, in the discontinuance of product marketing or other risk management programs such as the need for a patient registry.

22

We expend a significant amount of resources on research and development efforts that may not lead to successful product introductions or the recovery of our research and development expenditures.

We conduct research and development primarily to enable us to manufacture and market pharmaceuticals in accordance with FDA regulations. We spent approximately $86.2 million, $63.3 million and $59.2 million on research and development activities during the years ended December 31, 2010, 2009 and 2008, respectively. We estimate that our research and development expenses in 2011 will be approximately $87 million. We are required to obtain FDA approval before marketing our drug products. The FDA approval process is costly and time consuming. Typically, research expenses related to the development of innovative compounds and the filing of NDAs are significantly greater than those expenses associated with ANDAs. As we continue to develop new products, our research expenses will likely increase. Because of the inherent risk associated with research and development efforts in our industry, particularly with respect to new drugs, our research and development expenditures may not result in the successful introduction of FDA approved pharmaceuticals.

Our bioequivalence studies, other clinical studies and/or other data may not result in FDA approval to market our new drug products. While we believe that the FDA’s ANDA procedures will apply to our bioequivalent versions of controlled-release drugs, these drugs may not be suitable for, or approved as part of, these abbreviated applications. In addition, even if our drug products are suitable for FDA approval by filing an ANDA, the abbreviated applications are costly and time consuming to complete. After we submit an NDA or ANDA, the FDA may require that we conduct additional studies, and as a result, we may be unable to reasonably determine the total research and development costs to develop a particular product. Also, for products pending approval, we may obtain raw materials or produce batches of inventory to be used in anticipation of the product’s launch. In the event that FDA approval is denied or delayed, we could be exposed to the risk of this inventory becoming obsolete. Finally, we cannot be certain that any investment made in developing products or product-delivery technologies will be recovered, even if we are successful in commercialization. To the extent that we expend significant resources on research and development efforts and are not able, ultimately, to introduce successful new products or new delivery technologies as a result of those efforts, we will be unable to recover those expenditures.

The time necessary to develop generic drugs may adversely affect whether, and the extent to which, we receive a return on our capital.

We generally begin our development activities for a new generic drug product several years in advance of the patent expiration date of the brand-name drug equivalent. The development process, including drug formulation, testing, and FDA review and approval, often takes three or more years. This process requires that we expend considerable capital to pursue activities that do not yield an immediate or near-term return. Also, because of the significant time necessary to develop a product, the actual market for a product at the time it is available for sale may be significantly less than the originally projected market for the product. If this were to occur, our potential return on our investment in developing the product, if approved for marketing by the FDA, would be adversely affected and we may never receive a return on our investment in the product. It is also possible for the manufacturer of the brand-name product for which we are developing a generic drug to obtain approvals from the FDA to switch the brand-name drug from the prescription market to the OTC market. If this were to occur, we would be prohibited from marketing our product other than as an OTC drug, in which case revenues could be substantially less than we anticipated.

23

Approvals for our new generic drug products may be delayed or become more difficult to obtain if the FDA institutes changes to its approval requirements.

Some abbreviated application procedures for controlled-release drugs and other products, including those related to our ANDA filings, are or may become the subject of petitions filed by brand-name drug manufacturers seeking changes from the FDA in the approval requirements for particular drugs, which can delay or make development of generic drugs more difficult. We cannot predict whether the FDA will make any changes to its abbreviated application requirements as a result of these petitions, or the effect that any changes may have on us. Any changes in FDA regulations may make it more difficult for us to file ANDAs or obtain approval of our ANDAs and generate revenues and thus may materially harm our business and financial results.

Our inexperience in conducting clinical trials and submitting NDAs could result in delays or failure in development and commercialization of our own branded products, which could have a material adverse effect on our results of operations, liquidity, and financial condition.

With respect to products that we develop that are not generic equivalents of existing brand-name drugs and thus do not qualify for the FDA’s abbreviated application procedures, we must demonstrate through clinical trials that these products are safe and effective for use. We have only limited experience in conducting and supervising clinical trials. The process of completing clinical trials and preparing an NDA may take several years and requires substantial resources. Our studies and filings may not result in FDA approval to market our new drug products and, if the FDA grants approval, we cannot predict the timing of any approval. There are substantial filing fees for NDAs that are not refundable if FDA approval is not obtained.

There is no assurance that our expenses related to NDAs and clinical trials will lead to the development of brand-name drugs that will generate revenues in the near future. Delays or failure in the development and commercialization of our own branded products could have a material adverse effect on our results of operations, liquidity and financial condition.

24

The risks and uncertainties inherent in conducting clinical trials could delay or prevent the development and commercialization of our own branded products, which could have a material adverse effect on our results of operations, liquidity, financial condition, and growth prospects.

There are a number of risks and uncertainties associated with clinical trials. The results of clinical trials may not be indicative of results that would be obtained from large scale testing. Clinical trials are often conducted with patients having advanced stages of disease and, as a result, during the course of treatment these patients can die or suffer adverse medical effects for reasons that may not be related to the pharmaceutical agents being tested, but which nevertheless affect the clinical trial results. In addition, side effects experienced by the patients may cause delay of approval or limited profile of an approved product. Moreover, our clinical trials may not demonstrate sufficient safety and efficacy to obtain FDA approval.

Failure can occur at any time during the clinical trial process and, in addition, the results from early clinical trials may not be predictive of results obtained in later and larger clinical trials, and product candidates in later clinical trials may fail to show the desired safety or efficacy despite having progressed successfully through earlier clinical testing. A number of companies in the pharmaceutical industry, including us, have suffered significant setbacks in clinical trials, even in advanced clinical trials after showing positive results in earlier clinical trials. For example, we had previously sought to develop an earlier product formulation containing carbidopa/levodopa for the treatment of Parkinson’s disease. Following completion of the clinical trials and submission of the NDA, the NDA was not approved due to the FDA’s concerns over product nomenclature and the potential for medication errors. In the future, the completion of clinical trials for our product candidates may be delayed or halted for many reasons, including:

• delays in patient enrollment, and variability in the number and types of patients available for clinical trials;

• regulators or institutional review boards may not allow us to commence or continue a clinical trial;

• our inability, or the inability of our partners, to manufacture or obtain from third parties materials sufficient to complete our clinical trials;

• delays or failure in reaching agreement on acceptable clinical trial contracts or clinical trial protocols with prospective clinical trial sites;

• risks associated with trial design, which may result in a failure of the trial to show statistically significant results even if the product candidate is effective;

• difficulty in maintaining contact with patients after treatment commences, resulting in incomplete data;

• poor effectiveness of product candidates during clinical trials;

• safety issues, including adverse events associated with product candidates;

• the failure of patients to complete clinical trials due to adverse side effects, dissatisfaction with the product candidate, or other reasons;

• governmental or regulatory delays or changes in regulatory requirements, policy and guidelines; and

• varying interpretation of data by the FDA or foreign regulatory agencies.

In addition, our product candidates could be subject to competition for clinical study sites and patients from other therapies under development which may delay the enrollment in or initiation of our clinical trials.

The FDA or foreign regulatory authorities may require us to conduct unanticipated additional clinical trials, which could result in additional expense and delays in bringing our product candidates to market. Any failure or delay in completing clinical trials for our product candidates would prevent or delay the commercialization of our product candidates. There is no assurance our expenses related to clinical trials will lead to the development of brand-name drugs which will generate revenues in the near future. Delays or failure in the development and commercialization of our own branded products could have a material adverse effect on our results of operations, liquidity, financial condition, and our growth prospects.

25

We rely on our license partner for regulatory filing and commercialization of IPX066 outside of the United States and Taiwan.

Glaxo Group Limited, under the terms of our license, development and commercialization agreement, is responsible for certain regulatory activities outside the United States and Taiwan that are essential for the commercialization of IPX066. If Glaxo Group Limited is not successful in its performance of, or fails to perform, their regulatory obligations with respect to IPX066, we may not be able to obtain regulatory approval for IPX066 in certain jurisdictions outside of the United States and Taiwan, which could have a material adverse effect on our results of operations and financial condition.

We rely on third parties to conduct clinical trials for our product candidates, and if they do not properly and successfully perform their legal and regulatory obligations, as well as their contractual obligations to us, we may not be able to obtain regulatory approvals for our product candidates.

We design the clinical trials for our product candidates, but rely on contract research organizations and other third parties to assist us in managing, monitoring and otherwise carrying out these trials, including with respect to site selection, contract negotiation and data management. We do not control these third parties and, as a result, they may not treat our clinical studies as their highest priority, or in the manner in which we would prefer, which could result in delays.

Although we rely on third parties to conduct our clinical trials, we are responsible for confirming that each of our clinical trials is conducted in accordance with our general investigational plan and protocol. Moreover, the FDA and foreign regulatory agencies require us to comply with regulations and standards, commonly referred to as good clinical practices, for conducting, recording and reporting the results of clinical trials to ensure that the data and results are credible and accurate and that the trial participants are adequately protected. Our reliance on third parties does not relieve us of these responsibilities and requirements. The FDA enforces good clinical practices through periodic inspections of trial sponsors, principal investigators and trial sites. If we, our contract research organizations or our study sites fail to comply with applicable good clinical practices, the clinical data generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, the FDA will determine that any of our clinical trials comply with good clinical practices. In addition, our clinical trials must be conducted with product manufactured under the FDA’s current Good Manufacturing Practices, or cGMP, regulations. Our failure or the failure of our contract manufacturers if any are involved in the process, to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

If third parties do not successfully carry out their duties under their agreements with us; if the quality or accuracy of the data they obtain is compromised due to failure to adhere to our clinical protocols or regulatory requirements; or if they otherwise fail to comply with clinical trial protocols or meet expected deadlines; our clinical trials may not meet regulatory requirements. If our clinical trials do not meet regulatory requirements or if these third parties need to be replaced, our clinical trials may be extended, delayed, suspended or terminated. If any of these events occur, we may not be able to obtain regulatory approval of our product candidates, which could have a material adverse effect on our results of operations, financial condition and growth prospects.

26

We are dependent on a small number of suppliers for our raw materials that we use to manufacture our products.

We typically purchase the ingredients, other materials and supplies that we use in the manufacturing of our products, as well as certain finished products, from a small number of foreign and domestic suppliers. The FDA requires identification of raw material suppliers in applications for approval of drug products. If raw materials were unavailable from a specified supplier or the supplier was not in compliance with FDA or other applicable requirements, the FDA approval of a new supplier could delay the manufacture of the drug involved. As a result, there is no guarantee we will always have timely and sufficient access to a required raw material or other product. In addition, some materials used in our products are currently available from only one supplier or a limited number of suppliers. Generally, we would need as much as 18 months to find and qualify a new sole-source supplier. If we receive less than one year’s termination notice from a sole-source supplier that it intends to cease supplying raw materials, it could result in disruption of our ability to produce the drug involved. Further, a significant portion of our raw materials may be available only from foreign sources. Foreign sources can be subject to the special risks of doing business abroad, including:

• greater possibility for disruption due to transportation or communication problems;

• the relative instability of some foreign governments and economies;

• interim price volatility based on labor unrest, materials or equipment shortages, export duties, restrictions on the transfer of funds, or fluctuations in currency exchange rates; and

• uncertainty regarding recourse to a dependable legal system for the enforcement of contracts and other rights.

Those of our raw materials that are available from a limited number of suppliers are Bendroflumethiazide, Chloroquine, Colestipol, Demeclocycline, Digoxin, Flavoxate, Methyltestosterone, Nadolol, Orphenadrine, Terbutaline and Klucel, all of which are active pharmaceutical ingredients except Klucel, which is an excipient used in several product formulations. The manufacturers of two of these products, Formosa Laboratories, Ltd. and a division of Ashland, Inc., are sole-source suppliers. While none of the active ingredients is individually significant to our business, the excipient, while not covered by a supply agreement, is utilized in a number of significant products, it is manufactured for a number of industrial applications and supplies have been readily available. Only one of the active ingredients is covered by a long-term supply agreement and, while we have experienced occasional interruptions in supplies, none has had a material effect on our operations.

Any inability to obtain raw materials on a timely basis, or any significant price increases which cannot be passed on to customers, could have a material adverse effect on us.

Many third-party suppliers are subject to governmental regulation and, accordingly, we are dependent on the regulatory compliance of these third parties. We also depend on the strength, enforceability and terms of our various contracts with these third-party suppliers.

27

We may be adversely affected by alliance, collaboration, supply, or license and distribution agreements we enter into with other companies.

We have entered into several alliance, collaboration, supply or license and distribution agreements with respect to certain of our products and services and may enter into similar agreements in the future. These arrangements may require us to relinquish rights to certain of our technologies or product candidates, or to grant licenses on terms that ultimately may prove to be unfavorable to us. Relationships with alliance partners may also include risks due to regulatory requirements, incomplete marketplace information, inventories, and commercial strategies of our partners, and our agreements may be the subject of contractual disputes. If we or our partners are not successful in commercializing the products covered by the agreements, such commercial failure could adversely affect our business.

Pursuant to a license and distribution agreement with an unrelated third party pharmaceutical company, we are dependent on such company to supply us with product that we market and sell, and we may enter into similar agreements in the future. Any delay or interruption in the supply of product under such agreements could curtail or delay our product shipment and adversely affect our revenues, as well as jeopardize our relationships with our customers.

We depend on qualified scientific and technical employees, and our limited resources may make it more difficult to attract and retain these personnel.

Because of the specialized scientific nature of our business, we are highly dependent upon our ability to continue to attract and retain qualified scientific and technical personnel. We are not aware of any pending, significant losses of scientific or technical personnel. Loss of the services of, or failure to recruit, key scientific and technical personnel, however, would be significantly detrimental to our product-development programs. As a result of our small size and limited financial and other resources, it may be difficult for us to attract and retain qualified officers and qualified scientific and technical personnel.

In January 2010, we entered into employment agreements with our executive officers and certain other key employees. Under the employment agreements, the employee may terminate his or her employment upon 60 days prior written notice to us. All of our other key personnel are employed on an at-will basis with no formal employment agreements. We purchase a life insurance policy as an employee benefit for Dr. Hsu, but do not maintain “Key Man” life insurance on any executives.

We are subject to significant costs and uncertainties related to compliance with the extensive regulations that govern the manufacturing, labeling, distribution, and promotion of pharmaceutical products as well as environmental, safety and health regulations.

The manufacturing, distribution, processing, formulation, packaging, labeling and advertising of our products are subject to extensive regulation by federal agencies, including the FDA, DEA, Federal Trade Commission, Consumer Product Safety Commission and Environmental Protection Agency, among others. We are also subject to state and local laws, regulations and agencies in California, Pennsylvania and elsewhere, as well as the laws and regulations of Taiwan. Compliance with these regulations requires substantial expenditures of time, money and effort in such areas as production and quality control to ensure full technical compliance. Failure to comply with FDA and other governmental regulations can result in fines, disgorgement, unanticipated compliance expenditures, recall or seizure of products, total or partial suspension of production or distribution, suspension of the FDA’s review of NDAs or ANDAs, enforcement actions, injunctions and civil or criminal prosecution.

We cannot accurately predict the outcome or timing of future expenditures that we may be required to make in order to comply with the federal, state, and local environmental, safety, and health laws and regulations that are applicable to our operations and facilities. We are also subject to potential liability for the remediation of contamination associated with both present and past hazardous waste generation, handling, and disposal activities. We are subject periodically to environmental compliance reviews by environmental, safety, and health regulatory agencies. Environmental laws are subject to change and we may become subject to stricter environmental standards in the future and face larger capital expenditures in order to comply with environmental laws.

28

We may experience reductions in the levels of reimbursement for pharmaceutical products by governmental authorities, HMOs or other third-party payers. Any such reductions could have a material adverse effect on our business, financial position and results of operations.

Various governmental authorities and private health insurers and other organizations, such as HMOs, provide reimbursement to consumers for the cost of certain pharmaceutical products. Demand for our products depends in part on the extent to which such reimbursement is available. In addition, third-party payers are attempting to control costs by limiting the level of reimbursement for medical products, including pharmaceuticals, and increasingly challenge the pricing of these products which may adversely affect the pricing of our products. Moreover, health care reform has been, and is expected to continue to be, an area of national and state focus, which could result in the adoption of measures that could adversely affect the pricing of pharmaceuticals or the amount of reimbursement available from third-party payers for our products.

Reporting and payment obligations under the Medicaid rebate program and other government programs are complex, and failure to comply could result in sanctions and penalties or we could be required to reimburse the government for underpayments, which could have a material adverse affect on our business.

Medicaid and other government reporting and payment obligations are highly complex and somewhat ambiguous. State attorneys general and the U.S. Department of Justice have brought suits or instituted investigations against a number of other pharmaceutical companies for failure to comply with Medicaid and other government reporting obligations. Our methodologies for making these calculations are complex and the judgments involved require us to make subjective decisions, such that these calculations are subject to the risk of errors. Government agencies may impose civil or criminal sanctions, including fines, penalties and possible exclusion from federal health care programs, including Medicaid and Medicare. Any such penalties or sanctions could have a material adverse effect on our business.

Legislative or regulatory programs that may influence prices of prescription drugs could have a material adverse effect on our business.

Current or future federal or state laws and regulations may influence the prices of drugs and, therefore, could adversely affect the prices that we receive for our products. Programs in existence in certain states seek to set prices of all drugs sold within those states through the regulation and administration of the sale of prescription drugs. Expansion of these programs, in particular, state Medicaid programs, or changes required in the way in which Medicaid rebates are calculated under such programs, could adversely affect the price we receive for our products and could have a material adverse effect on our business, financial position and results of operations. Decreases in health care reimbursements could limit our ability to sell our products or decrease our revenues.

29

Our failure to comply with the legal and regulatory requirements governing the healthcare industry may result in substantial fines, sanctions and restrictions on our business activities.

Our practices and activities related to the sales and marketing of our products, as well as the pricing of our products, are subject to extensive regulation under U.S. federal and state healthcare statutes and regulations intended to combat fraud and abuse to federal and state healthcare payment programs, such as Medicare and Medicaid, Tri-Care, CHAMPUS, and Department of Defense programs. These laws include the federal Anti-Kickback Statute, the federal False Claims Act, and similar state laws and implementing regulations. For example, the payment of any incentive to a healthcare provider to induce the recommendation of our product or the purchase of our products reimbursable under a federal or state program would be considered a prohibited promotional practice under these laws. Similarly, the inaccurate reporting of prices leading to inflated reimbursement rates would also be considered a violation of these laws. These laws and regulations are enforced by the U.S. Department of Justice, the U.S. Department of Health and Human Services, Office of Inspector General, state Medicaid Fraud Units and other state enforcement agencies.

Violations of these laws and regulations are punishable by criminal and civil sanctions, including substantial fines and penal sanctions, such as imprisonment. It is common for enforcement agencies to initiate investigations into sales and marketing practices, as well as pricing practices, regardless of merit. These types of investigations and any related litigation can result in: (i) large expenditures of cash for legal fees, payment for penalties, and compliance activities; (ii) limitations on operations, (iii) diversion of management resources, (iv) injury to our reputation; and (v) decreased demand for our products.

While we believe that our practices and activities related to sales and marketing, and the pricing of our products, are in compliance with these fraud and abuse laws, the criteria for compliance are often complex and subject to change and interpretation. An investigation by an enforcement agency could have a material negative impact on our business and results of operations.

30

We have entered into, and anticipate entering into, contracts with various U.S. government agencies. Unfavorable provisions in government contracts, some of which may be customary, may harm our business, financial condition and operating results.

Government contracts customarily contain provisions that give the government substantial rights and remedies, many of which are not typically found in commercial contracts, including provisions that allow the government to:

• suspend or debar the contractor from doing business with the government or a specific government agency;

• terminate existing contracts, in whole or in part, for any reason or no reason;

• reduce the scope and value of contracts;

• change certain terms and conditions in contracts;

• claim rights to products, including intellectual property, developed under the contract;

• take actions that result in a longer development timeline than expected;

• direct the course of a development program in a manner not chosen by the government contractor;

• audit and object to the contractor’s contract-related costs and fees, including allocated indirect costs; and

• control and potentially prohibit the export of the contractor’s products.

Generally, government contracts contain provisions permitting unilateral termination or modification, in whole or in part, at the government’s convenience. Under general principles of government contracting law, if the government terminates a contract for convenience, the terminated company may recover only its incurred or committed costs, settlement expenses and profit on work completed prior to the termination.

If the government terminates a contract for default, the defaulting company is entitled to recover costs incurred and associated profits on accepted items only and may be liable for excess costs incurred by the government in procuring undelivered items from another source. Some government contracts grant the government the right to use, for or on behalf of the U.S. government, any technologies developed by the contractor under the government contract. If we were to develop technology under a contract with such a provision, we might not be able to prohibit third parties, including our competitors, from using that technology in providing products and services to the government.

As a government contractor, we may also become subject to periodic audits and reviews. As part of any such audit or review, the government may review the adequacy of, and our compliance with, our internal control systems and policies, including those relating to our purchasing, property, compensation and/or management information systems. In addition, if an audit or review uncovers any improper or illegal activity, we may be subject to civil and criminal penalties and administrative sanctions, including termination of our contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the government. We could also suffer serious harm to our reputation if allegations of impropriety were made against us.

31

Legislative or regulatory reform of the healthcare system in the United States may harm our future business.

Healthcare costs have risen significantly over the past decade. On March 23, 2010, President Obama signed the “Patient Protection and Affordable Care Act” (P.L. 111-148) and on March 30, 2010, the President signed the “Health Care and Education Reconciliation Act” (P.L. 111-152), collectively commonly referred to as the “Healthcare Reform Law” which, among other things, requires most individuals to have health insurance, effective January 1, 2014, establishes new regulations on health plans (with the earliest changes for certain benefits beginning with plan years commencing after September 23, 2010), creates insurance exchanges (effective January 2014) and imposes new requirements and changes in reimbursement or funding for healthcare providers, device manufacturers and pharmaceutical companies (with the earliest changes effective on March 23, 2010) and other changes staged in thereafter. The Healthcare Reform Law may impose additional requirements and obligations upon our company, which, to a certain extent, will depend upon the mix of products we sell. These changes include, among other things:

• revisions to the Medicaid rebate program by: (a) increasing the rebate percentage for branded drugs dispensed after December 31, 2009 to 23.1% of the average manufacturer price (“AMP”), with limited exceptions, (b) increasing the rebate for outpatient generic, multiple source drugs dispensed after December 31, 2009 to 13% of AMP; (c) changing the definition of AMP; and (d) effective January 1, 2011, the Medicaid rebate program will be extended to Medicaid managed care plans, with limited exception;

• the imposition of annual fees upon manufacturers or importers of branded prescription drugs, which fees will be in amounts determined by the Secretary of Treasury based upon market share and other data;

• providing a 50% discount on brand-name prescriptions filled in the Medicare Part D coverage gap beginning in 2011;

• imposing increased penalties for the violation of fraud and abuse laws and funding for anti-fraud activities;

• creating a new pathway for approval of biosimilar biological products and granting an exclusivity period of 12 years for branded drug manufacturers of biological products before biosimilar products can be approved for marketing in the U.S.; and

• expands the definition of “covered entities” that purchase certain outpatient drugs in the 340B Drug Pricing Program of Section 340B of the Public Health Service Act.

While the aforementioned Healthcare Reform Law may increase the number of patients who have insurance coverage for our products, such insurance mandate does not commence until January 2014, and the Healthcare Reform Law also restructures payments to Medicare managed care plans and reduces reimbursements to many institutional customers. Moreover, the Health Reform Law is currently subject to legal challenges that may have an impact on the law. Accordingly, the timing on the insurance mandate, the change in the Medicaid rebate levels, the additional fees imposed upon our company if it markets branded drugs, other compliance obligations, and the reduced reimbursement levels to institutional customers may result in a loss of revenue and could adversely affect our business. In addition, the Healthcare Reform Law contemplates the promulgation of significant future regulatory action which may also further affect our business.

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We depend on our intellectual property, and our future success is dependent on our ability to protect our intellectual property and not infringe on the rights of others.

We believe intellectual property protection is important to our business and that our future success will depend, in part, on our ability to maintain trade secret protection and operate without infringing on the rights of others. We cannot assure you that:

• any of our future processes or products will be patentable;

• our processes or products will not infringe upon the patents of third parties; or

• we will have the resources to defend against charges of patent infringement by third parties or to protect our own rights against infringement by third parties.

We rely on trade secrets and proprietary knowledge related to our products and technology which we generally seek to protect by confidentiality and non-disclosure agreements with employees, consultants, licensees and pharmaceutical companies. If these agreements are breached, we may not have adequate remedies for any breach, and our trade secrets may otherwise become known by our competitors.

We are subject to potential product liability claims that can result in substantial litigation costs and liability.

The design, development and manufacture of pharmaceutical products involve an inherent risk of product liability claims and associated adverse publicity. Product liability insurance coverage is expensive, difficult to obtain, and may not be available in the future on acceptable terms, or at all. Although we currently carry $80.0 million of such insurance, we believe that no reasonable amount of insurance can fully protect against all such risks because of the potential liability inherent in the business of producing pharmaceutical products for human consumption.

We face risks relating to our goodwill and intangibles.

At December 31, 2010, our goodwill, which was originally generated as a result of the December 1999 merger of Global Pharmaceuticals Corporation and Impax Pharmaceuticals, Inc., was approximately $27.6 million, or approximately 4% of our total assets. We may never realize the value of our goodwill and intangibles. We will continue to evaluate, on a regular basis, whether events or circumstances have occurred to indicate all, or a portion, of the carrying amount of goodwill may no longer be recoverable, in which case an impairment charge to earnings would become necessary. Although as of December 31, 2010, the carrying value of goodwill was not impaired based on our assessment performed in accordance with GAAP, any such future determination requiring the write-off of a significant portion of carrying value of goodwill could have a material adverse effect on our financial condition or results of operations.

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If we are unable to manage our growth, our business will suffer.

We have experienced rapid growth in the past several years and anticipate continued rapid expansion in the future. The number of ANDAs pending approval at the FDA has increased from 11 at June 30, 2001 to 38 at February 4, 2011. This growth has required us to expand, upgrade, and improve our administrative, operational, and management systems, internal controls and resources. We anticipate additional growth in connection with the expansion of our manufacturing operations, development of our brand-name products, and our marketing and sales efforts for the products we develop. Although we cannot assure you that we will, in fact, grow as we expect, if we fail to manage growth effectively or to develop a successful marketing approach, our business and financial results will be materially harmed. We may also seek to expand our business through complementary or strategic acquisitions of other businesses, products or assets, or through joint ventures, strategic agreements or other arrangements. Any such acquisitions, joint ventures or other business combinations may involve significant integration challenges, operational complexities and time consumption and require substantial resources and effort. It may also disrupt our ongoing businesses, which may adversely affect our relationships with customers, employees, regulators and others with whom we have business or other dealings. Further, if we are unable to realize synergies or other benefits expected to result from any acquisitions, joint ventures or other business combinations, or to generate additional revenue to offset any unanticipated inability to realize these expected synergies or benefits, our growth and ability to compete may be impaired, which would require us to focus additional resources on the integration of operations rather than other profitable areas of our business, and may otherwise cause a material adverse effect on our business.

The terms of our revolving credit facility impose financial and operating restrictions on us.

We have a revolving credit facility in the aggregate principal amount of $50 million. Our revolving credit facility contains a number of negative covenants that limit our ability to engage in activities. These covenants limit or restrict, among other things, our ability to:

• incur additional indebtedness and grant liens on assets;

• make certain investments and restricted payments (including the ability to pay dividends and repurchase stock);

• undertake certain acquisitions or sell certain assets; and

• enter into certain transactions with our affiliates.

These limitations and restrictions may adversely affect our ability to finance our future operations or capital needs or engage in other business activities that may be in our best interests. Further, the revolving credit facility subjects us to various financial covenants which require us to maintain certain levels of debt ratios and limit our capital expenditures.

Our ability to borrow under the revolving bank facility is subject to compliance with the negative and financial covenants. If we breach any of the covenants in our revolving credit facility, we may be in default under our revolving credit facility. If we default, our borrowings under the revolving credit facility could be declared due and payable, including accrued interest and other fees.

There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with GAAP. Any future changes in estimates, judgments and assumptions used or necessary revisions to prior estimates; judgments or assumptions could lead to a restatement of our results.

The consolidated financial statements included in this Annual Report on Form 10-K are prepared in accordance with GAAP. This involves making estimates, judgments and assumptions that affect reported amounts of assets (including intangible assets), liabilities, revenues, expenses and income. Estimates, judgments and assumptions are inherently subject to change in the future and any necessary revisions to prior estimates, judgments or assumptions could lead to a restatement. Any such changes could result in corresponding changes to the amounts of assets (including goodwill and other intangible assets), liabilities, revenues, expenses and income.

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Terrorist attacks and other acts of violence or war may adversely affect our business.

Terrorist attacks at or nearby our facilities in Hayward, California, Philadelphia, Pennsylvania, or our manufacturing facility in Taiwan may negatively affect our operations. While we do not believe that we are more susceptible to such attacks than other companies, such attacks could directly affect our physical facilities or those of our suppliers or customers and could make the transportation of our products more difficult and more expensive and ultimately affect our sales.

We carry insurance coverage on our facilities of types and in amounts that we believe are in line with coverage customarily obtained by owners of similar properties. We continue to monitor the state of the insurance market in general and the scope and cost of coverage for acts of terrorism in particular, but we cannot anticipate what coverage will be available on commercially reasonable terms in future policy years. Currently, we carry terrorism insurance as part of our property and casualty and business interruption coverage. If we experience a loss that is uninsured or that exceeds policy limits, we could lose the capital invested in the damaged facilities, as well as the anticipated future net sales from those facilities.

Because of the location of our manufacturing and research and development facilities, our operations could be interrupted by an earthquake or be susceptible to climate changes.

Our corporate headquarters in California, manufacturing operations in California and Taiwan, and research and development activities related to process technologies are located near major earthquake fault lines. Although we have other facilities, we produce a substantial portion of our products at our California facility. A disruption at these California facilities due to an earthquake, other natural disaster, or due to climate changes, even on a short-term basis, could impair our ability to produce and ship products to the market on a timely basis. In addition, we could experience a destruction of facilities which would be costly to rebuild, or loss of life, all of which could materially adversely affect our business and results of operations.

We presently carry $10.0 million of earthquake coverage which covers all of our facilities on a worldwide basis. We carry an additional $40.0 million of earthquake coverage specifically for our California facilities. We believe the aggregate amount of earthquake coverage we currently carry is appropriate in light of the risks; however, the amount of our earthquake insurance coverage may not be sufficient to cover losses from earthquakes. We may discontinue some or all of this insurance coverage in the future if the cost of premiums exceeds the value of the coverage discounted for the risk of loss. If we experience a loss which is uninsured or which exceeds policy limits, we could lose the capital invested in the damaged facilities, as well as the anticipated future net sales from those facilities.

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Risks Related to Our Stock

Our stock price is volatile.

The stock market has, from time to time, experienced significant price and volume fluctuations that may be unrelated to the operating performance of particular companies. In addition, the market price of our common stock, like the stock price of many publicly traded specialty pharmaceutical companies, is volatile. For example, the sale price of our stock during the years ended December 31, 2010 and 2009 ranged from a high of $21.94 during the quarter ended December 31, 2010 to a low of $2.50 during the quarter ended March 31, 2009.

Prices of our common stock may be influenced by many factors, including:

• our ability to maintain compliance with SEC reporting requirements;

• our ability to maintain the listing of our common stock on The NASDAQ Stock Market LLC;

• investor perception of us;

• analyst recommendations;

• market conditions relating to specialty pharmaceutical companies;

• announcements of new products by us or our competitors;

• publicity regarding actual or potential developments relating to products under development by us or our competitors;

• developments, disputes or litigation concerning patent or proprietary rights;

• delays in the development or approval of our product candidates;

• regulatory developments;

• period to period fluctuations in our financial results and those of our competitors;

• future sales of substantial amounts of common stock by stockholders; and

• economic and other external factors.

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We have adopted certain provisions that may have the effect of hindering, delaying or preventing third party takeovers, which may prevent our stockholders from receiving premium prices for shares of their common stock in an unsolicited takeover.

We have adopted a stockholder rights plan and initially declared a dividend distribution of one right for each outstanding share of common stock to stockholders of record as of January 30, 2009. Each Right entitles the holder to purchase one one-thousandth of a share of our Series A junior participating preferred stock for $15, subject to adjustment.

Under certain circumstances, if a person or group acquires, or announces its intention to acquire, beneficial ownership of 20% or more of our outstanding common stock, each holder of such right (other than the third party triggering such exercise), would be able to purchase, upon exercise of the right at the then applicable exercise price (currently $15), that number of shares of our common stock having a market value of two times the exercise price of the right (currently $30). Subject to certain exceptions, if we are consolidated with, or merged into, another entity and we are not the surviving entity in such transaction or shares of our outstanding common stock are exchanged for securities of any other person, cash or any other property, or more than 50% of our assets or earning power is sold or transferred, then each holder of the right would be able to purchase, upon the exercise of the right at the then applicable exercise price (currently $15), the number of shares of common stock of the third party acquirer having a market value of two times the exercise price of the right (currently $30). The rights expire on January 20, 2012, unless extended by our board of directors.

If our board of directors does not redeem the rights or amend the rights agreement to make it inapplicable to the foregoing acquisitions, mergers or similar transactions, the rights when exercised could significantly increase the cost for a third party acquirer seeking to acquire control of us on an unsolicited basis or substantially dilute the equity ownership of such third party acquirer. As a result, the existence of the rights agreement could deter potential third party acquirers from attempting to acquire us on an unsolicited basis and reduce the likelihood that stockholders will receive a premium for our common stock in such a transaction.

In addition, under our Restated Certificate of Incorporation, our board of directors has authority to issue 2,000,000 shares of “blank check” preferred stock, of which 100,000 shares were designated as series A junior participating preferred stock, which also may make it more difficult for a third party to acquire control of us without the approval of our board of directors. Blank check preferred stock enables our board of directors, without stockholder approval, to designate and issue additional series of preferred stock with such dividend, liquidation, conversion, voting or other rights, including the right to issue convertible securities with no limitations on conversion, as our board of directors may determine are appropriate, including rights to dividends and proceeds in a liquidation that are senior to our common stock.

We do not pay dividends on our common stock and do not anticipate doing so in the foreseeable future.

We have not paid any cash dividends on our common stock and we do not plan to pay any cash dividends in the foreseeable future. We plan to retain any earnings for the operation and expansion of our business. As a Delaware corporation, we may not declare or pay a dividend on our capital stock if the amount paid exceeds an amount equal to the surplus, which represents the excess of our net assets over paid-in capital or, if there is no surplus, our net profits for the current or immediately preceding year. In addition, our loan agreement prohibits the payment of dividends without the lender’s consent. As we do not intend to declare dividends on our common stock in the foreseeable future, any gains on your investment will result from an increase in our stock price, which may or may not occur.

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Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Our primary properties consist of a leased 45,000 sq. ft. corporate headquarter facility, an owned 35,000 sq. ft. research and development center and an owned 50,000 sq. ft. manufacturing facility, all located in Hayward, California; a 113,000 sq. ft. packaging and warehousing facility located in Philadelphia, Pennsylvania, also owned by us, and a leased 44,000 sq. ft. facility located in New Britain, Pennsylvania, which houses sales, marketing and administration personnel and also serves as our distribution center. In addition, we own a 19,000 sq. ft. office building containing additional administrative and laboratory facilities in Hayward and lease three additional facilities aggregating 85,100 sq. ft. in Hayward, and Fremont, California, which are utilized for additional research and development, administrative services and equipment storage. The expiration dates of these lease agreements range between May 31, 2011 and December 31, 2015. We also own a 100,000 sq. ft. manufacturing facility in Taiwan. Our properties are generally used to support the operations of both the Global Division and the Impax Division.

In our various facilities we maintain an extensive equipment base that includes new or recently reconditioned equipment for the manufacturing and packaging of compressed tablets, coated tablets, and capsules. The manufacturing and research and development equipment includes mixers and blenders for capsules and tablets, automated capsule fillers, tablet presses, particle reduction, sifting equipment, and tablet coaters. The packaging equipment includes fillers, cottoners, cappers, and labelers. We also maintain two well equipped, modern laboratories used to perform all the required physical and chemical testing of our products. We also maintain a broad variety of material handling and cleaning, maintenance, and support equipment. We own substantially all of our manufacturing equipment and believe it is well maintained and suitable for its requirements.

We maintain property and casualty and business interruption insurance in amounts we believe are sufficient and consistent with practices for companies of comparable size and business.

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Item 3. Legal Proceedings

Patent Infringement Litigation

Aventis Pharmaceuticals Inc., et al. v. Impax Laboratories, Inc. (Fexofenadine /Pseudoephedrine)

We are a defendant in an action brought in March 2002 by Aventis Pharmaceuticals Inc. and others in the U.S. District Court for the District of New Jersey alleging our proposed Fexofenadine and Pseudoephedrine Hydrochloride tablets, generic to Allegra-D^®, infringe seven Aventis patents and seeking an injunction preventing us from marketing the products until expiration of the patents. The case has since been consolidated with similar actions brought by Aventis against five other manufacturers (including generics to both Allegra^® and Allegra-D^®). In March 2004, Aventis and AMR Technology, Inc. filed a complaint and first amended complaint against us and one of the other defendants alleging infringement of two additional patents, owned by AMR and licensed to Aventis, relating to a synthetic process for making the active pharmaceutical ingredient, Fexofenadine Hydrochloride and intermediates in the synthetic process. We believe we have defenses to the claims based on non-infringement and invalidity.

In June 2004, the court granted our motion for summary judgment of non-infringement with respect to two of the patents and, in May 2005, granted summary judgment of invalidity with respect to a third patent. We will have the opportunity to file additional summary judgment motions in the future and to assert both non-infringement and invalidity of the remaining patents (if necessary) at trial. No trial date has yet been set. In September 2005, Teva Pharmaceuticals, USA launched its Fexofenadine tablet products (generic to Allegra^®), and Aventis and AMR moved for a preliminary injunction to bar Teva’s sales based on four of the patents in suit, which patents are common to the Allegra^® and Allegra-D^® litigations. The district court denied Aventis’s motion in January 2006, finding Aventis did not establish a likelihood of success on the merits, which decision was affirmed on appeal. Discovery is complete and summary judgment motions have been filed. Trial is scheduled to begin April 4, 2011.

Pfizer Inc., et aI. v. Impax Laboratories, Inc. (Tolterodine)

In March 2008, Pfizer Inc., Pharmacia & Upjohn Company LLC, and Pfizer Health AB (collectively, “Pfizer”) filed a complaint against us in the U.S. District Court for the Southern District of New York, alleging our filing of an ANDA relating to Tolterodine Tartrate Extended Release Capsules, 4 mg, generic to Detrol^® LA, infringes three Pfizer patents. We filed an answer and counterclaims seeking declaratory judgment of non-infringement, invalidity, or unenforceability with respect to the patents in suit. In April 2008, the case was transferred to the U.S. District Court for the District of New Jersey. On September 3, 2008, an amended complaint was filed alleging infringement based on our ANDA amendment adding a 2mg strength. For one of the patents-in-suit, U.S. Patent No. 5,382,600, expiring on September 25, 2012 with pediatric exclusivity, we agreed by stipulation to be bound by the decision in Pfizer Inc. et al. v. Teva Pharmaceuticals USA, Inc., Case No. 04-1418 (D. N.J.). After the Pfizer court conducted a bench trial, it found the ‘600 patent not invalid on January 20, 2010 and that decision is on appeal to the U.S. Court of Appeals for the Federal Circuit. Discovery is proceeding in our case, and no trial date has been set.

Eli Lilly and Company v. Impax Laboratories, Inc. (Duloxetine)

In November 2008, Eli Lilly and Company filed suit against us in the U.S. District Court for the Southern District of Indiana, alleging patent infringement for the filing of our ANDA relating to Duloxetine Hydrochloride Delayed Release Capsules, 20 mg, 30 mg, and 60 mg, generic to Cymbalta^®. In February 2009, the parties agreed to be bound by the final judgment concerning infringement, validity and enforceability of the patent at issue in cases brought by Eli Lilly against other generic drug manufacturers that have filed ANDAs relating to this product and proceedings in this case were stayed.

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Warner Chilcott, Ltd. et.al. v. Impax Laboratories, Inc. (Doxycycline Hyclate)

In December 2008, Warner Chilcott Limited and Mayne Pharma International Pty. Ltd. (together, “Warner Chilcott”) filed suit against us in the U.S. District Court for the District of New Jersey, alleging patent infringement for the filing of our ANDA relating to Doxycycline Hyclate Delayed Release Tablets, 75 mg and 100 mg, generic to Doryx^®. We filed an answer and counterclaim. Thereafter, in March 2009, Warner Chilcott filed another lawsuit in the same jurisdiction, alleging patent infringement for the filing of our ANDA for the 150 mg strength. Fact discovery closed on January 31, 2011 and no trial date has been set.

Eurand, Inc., et al. v. Impax Laboratories, Inc. (Cyclobenzaprine)

In January 2009, Eurand, Inc., Cephalon, Inc., and Anesta AG (collectively, “Cephalon”) filed suit against us in the U.S. District Court for the District of Delaware, alleging patent infringement for the filing of our ANDA relating to Cyclobenzaprine Hydrochloride Extended Release Capsules, 15 mg and 30 mg, generic to Amrix^®. This matter was settled and dismissed on October 11, 2010. Under the terms of the settlement, we obtained the right to launch our product one year prior to expiration of the Eurand patent, which is currently expected to expire in February 2025, or earlier under certain circumstances.

Genzyme Corp. v. Impax Laboratories, Inc. (Sevelamer Hydrochloride)

In March 2009, Genzyme Corporation filed suit against us in the U.S. District Court for the District of Maryland, alleging patent infringement for the filing of our ANDA relating to Sevelamer Hydrochloride Tablets, 400 mg and 800 mg, generic to Renagel^®. We have filed an answer and counterclaim. Fact discovery closes on February 28, 2011, and trial is scheduled for September 27, 2012.

Genzyme Corp. v. Impax Laboratories, Inc. (Sevelamer Carbonate)

In April 2009, Genzyme Corporation filed suit against us in the U.S. District Court for the District of Maryland, alleging patent infringement for the filing of our ANDA relating to Sevelamer Carbonate Tablets, 800 mg, generic to Renvela^®. We have filed an answer and counterclaim. Fact discovery closes on February 28, 2011, and trial is scheduled for September 27, 2012.

The Research Foundation of State University of New York et al. v. Impax Laboratories, Inc. (Doxycycline Monohydrate)

In September 2009, The Research Foundation of State University of New York; New York University; Galderma Laboratories Inc.; and Galderma Laboratories, L.P. (collectively, “Galderma”) filed suit against us in the U.S. District Court for the District of Delaware alleging patent infringement for the filing of our ANDA relating to Doxycycline Monohydrate Delayed-Release Capsules, 40 mg, generic to Oracea^®. We filed an answer and counterclaim. In October 2009, the parties agreed to be bound by the final judgment concerning infringement, validity and enforceability of the patent at issue in cases brought by Galderma against another generic drug manufacturer that has filed an ANDA relating to this product and proceedings in this case were stayed. In June 2010, Galderma moved for a preliminary injunction to bar sales by the other generic manufacturer based on two of the patents in suit, which motion was granted by the magistrate judge in a decision finding Galderma had shown a likelihood of success on the merits.

Elan Pharma International Ltd. and Fournier Laboratories Ireland Ltd. v. Impax Laboratories, Inc. and Abbott Laboratories and Laboratories Fournier S.A. v. Impax Laboratories, Inc. (Fenofibrate)

In October 2009, Elan Pharma International Ltd. with Fournier Laboratories Ireland Ltd. and Abbott Laboratories with Laboratories Fournier S.A. filed separate suits against us in the U.S. District Court for the District of New Jersey alleging patent infringement for the filing of our ANDA relating to Fenofibrate Tablets, 48 mg and 145 mg, generic to Tricor^®. We have filed an answer and counterclaim. In September 2010, the Court vacated the schedule and ordered a stay in the two matters related to us.

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Daiichi Sankyo, Inc. et al. v. Impax Laboratories, Inc. (Colesevelam)

In January 2010, Daiichi Sankyo, Inc. and Genzyme Corporation (together, “Genzyme”) filed suit against us in the U.S. District Court for the District of Delaware alleging patent infringement for the filing of our ANDA relating to Colesevelam Hydrochloride Tablets, 625 mg, generic to Welchol^®. We have filed an answer and counterclaim. Fact discovery closes July 29, 2011 and no trial date has been scheduled.

Abbott Laboratories, et al. v. Impax Laboratories, Inc. (Choline Fenofibrate)

In March 2010, Abbott Laboratories and Fournier Laboratories Ireland Ltd. (together, “Abbott”) filed suit against us in the U.S District Court for the District of New Jersey alleging patent infringement for the filing of our ANDA related to Choline Fenofibrate Delayed Release Capsules, 45 mg and 135 mg, generic of Trilipix^®. We have filed an answer. Fact discovery closes February 4, 2011 and no trial date has been scheduled.

Shionogi Pharma, Inc. and LifeCycle Pharma A/S v. Impax Laboratories, Inc. (Fenofibrate)

In April 2010, Shionogi Pharma, Inc. and LifeCycle Pharma A/S filed suit against us in the U.S. District Court for the District of Delaware alleging patent infringement for the filing of our ANDA relating to Fenofibrate Tablets, 40 and 120 mg, generic to Fenoglide^®. We have filed our answer.

Genzyme Corp. v. Impax Laboratories, Inc. (Sevelamer Carbonate Powder)

In July 2010, Genzyme Corporation filed suit against us in the U.S. District Court for the District of Maryland, alleging patent infringement for the filing of our ANDA relating to Sevelamer Carbonate Powder, 2.4 g and 0.8 g packets, generic to Renvela^® powder. We have filed an answer and counterclaim. Fact discovery closes on February 28, 2011 and trial is scheduled for September 27, 2012.

Schering Corp., et al. v. Impax Laboratories, Inc. (Ezetimibe/Simvastatin)

In August 2010, Schering Corporation and MSP Singapore Company LLC (together, “Schering”) filed suit against us in the U.S. District Court for the District of New Jersey alleging patent infringement for the filing of our ANDA relating to Ezetimibe/Simvastatin Tablets, 10 mg/80 mg, generic to Vytorin ^®. We have filed an answer and counterclaim. In December 2010, the parties agreed to be bound by the final judgment concerning validity and enforceability of the patents at issue in cases brought by Schering against other generic drug manufacturers that have filed ANDAs relating to this product and proceedings in this case were stayed.

Abbott Laboratories, et al. v. Impax Laboratories, Inc. (Niacin-Simvastatin)

In November 2010, Abbott Laboratories and Abbott Respiratory LLC filed suit against us in the U.S. District Court for the District of Delaware, alleging patent infringement for the filing of our ANDA relating to Niacin-Simvastatin Tablets, 1000/20 mg, generic to Simcor^®. We have not yet filed our answer.

Alza Corp., et al. v. Impax Laboratories, Inc., et al. (Methylphenidate)

In November 2010, Alza Corp. and Ortho-McNeil-Janssen Pharmaceuticals, Inc. (together, “Alza”) filed suit against us in the U.S. District Court for the District of Delaware, alleging patent infringement for the filing of our ANDA relating to Methylphenidate, 54 mg, generic to Concerta^®. We have filed our answer.

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Daiichi Sankyo, Inc. et al. v. Impax Laboratories, Inc. (Colesevelam Powder)

In November 2010, Daiichi Sankyo, Inc. and Genzyme Corporation (together, “Daiichi”) filed suit against us in the U.S. District Court for the District of Delaware alleging patent infringement for the filing of our ANDA relating to Colesevelam Hydrochloride Powder, 1.875 gm/packet and 3.75 gm/packet, generic to Welchol^® for Oral Suspension. We have filed an answer and counterclaim. Fact discovery closes July 29, 2011 and no trial date has been scheduled.

Shire LLC, et al. v. Impax Laboratories, Inc., et al. (Guanfacine)

In December 2010, Shire LLC, Supernus Pharmaceuticals, Inc., Amy F.T. Arnsten, Ph.D., Pasko Rakic, M.D., and Robert D. Hunt, M.D. (together, “Shire”) filed suit against us in the U.S. District Court for the Northern District of California alleging patent infringement for the filing of our ANDA relating to Guanfacine Hydrochloride Tablets, 4 mg, generic to Intuniv^®. In January, 2011 Shire amended its complaint to add the 1 mg, 2 mg, and 3 mg strengths. We have filed an answer and counterclaims.

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Other Litigation Related to Our Business

Budeprion XL Litigation

In June 2009, we were named a co-defendant in class action lawsuits filed in California state court in an action titled Kelly v. Teva Pharmaceuticals Indus. Ltd, et al., No. BC414812 (Calif. Superior Crt. L.A. County). Subsequently, additional class action lawsuits were filed in Louisiana (Morgan v. Teva Pharmaceuticals Indus. Ltd, et al., No. 673880 (24th Dist Crt., Jefferson Parish, LA.)), North Carolina (Weber v. Teva Pharmaceuticals Indus., Ltd., et al., No. 07 CV5002556, (N.C. Superior Crt., Hanover County)), Pennsylvania (Rosenfeld v. Teva Pharmaceuticals USA, Inc.. et al., No. 2:09-CV-2811 (E.D. Pa.)), Florida (Henchenski and Vogel v. Teva Pharmaceuticals Industries Ltd., et al., No. 2:09-CV-470-FLM-29SPC (M.D. Fla.)), Texas (Anderson v. Teva Pharmaceuticals Indus., Ltd., et al., No. 3-09CV1200-M (N.D. Tex.)), Oklahoma (Brown et al. v. Teva Pharmaceuticals Inds., Ltd., et al., No. 09-cv-649-TCK-PJC (N.D. OK)), Ohio (Latvala et al. v. Teva Pharmaceuticals Inds., Ltd., et al., No. 2:09-cv-795 (S.D. OH)), Alabama (Jordan v. Teva Pharmaceuticals Indus. Ltd et al., No. CV09-709 (Ala. Cir. Crt. Baldwin County)), and Washington (Leighty v. Teva Pharmaceuticals Indus. Ltd et al., No. CV09-01640 (W. D. Wa.)). All of the complaints involve Budeprion XL, a generic version of Wellbutrin XL^® that is manufactured by us and marketed by Teva, and allege that, contrary to representations of Teva, Budeprion XL is less effective in treating depression, and more likely to cause dangerous side effects, than Wellbutrin XL. The actions are brought on behalf of purchasers of Budeprion XL and assert claims such as unfair competition, unfair trade practices and negligent misrepresentation under state law. Each lawsuit seeks damages in an unspecified amount consisting of the cost of Budeprion XL paid by class members, as well as any applicable penalties imposed by state law, and disclaims damages for personal injury. The state court cases have been removed to federal court, and a petition for multidistrict litigation to consolidate the cases in federal court has been granted. These cases and any subsequently filed cases will be heard under the consolidated action entitled In re: Budeprion XL Marketing Sales Practices, and Products Liability Litigation, MDL No. 2107, in the U.S. District Court for the Eastern District of Pennsylvania. We filed a motion to dismiss and a motion to certify that order for interlocutory appeal, both of which were denied. Discovery is proceeding, and no trial date has been scheduled.

Impax Laboratories, Inc. v. Shire LLC and Shire Laboratories, Inc. (generic Adderall XR)

On November 1, 2010, we filed suit against Shire LLC and Shire Laboratories, Inc. (collectively “Shire”) in the Supreme Court of the State of New York, alleging breach of contract and other related claims due to Shire’s failure to fill our orders for the generic Adderall XR^® product as required by the parties’ settlement agreement and license and distribution agreement, signed in January 2006. In addition, we have filed a motion for a preliminary injunction and a temporary restraining order seeking to require Shire to fill product orders placed by us. The case was removed to the U.S. District Court for the Southern District of New York by Shire based on diversity jurisdiction. Discovery is proceeding, and no trial date has been scheduled.

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Insurance

Product liability claims by customers constitute a risk to all pharmaceutical manufacturers. At December 31, 2010, we carried $80 million of product liability insurance for our own manufactured products. This insurance may not be adequate to cover any product liability claims to which we may become subject.

Item 4. (Removed and Reserved)

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Stock Price

Our common stock is traded on the NASDAQ Global Market under the symbol “IPXL”. The following table sets forth the high and low sales prices for our common stock, as follows:

	Price Range
	per Share
	High		Low
Year Ending December 31, 2010
First Quarter	$	18.15	$	12.87
Second Quarter	$	22.39	$	7.20
Third Quarter	$	20.12	$	14.70
Fourth Quarter	$	22.00	$	17.61
Year Ended December 31, 2009
First Quarter	$	7.74	$	2.50
Second Quarter	$	7.75	$	4.68
Third Quarter	$	9.35	$	6.81
Fourth Quarter	$	13.97	$	8.30

The sales prices noted above were reported by: (i) Pink OTC Markets Inc. from January 2009 through March 15, 2009 and (ii) the NASDAQ Global Market from March 16, 2009 through December 31, 2010. The prices reported by Pink OTC Markets Inc. were inter-dealer quotations, without retail mark-up, mark-down or commission.

Previously, our common stock was traded on The NASDAQ Stock Market LLC under the symbol “IPXL” until August 8, 2005 when it was delisted due to our failure to file our Annual Report on Form 10-K for the year ended December 31, 2004 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, which violated NASDAQ Marketplace Rule 4310(c) (14), compliance with which was required for continued listing on The NASDAQ Stock Market LLC. Then, from August 8, 2005 until December 29, 2006, our common stock was quoted on the Pink Sheets^® operated by Pink OTC Markets Inc. under the symbol “IPXL.PK.” On December 29, 2006, the SEC suspended all trading in our common stock through January 16, 2007 and instituted an administrative proceeding to determine whether, in light of our reporting delinquency, to suspend or revoke the registration of our common stock under Section 12 of the Exchange Act. Beginning January 17, 2007, our common stock was again quoted in the Pink Sheets^®, but from such time forward, dealers were permitted to publish quotations only on behalf of customers representing such customers’ indications of interest and not involving dealers’ solicitation of such interest. However, on May 23, 2008, the registration of our common stock under Section 12 of the Exchange Act was revoked and brokers and dealers were prohibited from effecting transactions in our common stock. Subsequently, on December 9, 2008 our common stock again became registered under Section 12 of the Exchange Act and beginning January 2009 was quoted on the Pink Sheets^® and OTC Bulletin Board under the symbol “IPXL.OB” until March 16, 2009, when our common stock was again listed on the NASDAQ Global Market.

Holders

As of February 15, 2011, there were approximately 353 holders of record of our common stock, solely based upon the count our transfer agent provided us as of that date.

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Dividends

We have never paid cash dividends on our common stock and have no present plans to do so in the foreseeable future. Our current policy is to retain all earnings, if any, for use in the operation of our business. The payment of future cash dividends, if any, will be at the discretion of the Board of Directors and will be dependent upon our earnings, financial condition, capital requirements and other factors as the Board of Directors may deem relevant. Our loan agreement with Wells Fargo prohibits the payment of dividends without the consent of Wells Fargo.

Unregistered Sales of Securities

On December 22, 2010, we issued an aggregate amount of 15,811 shares of our common stock as a royalty payment to two individuals under a development and licensing agreement pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended. There were no other sales of unregistered securities during the year ended December 31, 2010.

Purchases of Equity Securities by the Issuer

The following table provides information regarding the purchases of our equity securities by us during the quarter ended December 31, 2010.

				Total
				Number of
				Shares (or		Maximum
				Units)		Number (or
				Purchased		Approximate Dollar
				as Part of		Value) of Shares (or
	Total			Publicly		Units) that May Yet
	Number of Shares	Average		Announced		Be Purchased Under
	(or Units)	Price Paid Per		Plans or		the Plans or
Period	Purchased(1)	Share (or Unit)		Programs		Programs
October 1, 2010 to October 31, 2010	34,492 shares of common stock	$	21.38		—		—
November 1, 2010 to November 30, 2010	8,587 shares of common stock	$	18.97		—		—
December 1, 2010 to December 31, 2010	3,024 shares of common stock	$	18.65		—		—

(1) Represents shares of our common stock that we accepted during the indicated periods as a tax withholding from certain of our employees in connection with the vesting of shares of restricted stock pursuant to the terms of our Amended and Restated 2002 Equity Incentive Plan (the “2002 Plan”).

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Equity Compensation Plans

The following table details information regarding our existing equity compensation plans as of December 31, 2010:

						Number of
						Securities
						Remaining
						Available for
	Number of					Future Issuance
	Securities to be					Under Equity
	Issued Upon			Weighted Average		Compensation
	Exercise of			Exercise Price of		Plans (Excluding
	Outstanding			Outstanding		Securities reflected
	Options, Warrants			Options, Warrants		in
	and Rights			and Rights		Column (a))
Plan Category	(a)			(b)		(c)
Equity compensation plans approved by security holders		6,514,676	(1)	$	10.84		2,674,061
Equity compensation plans not approved by security holders		—			—		283,481	(2)
Total:		6,514,676		$	10.84		2,957,542

(1)	Represents options issued pursuant to the 2002 Plan, and the Impax Laboratories Inc. 1999 Equity Incentive Plan.
(2)	Represents 283,481 shares of common stock available for future issuance under the Impax Laboratories, Inc. 2001 Non-Qualified Employee Stock Purchase Plan.

See “Item 15. Exhibits and Financial Statement Schedules — Notes 14 and 15 to Consolidated Financial Statements,” for information concerning our equity compensation plans and employee benefit plans.

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Item 6. Selected Financial Data

The following selected financial data should be read together with our consolidated financial statements and accompanying consolidated financial statement footnotes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this Annual Report on Form 10-K. The selected consolidated financial statement data in this section are not intended to replace our consolidated financial statements and the accompanying consolidated financial statement footnotes. Our historical consolidated financial results are not necessarily indicative of our future consolidated financial results.

The selected financial data set forth below are derived from our consolidated financial statements. The consolidated statements of operations data for the years ended December 31, 2010, 2009 and 2008 and the consolidated balance sheet data as of December 31, 2010 and 2009 are derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. These audited consolidated financial statements include, in the opinion of management, all adjustments necessary for the fair presentation of our financial position and results of operations for these periods.

	For the Years Ended December 31
($ in 000s, except per share data)	2010		2009		2008		2007		2006
Statements of Operations Data:
Total revenues	$	879,509	$	358,409	$	210,071	$	273,753	$	135,246
Research and development		86,223		63,274		59,237		39,992		29,635
Total operating expenses		145,939		117,683		114,179		89,590		74,245
Income (loss) from operations		393,324		70,413		3,923		76,507		(11,247	)
Net income (loss)		250,418		50,061		15,987		125,410		(12,044	)
Net income (loss) per share — basic	$	4.04	$	0.83	$	0.27	$	2.13	$	(0.20	)
Net income (loss) per share — diluted	$	3.82	$	0.82	$	0.26	$	2.05	$	(0.20	)

	As of December 31
($ in 000s)	2010		2009		2008			2007			2006
Balance Sheet Data:
Cash, cash equivalents and short-term investments	$	348,401	$	90,369	$	119,985		$	143,496		$	29,834
Working capital		394,287		170,143		126,784			110,108			81,919
Total assets		693,318		660,756		514,287			513,745			343,888
Long-term debt		—		—		5,990			16,061			89,603
Total liabilities		185,169		438,529		354,637			377,697			347,864
Retained earnings (deficit)		251,246		828		(49,233	)		(65,220	)		(186,215	)
Total stockholders’ equity (deficit)	$	508,149	$	222,227	$	159,650		$	136,048		$	(3,976	)

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis, as well as other sections in this report, should be read in conjunction with the consolidated financial statements and related Notes to Consolidated Financial Statements included elsewhere herein. All references to years mean the relevant 12-month period ended December 31.

Overview

General

We are a technology based, specialty pharmaceutical company applying formulation and development expertise, as well as our drug delivery technology, to the development, manufacture and marketing of controlled-release and niche generics, in addition to the development of branded products. As of February 4, 2011, we marketed 99 generic pharmaceuticals, which represent dosage variations of 29 different pharmaceutical compounds through our own Global Pharmaceuticals division; another 10 of our generic pharmaceuticals representing dosage variations of 4 different pharmaceutical compounds are marketed by our alliance and collaboration agreement partners. We have 38 applications pending at the FDA, including 2 tentatively approved by the FDA, and 61 other products in various stages of development for which applications have not yet been filed.

In the generic pharmaceuticals market, we focus our efforts on controlled-release generic versions of selected brand-name pharmaceuticals covering a broad range of therapeutic areas and having technically challenging drug-delivery mechanisms or limited competition. We employ our technologies and formulation expertise to develop generic products that will reproduce the brand-name product’s physiological characteristics but not infringe any valid patents relating to the brand-name product. We generally focus on brand-name products as to which the patents covering the active pharmaceutical ingredient have expired or are near expiration, and we employ our proprietary formulation expertise to develop controlled-release technologies that do not infringe patents covering the brand-name products’ controlled-release technologies.

We are also developing specialty generic pharmaceuticals that we believe present one or more barriers to entry by competitors, such as difficulty in raw materials sourcing, complex formulation or development characteristics or special handling requirements. In the brand-name pharmaceuticals market, we are developing products for the treatment of central nervous system (“CNS”) disorders. Our brand-name product portfolio consists of development-stage projects to which we are applying our formulation and development expertise to develop differentiated, modified, or controlled-release versions of currently marketed (either in the U.S. or outside the U.S.) drug substances. We intend to expand our brand-name products portfolio primarily through internal development and also through licensing and acquisition.

We operate in two segments, referred to as the “Global Pharmaceuticals Division” or “Global Division” and the “Impax Pharmaceuticals Division” or “Impax Division.”

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The Global Division develops, manufactures, sells, and distributes generic pharmaceutical products primarily through four sales channels: the “Global Products” sales channel, for generic pharmaceutical prescription products we sell directly to wholesalers, large retail drug chains, and others; the “Private Label” sales channel, for generic pharmaceutical over-the-counter (“OTC”) and prescription products we sell to unrelated third-party customers who in-turn sell the product to third parties under their own label, the “Rx Partner” sales channel, for generic prescription products sold through unrelated third-party pharmaceutical entities under their own label pursuant to alliance and collaboration agreements; and the “OTC Partner” sales channel, for sales of generic pharmaceutical OTC products sold through unrelated third-party pharmaceutical entities under their own label pursuant to alliance and collaboration agreements. We sell our Global Division products within the continental United States of America and the Commonwealth of Puerto Rico. We have no sales in foreign countries. We also generate revenue from research and development services provided under a joint development agreement with another pharmaceutical company, and report such revenue under the caption “Research partner” revenue on the consolidated statement of operations. We provide theses services through the research and development group in our Global Division.

The Impax Division is engaged in the development of proprietary brand pharmaceutical products through improvements to already approved pharmaceutical products to address CNS disorders. The Impax Division is also engaged in the co-promotion of products developed by unrelated third-party pharmaceutical entities through our direct sales force focused on marketing to physicians (referred to as “physician detailing sales calls”) in the CNS community. We also generate revenue in the Impax Division from research and development services provided under a development and license agreement with an unrelated third-party pharmaceutical company, and report such revenue under the caption “Research Partner” revenue on the consolidated statement of operations.

We have entered into several alliance, collaboration or license and distribution agreements with respect to certain of our products and services and may enter into similar agreements in the future. These agreements may require us to relinquish rights to certain of our technologies or product candidates, or to grant licenses on terms which ultimately may prove to be unfavorable to us. Relationships with alliance and collaboration partners may also include risks due to the failure of a partner to perform under the agreement, incomplete marketplace information, inventories, development capabilities, regulatory compliance and commercial strategies of our partners and our agreements may be the subject of contractual disputes. If we, or our partners, are not successful in commercializing the products covered by the agreements, such commercial failure could adversely affect our business.

Pursuant to a license and distribution agreement, we are dependent on an unrelated third-party pharmaceutical company to supply us with our authorized generic of Adderall XR^®, which we market and sell. We experienced disruptions related to the supply of our authorized generic of Adderall XR^® under the license and distribution agreement during the fiscal year ended December 31, 2010. In November 2010, we filed suit against the third party supplier of our authorized generic of Adderall XR^® for breach of contract and other related claims due to a failure to fill our orders as required by the license and distribution agreement. In addition, we have filed a motion for a preliminary injunction and a temporary restraining order seeking to require the third party supplier to fill product orders placed by us. If we suffer supply disruptions related to our generic of Adderall XR^® in the future, our revenues and relationships with our customers may be materially adversely affected. Further, we may enter into similar license and distribution agreements in the future. Any delay or interruption in the supply of product under such agreements could curtail or delay our product shipments and adversely affect our revenues, as well as jeopardize our relationships with our customers.

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Impact of Economic and Regulatory Conditions

The global economy has undergone a period of significant volatility which has lead to diminished credit availability, declines in consumer confidence, and increases in unemployment rates. There remains caution about the stability of the U.S. economy due to the global financial crisis, and there can be no assurances further deterioration in the financial markets will not occur. These economic conditions have resulted in, and could lead to further, reduced consumer spending related to healthcare in general and pharmaceutical products in particular. In addition, we have exposure to many different industries and counterparties, including our partners under our alliance and collaboration agreements, suppliers of raw chemical materials, drug wholesalers and other customers that may be affected by an unstable economic environment. Any economic instability may affect these parties’ ability to fulfill their respective contractual obligations to us or cause them to limit or place burdensome conditions upon future transactions with us which could adversely affect our business, financial position and results of operations. Healthcare costs have risen significantly over the past decade. There have been, and continue to be, new and proposed healthcare regulations, including the “Healthcare Reform Law,” to reduce healthcare spending and contain costs. Certain reform initiatives may impose significant new regulations that limit prices on currently marketed products and future products currently under development, or require us to agree to provide product rebates on certain items to government payers, which may be significant. These limitations could, in turn, reduce the amount of revenues we will be able to ultimately earn in the future from sales of our products and services.

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Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States (GAAP) and the rules and regulations of the U.S. Securities & Exchange Commission (SEC) require the use of estimates and assumptions, based on complex judgments considered reasonable, and affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant judgments are employed in estimates used in determining values of tangible and intangible assets, legal contingencies, tax assets and tax liabilities, fair value of share-based compensation related to equity incentive awards issued to employees and directors, and estimates used in applying the Company’s revenue recognition policy including those related to accrued chargebacks, rebates, product returns, Medicare, Medicaid, and other government rebate programs, shelf-stock adjustments, and the timing and amount of deferred and recognized revenue and deferred and amortized manufacturing costs under the Company’s several alliance and collaboration agreements. Actual results may differ from estimated results. Certain prior year amounts have been reclassified to conform to the current year presentation.

Although we believe our estimates and assumptions are reasonable when made, they are based upon information available to us at the time they are made. We periodically review the factors having an influence on our estimates and, if necessary, adjust such estimates. Although historically our estimates have generally been reasonably accurate, due to the risks and uncertainties involved in our business and evolving market conditions, and given the subjective element of the estimates made, actual results may differ from estimated results. This possibility may be greater than normal during times of pronounced economic volatility.

Global Product sales, net. We recognize revenue from direct sales in accordance with SEC Staff Accounting Bulletin No. 104, Topic 13, “Revenue Recognition” (“SAB 104”). Revenue from direct product sales is recognized at the time title and risk of loss pass to customers. Accrued provisions for estimated chargebacks, rebates, product returns, and other pricing adjustments are provided for in the period the related sales are recorded.

Consistent with industry practice, we record an accrued provision for estimated deductions for chargebacks, rebates, product returns, Medicare, Medicaid, and other government rebate programs, shelf-stock adjustments, and other pricing adjustments, in the same period when revenue is recognized. The objective of recording provisions for such deductions at the time of sale is to provide a reasonable estimate of the aggregate amount we expect to ultimately credit our customers. Since arrangements giving rise to the various sales credits are typically time driven (i.e. particular promotions entitling customers who make purchases of our products during a specific period of time, to certain levels of rebates or chargebacks), these deductions represent important reductions of the amounts those customers would otherwise owe us for their purchases of those products. Customers typically process their claims for deductions in a reasonably timely manner, usually within the established payment terms. We monitor actual credit memos issued to our customers and compare such actual amounts to the estimated provisions, in the aggregate, for each deduction category to assess the reasonableness of the various reserves at each quarterly balance sheet date. Differences between our estimated provisions and actual credits issued have not been significant, and are accounted for in the current period as a change in estimate in accordance with GAAP. We do not have the ability to specifically link any particular sales credit to an exact sales transaction and since there have been no material differences, we believe our systems and procedures are adequate for managing our business. An event such as the failure to report a particular promotion could result in a significant difference between the estimated amount accrued and the actual amount claimed by the customer, and, while there have been none to date, we would evaluate the particular events and factors giving rise to any such significant difference in determining the appropriate accounting.

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Chargebacks. We have agreements establishing contract prices for certain products with certain indirect customers, such as managed care organizations, hospitals, and government agencies who purchase our products from drug wholesalers. The contract prices are lower than the prices the customer would otherwise pay to the wholesaler, and the difference is referred to as a chargeback, which generally takes the form of a credit issued by us to reduce the gross sales amount we invoiced to our wholesaler customer. An accrued provision for chargeback deductions is estimated and recorded at the time we ship the products to our wholesaler customers. The primary factors we consider when estimating the accrued provision for chargebacks are the average historical chargeback credits given, the mix of products shipped, and the amount of inventory on hand at the three major drug wholesalers with whom we do business. We monitor aggregate actual chargebacks granted and compare them to the estimated accrued provision for chargebacks to assess the reasonableness of the chargeback reserve at each quarterly balance sheet date. The following table is a roll-forward of the activity in the chargeback reserve for the years ended December 31, 2010, 2009 and 2008:

	As of December 31,
Chargeback reserve	2010			2009			2008
	($ in 000s)
Beginning balance	$	21,448		$	4,056		$	2,977
Provision recorded during the period		181,566			126,105			50,144
Credits issued during the period		(188,096	)		(108,713	)		(49,065	)
Ending balance	$	14,918		$	21,448		$	4,056
Provision as a percent of gross Global Product sales		19	%		24	%		28	%

The decrease in the provision for estimated chargebacks as a percent of gross Global Product sales from 2009 to 2010 was principally the result of the launch of our tamsulosin product and our authorized generic Adderall XR^® products, both of which generally resulted in higher gross Global Product sales and carried a lower average chargeback credit amount, relative to our other products sold through our Global Division’s Global Products sales channel, resulting in a lower overall aggregate average chargebacks as a percentage of gross Global Product sales during the year ended December 30, 2010. We commenced sales of our tamsulosin product on March 2, 2010 and had contractual market exclusivity for this generic product for the succeeding eight weeks, during which we were able to achieve high market-share penetration. Our tamsulosin product sales after the end of the contractual exclusivity period, have not remained at this level, as additional competing generic versions of the product entered the market in late April 2010, and have resulted in both price erosion and reduction of our market-share. (See Results of Operations below for additional discussion.)

The decrease in the provision for chargebacks as a percent of Global Product sales, gross from 2008 to 2009 was principally the result of the launch of our authorized generic Adderall XR^® products during the quarter ended December 31, 2009, which generally carried a lower level of chargebacks than other products sold through our Global Division’s Global Products sales channel, and resulted in a reduced overall aggregate chargeback rate during 2009.

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Rebates. In an effort to maintain a competitive position in the marketplace and to promote sales and customer loyalty, we maintain various rebate programs with our customers to whom we market our products through our Global Division Global Products sales channel. The rebates generally take the form of a credit memo to reduce the invoiced gross sales amount charged to a customer for products shipped. An accrued provision for rebate deductions is estimated and recorded at the time of product shipment. The primary factors we consider when estimating the provision for rebates are the average historical experience of aggregate credits issued, the mix of products shipped and the historical relationship of rebates as a percentage of total Global Product sales, gross, the contract terms and conditions of the various rebate programs in effect at the time of shipment, and the amount of inventory on hand at the three major drug wholesalers with which we do business. We also monitor aggregate actual rebates granted and compare them to the estimated aggregate provision for rebates to assess the reasonableness of the aggregate rebate reserve at each quarterly balance sheet date.

The following table is a roll-forward of the activity in the rebate reserve for the years December 31, 2010, 2009 and 2008:

	As of December 31,
Rebate reserve	2010			2009			2008
	($ in 000s)
Beginning balance	$	37,781		$	4,800		$	3,603
Provision recorded during the period		91,064			72,620			20,361
Credits issued during the period		(107,953	)		(39,639	)		(19,164	)
Ending balance	$	20,892		$	37,781		$	4,800
Provision as a percent of gross Global Product sales		9	%		14	%		11	%

The decrease in the provision for estimated rebates as a percent of gross Global Product sales from 2009 to 2010 was principally the result of our tamsulosin product and our authorized generic Adderall XR^® products, both of which resulted in higher gross Global Product sales. Our tamsulosin product carried a lower rebate credit amount, relative to our other products sold through our Global Division’s Global Products sales channel, resulting in a lower overall aggregate average rebate as a percentage of gross Global Product sales during the twelve months ended December 31, 2010. Additionally, average rebates provided for as a percentage on sales of our authorized generic Adderall XR^® products were lower during the twelve months ended December 31, 2010. We commenced sales of our tamsulosin product on March 2, 2010 and had contractual market exclusivity for this generic product for the succeeding eight weeks, during which we were able to achieve high market-share penetration. Following the expiration of our contractual exclusivity period, our tamsulosin product sales have decreased as additional competing generic versions of the product entered the market in late April 2010, and have resulted in both price erosion and reduction of our market-share. See “— Results of Operations” below for additional discussion on the affect of tamsulosin and our authorized generic of Adderall XR^® product sales on our financial condition.

The increase in the provision for rebates as a percent of Global Product sales, gross from 2008 to 2009 was principally the result of the launch of our authorized generic Adderall XR^® products during the fourth quarter ended December 31, -2009, which generally carried a higher level of rebates than other products sold through our Global Division’s Global Products sales channel, and resulted in a higher overall aggregate rebate rate during 2009.

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Returns. We allow our customers to return product (i) if approved by authorized personnel in writing or by telephone with the lot number and expiration date accompanying any request and (ii) if such products are returned within six months prior to, or until twelve months following, the products’ expiration date. We estimate a provision for product returns as a percentage of gross sales based upon historical experience of Global Division Global Product sales. The product return reserve is estimated using a historical lag period, which is the time between when the product is sold and when it is ultimately returned, and return rates, adjusted by estimates of the future return rates based on various assumptions, which may include changes to internal policies and procedures, changes in business practices, and commercial terms with customers, competitive position of each product, amount of inventory in the wholesaler supply chain, the introduction of new products and changes in market sales information. We also consider other factors, including significant market changes which may impact future expected returns, and actual product returns. We monitor aggregate actual product returns on a quarterly basis and we may record specific provisions for product returns we believe are not covered by historical percentages. The following table is a roll-forward of the activity in the accrued product returns for the years ended December 31, 2010, 2009 and 2008:

	As of December 31,
Returns reserve	2010			2009			2008
	($ in 000s)
Beginning balance	$	22,114		$	13,675		$	14,261
Provision recorded during the period		15,821			11,847			5,719
Credits issued during the period		(4,180	)		(3,408	)		(6,305	)
Ending balance	$	33,755		$	22,114		$	13,675
Provision as a percent of gross Global Product sales		1.6	%		2.3	%		3.2	%

The provision for returns as a percent of Global Product sales, gross has declined steadily during the three year period ended December 31, 2010 primarily as the result of continued improvement in our historical experience of actual return credits processed. Our historical experience for returns has improved due to the launch of new products in recent years, for example our tamsulosin product and our authorized generic Adderall XR^® products. In addition, sales of generic drug products which are not bioequivalent (sometimes referred to as “non-AB-rated”) to the associated brand drug, declined significantly as a percent of total gross Global Product sales from 2008 to 2009, and continued to make-up a small portion of our Global Product sales during the year ended December 31, 2010. Sales of our “non-AB-rated” drugs as a percent of total gross Global Product sales were approximately 0.2%, 0.2% and 2.0%, during the years ended December 31, 2010, 2009, and 2008, respectively, as a result of our decision to begin to discontinue the sale of non-AB-rated products, thereby having less impact on the overall returns percentage in 2008, and continuing through 2009 and 2010.

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Medicaid. As required by law, we provide a rebate payment on drugs dispensed under the Medicaid program. We determine our estimate of the accrued Medicaid rebate reserve primarily based on historical experience of claims submitted by the various states and any new information regarding changes in the Medicaid program which may impact our estimate of Medicaid rebates. In determining the appropriate accrual amount, we consider historical payment rates and processing lag for outstanding claims and payments. We record estimates for Medicaid payments as a deduction from gross sales, with corresponding adjustments to accrued liabilities. The accrual for Medicaid payments totaled $12,475,000 and $9,759,000 as of December 31, 2010 and 2009, respectively. The accrual for Medicaid rebate payments increased significantly beginning in 2009 as a result of the launch of our authorized generic Adderall XR^® products in October 2009; as such Medicaid rebate payments are calculated under the regulations applicable to brand products.

Shelf-Stock Adjustments. Based upon competitive market conditions, we may reduce the selling price of certain products. We may issue a credit against the sales amount to a customer based upon their remaining inventory of the product in question, provided the customer agrees to continue to make future purchases of product from the Company. . This type of customer credit is referred to as a shelf-stock adjustment, which is the difference between the sales price and the revised lower sales price, multiplied by an estimate of the number of product units on hand at a given date. Decreases in selling prices are discretionary decisions made by us in response to market conditions, including estimated launch dates of competing products and estimated declines in market price. The accrued reserve for shelf-stock adjustments totaled $281,000 and $225,000 as of December 31, 2010 and 2009, respectively. Historically, differences between our estimated and actual credits issued for shelf stock adjustments have not been significant.

Allowance for Uncollectible Amounts. We maintain allowances for uncollectible amounts for estimated losses resulting from amounts deemed to be uncollectible from our customers; these allowances are for specific amounts on certain accounts. The allowance for uncollectible amounts totaled $539,000 and $372,000 at December 31, 2010 and 2009, respectively.

Private Label Sales. We recognize revenue from direct sales in accordance with SAB 104. Revenue from direct product sales is recognized at the time title and risk of loss pass to customers. Revenue received from Private Label product sales are generally not subject to deductions for chargebacks, rebates, product returns, and other pricing adjustments. Additionally, Private Label product sales do not have upfront, milestone, or lump-sum payments and do not contain multiple deliverables under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ^TM (“ASC” or “the Codification”) Topic 605.

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Rx Partner and OTC Partner. Each of our alliance and collaboration agreements involves multiple deliverables in the form of products, services and/or licenses over extended periods. FASB ASC Topic 605-25 supplemented SAB 104 for accounting for such multiple-element revenue arrangements. With respect to our multiple-element revenue arrangements, we determine whether any or all of the elements of the arrangement should be separated into individual units of accounting under FASB ASC Topic 605-25. If separation into individual units of accounting is appropriate, we recognize revenue for each deliverable when the revenue recognition criteria specified by SAB 104 are achieved for the deliverable. If separation is not appropriate, we recognize revenue (and related direct manufacturing costs) over the estimated life of the agreement or the Company’s estimated expected period of performance using either the straight-line method or a modified proportional performance method. Under the modified proportional performance method, the amount recognized in the period of initial recognition is based upon the number of years elapsed under the agreement relative to the estimated total recognition period of the particular agreement. The amount of revenue recognized in the year of initial recognition is thus determined by multiplying the total amount realized by a fraction, the numerator of which is the then current year of the agreement and the denominator of which is the total number of years estimated to be the recognition period. The remaining balance of the amount realized is then recognized in equal amounts in each of the succeeding years of the recognition period. Thus, for example, with respect to profit share or royalty payments reported by an alliance and collaboration agreement partner during the third year of an agreement with an estimated recognition period of 15 years, 3 / 15 of the amount reported is recognized in the year reported and 1/15 of the amount is recognized during each of the remaining 12 years. A fuller description of our analysis under FASB ASC Topic 605-25 and the modified proportional performance method is set forth in Item 15. Exhibits and Financial Statement Schedules — Note 2 to Consolidated Financial Statements.”

We applied the updated guidance of ASC 605-25, “Multiple Element Arrangements”, to the Strategic Alliance Agreement with Teva Pharmaceuticals Curacao N.V., a subsidiary of Teva Pharmaceutical Industries Ltd. (“Teva Agreement”) during the year ended December 31, 2010 — see “Item 15. Exhibits and Financial Statement Schedules — Note 13 to Consolidated Financial Statements for a detailed discussion of the application of the updated guidance to the Teva Agreement. Rx Partner revenue is related to the Teva Agreement. All consideration received under the Teva Agreement is contingent, and therefore can not be allocated to the deliverables. We look to the underlying delivery of goods and /or services which give rise to the payment of consideration under the Teva Agreement to determine the appropriate revenue recognition. Consideration received as a result of research and development-related activities performed under the Teva Agreement are initially deferred and recorded as a liability captioned “Deferred revenue-alliance agreements”. We recognize the deferred revenue on a straight-line basis over our expected period of performance of such services. Consideration received as a result of the manufacture and delivery of products under the Teva Agreement is recognized at the time title and risk of loss passes to the customer — generally when product is received by Teva. We recognize profit share as current period revenue when earned.

OTC Partner revenue is related to our alliance and collaboration agreements with Merck & Co., Inc. (formerly Schering-Plough Corporation) and Pfizer Inc. (formerly Wyeth) with respect to supply of over-the-counter pharmaceutical products and related research and development services. We initially defer all revenue earned under our OTC Partner alliance and collaboration agreements. The deferred revenue is recorded as a liability captioned “Deferred revenue — alliance and collaboration agreements.” We also defer direct product manufacturing costs to the extent such costs are reimbursable by the OTC Partners. These deferred product manufacturing costs are recorded as an asset captioned “Deferred product manufacturing costs — alliance and collaboration agreements.” The product manufacturing costs in excess of amounts reimbursable by the OTC Partners are recognized as current period cost of revenue. We recognize revenue as OTC Partner revenue and amortize deferred product manufacturing costs as cost of revenues — as we fulfill our contractual obligations. Revenue is recognized and associated costs are amortized over the respective alliance and collaboration agreements’ term of the arrangement or our expected period of performance, using a modified proportional performance method. Under the modified proportional performance method of revenue recognition utilized by us, the amount recognized in the period of initial recognition is based upon the number of years elapsed under the respective alliance and collaboration agreement relative to the estimated total length of the recognition period. Under this method, the amount of revenue recognized in the year of initial recognition is determined by multiplying the total amount realized by a fraction, the numerator of which is the then current year of the alliance and collaboration agreement and the denominator of which is the total estimated life of the alliance and collaboration agreement. The amount recognized during each remaining year is an equal pro rata amount. Finally, cumulative revenue recognized is limited to the extent of cash collected and /or the fair value received. The result of the modified proportional performance method is a greater portion of the revenue is recognized in the initial period with the remaining balance being recognized ratably over either the remaining life of the arrangement or the expected period of performance of each respective alliance agreement.

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As noted above, our alliance and collaboration agreements obligate us to deliver multiple goods and /or services over extended periods. Such deliverables include manufactured pharmaceutical products, exclusive and semi-exclusive marketing rights, distribution licenses, and research and development services. In exchange for these deliverables, we receive payments from our alliance and collaboration agreement partners for product shipments, and may also receive royalty, profit sharing, and /or upfront or periodic milestone payments. Revenue received from the alliance and collaboration agreement partners for product shipments under these agreements is generally not subject to deductions for chargebacks, rebates, returns, shelf-stock adjustments, and other pricing adjustments. Royalty and profit sharing amounts we receive under these agreements are calculated by the respective alliance and collaboration agreement partner, with such royalty and profit share amounts generally based upon estimates of net product sales or gross profit which include estimates of deductions for chargebacks, rebates, returns, shelf stock adjustments and other adjustments the alliance agreement partners may negotiate with their customers. We record the alliance and collaboration agreement partner’s adjustments to such estimated amounts in the period the alliance and collaboration agreement partner reports the amounts to us.

Research Partner. We have entered into development agreements with unrelated third-party pharmaceutical companies under which we are collaborating in the development of five dermatological products, including four generic products and one branded dermatological product, and one branded CNS product. Under each of the development agreements, we received an upfront fee with the potential to receive additional milestone payments upon completion of contractually specified clinical and regulatory milestones. Additionally, we may also receive royalty payments from the sale, if any, of a successfully developed and commercialized branded product under one of the development agreements. Revenue received from the provision of research and development services, including the upfront payment and the contingent milestone payments, if any, will be deferred and recognized on a straight line basis over the expected period of performance of the research and development services. Royalty fee income, if any, will be recognized by us as current period revenue when earned.

Promotional Partner. We have entered into promotional services agreements with unrelated third-party pharmaceutical companies under which we provide physician detailing sales calls services to promote certain of those companies’ branded drug products. We receive service fee revenue in exchange for providing this service. We recognize revenue from the provision of physician detailing sales calls as such services are rendered and the performance obligations are met and from contingent payments, if any, at the time they are earned.

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Estimated Lives of Alliance and Collaboration Agreements. The revenue we receive under our alliance and collaboration agreements is not subject to adjustment for estimated chargebacks, rebates, product returns and other pricing adjustments as such adjustments are included in the amounts we receive from our partners. However, because we recognize revenue we receive under our alliance and collaboration agreements, which is required to be deferred, over the estimated life of the related agreement or our expected performance utilizing either the straight-line method or a modified proportional performance method, we are required to estimate the recognition period under each such agreement in order to determine the amount of revenue to be recognized in the current period. Sometimes this estimate is based solely on the fixed term of the particular alliance and collaboration agreement. In other cases the estimate may be based on more subjective factors as noted in the following paragraphs. While changes to the estimated recognition periods have been infrequent, such changes, should they occur, may have a significant impact on our financial statements.

As an illustration, with the application of the updated accounting principles promulgated by FASB ASC 605-25, to the Teva Agreement beginning in the quarter ended September 30, 2010, our estimated expected period of performance to provide research and development services under the Teva Agreement is now estimated to be a 160 month period, starting in July 2001 (following the June 2001 effective date of the Teva Agreement), and through to and including October 2014 (with the estimated date of FDA approval of the final product covered by the Teva Agreement). The FDA approval of the final product under the Teva Agreement represents the end of our expected period of performance as we will have no further contractual obligation to perform research and development services under the Teva Agreement and, therefore, the earnings process for consideration received from the provision of research and development services will be complete. In accordance with our accounting policy, the change in the recognition period for the Teva Agreement was applied prospectively, as an adjustment in the period of change in the quarter ended September 30, 2010. If we determine our estimated timing of FDA approval of the final product under the Teva Agreement requires further adjustment, we would adjust the recognition period under the Teva Agreement on a prospective basis, resulting in a change to the periodic revenue recognized under the Teva Agreement. For additional information on the accounting afforded the Teva Agreement, see “Item 15. Exhibits and Financial Statement Schedules — Note 13 to Consolidated Financial Statements.”

Additionally, for example, our expected period of performance to provide research and development services under our Joint Development Agreement with Medicis is estimated to be a 48 month period, starting in December 2008 (when the performance of the contractual services commenced) and ending in November 2012 (upon FDA approval of the fifth and final submission). The FDA approval of the final submission under the Joint Development Agreement represents the end of our estimated expected period of performance, as we will have no further contractual obligation to perform research and development services under the Joint Development Agreement, and therefore the earnings process will be complete. If the timing of FDA approval for the final submission under the Joint Development Agreement is different from our estimate, the revenue recognition period will change on a prospective basis at the time such event occurs. While no such change in the estimated life of the Joint Development Agreement has occurred to date, if we were to conclude significantly more time will be required to obtain FDA approval, then we would increase our estimate of the revenue recognition period under the Joint Development Agreement, resulting in reduced revenue recognition (and related amortized costs, if any) in current and future periods.

Additionally, we estimate our expected period of performance to provide research and development services under our Development and Co-Promotion Agreement with Endo Pharmaceuticals, Inc. (“Endo Agreement”) is 91 months commencing in June 2010 (when the performance of the contractual services commenced) and ending in December 2017 (the estimated date of FDA approval of the product to be developed under the Endo Agreement). The FDA approval of the product which is the subject of the Endo Agreement represents the end of our expected period of performance, as we will have no further contractual obligation to perform research and development activities under the Endo Agreement, and therefore the earnings process will be completed. If the timing of FDA approval for the final submission under the Endo Agreement is different from our estimate, the revenue recognition period will change on a prospective basis at the time such event occurs. While no such change in the estimated life of the Endo Agreement has occurred to date, if we were to conclude that significantly more time will be required to obtain FDA approval of the product to be developed under the Endo Agreement, then we would increase our estimate of the recognition period under the agreement, resulting in a lesser amount of revenue and related costs in current and future periods.

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Third-Party Research Agreements. In addition to our own research and development resources, we may use unrelated third-party vendors, including universities and independent research companies, to assist in our research and development activities. These vendors provide a range of research and development services to us, including clinical and bio-equivalency studies. We generally sign agreements with these vendors which establish the terms of each study performed by them, including, among other things, the technical specifications of the study, the payment schedule, and timing of work to be performed. Payments are generally earned by third-party researchers either upon the achievement of a milestone, or on a pre-determined date, as specified in each study agreement. We account for third-party research and development expenses as they are incurred according to the terms and conditions of the respective agreement for each study performed, with an accrued expense at each balance sheet date for estimated fees and charges incurred by us, but not yet billed to us. We monitor aggregate actual payments and compare them to the estimated provisions to assess the reasonableness of the accrued expense balance at each quarterly balance sheet date. Differences between our estimated and actual payments made have not been significant.

Share-Based Compensation. We recognize the fair value of each option and restricted share over its vesting period. Options and restricted shares granted under the 2002 Plan vest over a three or four year period and have a term of ten years. We estimate the fair value of each stock option award on the grant date using the Black-Scholes Merton option-pricing model, wherein: expected volatility is based on historical volatility of our common stock, and of a peer group for the period of time our common stock was deregistered as described in “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities”, over the period commensurate with the expected term of the stock options. The expected term calculation is based on the “simplified” method described in SAB No. 107, Share-Based Payment and SAB No. 110, Share-Based Payment, as the simplified method provides a reasonable estimate in comparison to our actual experience. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for an instrument with a maturity that is commensurate with the expected term of the stock options. The dividend yield is zero as we have never paid cash dividends on our common stock, and have no present intention to pay cash dividends.

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Income Taxes. We are subject to U.S. federal, state and local income taxes and Taiwan R.O.C. income taxes. We create a deferred tax asset, or a deferred tax liability, when we have temporary differences between the financial statement carrying values (GAAP) and the tax bases of the Company’s assets and liabilities.

Fair Value of Financial Instruments. Our cash and cash equivalents include a portfolio of high-quality credit securities, including U.S. Government sponsored entity securities, treasury bills, corporate bonds, short-term commercial paper, and /or high rated money market funds. Our entire portfolio matures in less than one year. The carrying value of the portfolio approximated the market value at December 31, 2010. Our deferred compensation liability is carried at fair value, based upon observable market values. We had no debt outstanding as of December 31, 2010. Our only remaining debt instrument at December 31, 2010 was the Wells Fargo credit facility, which would be subject to variable interest rates and principal payments should we decide to borrow against it.

Contingencies. In the normal course of business, we are subject to loss contingencies, such as legal proceedings and claims arising out of our business, covering a wide range of matters, including, among others, patent litigation, shareholder lawsuits, and product and clinical trial liability. In accordance with FASB ASC Topic 450 — Contingencies, we record accrued loss contingencies when it is probable a liability will be incurred and the amount of loss can be reasonably estimated and we do not recognize gain contingencies until realized.

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Goodwill. — In accordance with FASB ASC Topic 350, “Goodwill and Other Intangibles”, rather than recording periodic amortization of goodwill, goodwill is subject to an annual assessment for impairment by applying a fair-value-based test. Under FASB ASC Topic 350, if the fair value of the reporting unit exceeds the reporting unit’s carrying value, including goodwill, then goodwill is considered not impaired, making further analysis not required. We consider each of our Global Division and Impax Division operating segments to be a reporting unit, as this is the lowest level for each of which discrete financial information is available. We attribute the entire carrying amount of goodwill to the Global Division. We concluded the carrying value of goodwill was not impaired as of December 31, 2010 and 2009, as the fair value of the Global Division exceeded its carrying value at each date. We perform our annual goodwill impairment test in the fourth quarter of each year. We estimate the fair value of the Global Division using a discounted cash flow model for both the reporting unit and the enterprise, as well as earnings and revenue multiples per common share outstanding for enterprise fair value. In addition, on a quarterly basis, we perform a review of our business operations to determine whether events or changes in circumstances have occurred that could have a material adverse effect on the estimated fair value of the reporting unit, and thus indicate a potential impairment of the goodwill carrying value. If such events or changes in circumstances were deemed to have occurred, we would perform an interim impairment analysis, which may include the preparation of a discounted cash flow model, or consultation with one or more valuation specialists, to analyze the impact, if any, on our assessment of the reporting unit’s fair value. We have not to date deemed there to be any significant adverse changes in the legal, regulatory or business environment in which we conduct our operations.

Adoption of FASB ASC Topic 470

In May 2008, the FASB issued an accounting standard related to convertible debt instruments which may be settled in cash upon conversion (including partial cash settlement), referred to as FASB ASC Topic 470. FASB ASC Topic 470 requires the issuing entity of such instruments to separately account for the liability and equity components to represent the issuing entity’s nonconvertible debt borrowing interest rate when interest charges are recognized in subsequent periods. The provisions of FASB ASC Topic 470 must be applied retrospectively for all periods presented even if the instrument has matured, has been extinguished, or has been converted as of its effective date. The Statement of Operations for 2008 presented below has been adjusted to reflect the application of FASB ASC Topic 470, which we applied on a retrospective basis beginning with the year ended December 31, 2007. See “Item 15. Exhibits and Financial Statement Schedules — Notes 2 and 18 to Consolidated Financial Statements” for more information on the adoption of FASB ASC Topic 470.

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Results of Operations

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

Overview:

The following table sets forth our summarized, consolidated results of operations for the years ended December 31, 2010 and 2009:

	Year Ended				Increase/
	December 31		December 31		(Decrease)
(in $000’s)	2010		2009		$			%
Total revenues	$	879,509	$	358,409	$	521,100			145	%
Gross profit		539,263		188,096		351,167			187	%
Income from operations		393,324		70,413		322,911			459	%
Income before income taxes		393,879		70,977		322,902			455	%
Provision for income taxes		143,521		21,006		122,515			583	%
		250,358		49,971		200,387			401	%
Non-controlling interest		60		90		(30	)		(33	)%
Net income	$	250,418	$	50,061	$	200,357			400	%

Net Income

Net income for the year ended December 31, 2010 was $250.4 million, an increase of $200.4 million, or 400%, as compared to net income of $50.1 million for the year ended December 31, 2009, primarily attributable to significant revenues and gross profit earned from sales of our tamsulosin, authorized generic Adderall XR^® and fenofibrate products. In addition, the year-over-year increase in net income was positively impacted by an adjustment to the accounting for the Teva Agreement of $64.2 million, or 26% of net income for the year ended December 31, 2010, partially offset by higher total operating expenses and an increase in the provision for income taxes. For additional information on the accounting afforded the Teva Agreement, see “Overview — Critical Accounting Estimates — Estimated Lives of Alliance and Collaboration Agreements.” As discussed throughout this section, we earned significant revenues and gross profit from sales of our tamsulosin, authorized generic Adderall XR^®, and fenofibrate products during the twelve months ended December 31, 2010. With respect to our authorized generic Adderall XR^® products, we are dependent on an unrelated third-party pharmaceutical company to supply us with such products we market and sell through our Global Division. Any delay or interruption in the supply of our authorized generic Adderall XR^® products from our supplier could curtail or delay our product shipments and adversely affect our revenues, as well as jeopardize our relationships with our customers. Any significant diminution of our authorized generic Adderall XR^® and fenofibrate product sales revenue and /or gross profit due to competition and /or product supply or any other reasons in future periods may materially and adversely affect our results of operations in such periods.

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Global Division

The following table sets forth results of operations for the Global Division for the years ended December 31, 2010 and 2009:

	Year Ended				Increase/
	December 31		December 31		(Decrease)
(in $000’s)	2010		2009		$			%
Revenues
Global Product sales, net	$	622,889	$	287,079	$	335,810			117	%
Private Label product sales		2,074		5,513		(3,439	)		(62	)%
Rx Partner		217,277		33,835		183,442			542	%
OTC Partner		8,888		6,842		2,046			30	%
Research Partner		13,539		11,680		1,859			16	%
Other		—		12		(12	)		(100	)%
Total revenues		864,667		344,961		519,706			151	%
Cost of revenues		328,163		158,270		169,893			107	%
Gross profit		536,504		186,691		349,813			187	%
Operating expenses:
Research and development		44,311		38,698		5,613			15	%
Patent litigation		6,384		5,379		1,005			19	%
Selling, general and administrative		15,951		10,891		5,060			46	%
Total operating expenses		66,646		54,968		11,678			21	%
Income from operations	$	469,858	$	131,723		338,135			257	%

Revenues

Total revenues for the Global Division for the year ended December 31, 2010, were $864.7 million, an increase of 151% over the year ended December 31, 2009.

Global Product sales, net, were $622.9 million, an increase of 117% over the year ended December 31, 2009 primarily as a result of sales of our tamsulosin, authorized generic Adderall XR^®, and fenofibrate products. Of the $335.8 million increase, $215.1 million resulted from sales of tamsulosin, our generic version of Flomax^®, a drug used to improve symptoms associated with an enlarged prostate. We commenced sales of our tamsulosin product on March 2, 2010 and had contractual market exclusivity for this generic product for the succeeding eight week period, during which we were able to achieve high market-share penetration. Our tamsulosin product sales, however, have not remained at this level, as additional competing generic versions of the product entered the market in late April 2010, at the conclusion of our contractual exclusivity period, and have resulted in both price erosion and reduction of our market share. We commenced sales of our authorized generic Adderall XR^® products, indicated for the treatment of attention deficit hyperactivity disorder, in October 2009, and thus had only three months of sales of these products in the prior year. The increase in sales of our fenofibrate products a cholesterol-lowering drug, resulted from a continued increase in demand for generic versions of cholesterol-lowering drugs in general.

Private Label product sales for the year ended December 31, 2010, were $2.1 million, a decrease of 62% over the prior year, primarily due to lower demand for our generic loratadine /pseudoephedrine products.

Rx Partner revenues for the year ended December 31, 2010, were $217.3 million, an increase of $183.4 million over the prior year, primarily attributable to an adjustment to the accounting for the Teva Agreement of $196.4 million and partially offset by reduced sales of our generic Wellbutrin^® XL 300mg resulting from increased marketplace competition. For additional information on the accounting afforded the Teva Agreement, see “— Overview — Critical Accounting Estimates — Estimated Lives of Alliance and Collaboration Agreements.” The adjustment to the accounting for the Teva Agreement represents the recognition of previously deferred revenue which otherwise would have been recognized, under the previous accounting standards, over the remaining life of the Teva Agreement, using the modified proportional performance method.

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OTC Partner revenues were $8.9 million for the year ended December 31, 2010, an increase of $2.0 million over the prior year, primarily attributable to royalty payments received from Merck & Co., Inc. (formerly Schering-Plough Corporation) on sales of Claritin-D ^® 12-hour Extended Release Tablets; there were no such royalty payments received in the year ended December 31, 2009.

Research Partner revenues were $13.5 million for the year ended December 31, 2010, an increase of $1.9 million over the prior year, primarily driven by revenue recognition related to three milestone payments aggregating $12.0 million, received at various times during 2009, including $5.0 million in May 2009, $5.0 million received in September 2009, and $2.0 million received in December 2009.

Cost of Revenues

Cost of revenues was $328.2 million for the year ended December 31, 2010, an increase of $169.9 million over the prior year, of which $95.4 million was related to the adjustment to the amortization of deferred manufacturing costs (corresponding to the adjustment to revenue recognition) under the Teva Agreement. , The increase in cost of revenues was also related to the higher sales of our tamsulosin, authorized generic Adderall XR^®, and fenofibrate products.

Gross Profit

Gross profit for the year ended December 31, 2010 was $536.5 million, or approximately 62% of total revenues, as compared to $186.7 million or 54% of total revenue in the prior year primarily attributable to sales of our tamsulosin product, which accounted for $193.9 million of the year over year increase, the adjustment in revenue recognition under the Teva Agreement. and higher sales of our authorized generic Adderall XR^® and fenofibrate products, as discussed above.

Research and Development Expenses

Total research and development expenses for the year ended December 31, 2010 were $44.3 million, an increase of 15%, as compared to the prior year. Generic research and development expense increased $5.6 million due to higher spending on bio-equivalency study costs of $3.2 million, $1.5 million related to higher employee compensation costs, and $1.0 million on active pharmaceutical ingredient used for research purposes.

Patent Litigation Expenses

Patent litigation expenses for the years ended December 31, 2010 and 2009 were $6.4 million and $5.4 million, respectively, an increase of $1.0 million over the prior year which principally resulted from higher expenses in the year ended December 31, 2010 resulting from increased activity related to existing litigation matters, as well as new litigation matters which began in 2010.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the year ended December 31, 2010 were $16.0 million, a 46% increase over the prior year, generally attributable to overall higher sales levels period over period, and including $1.3 million of higher marketing expenses, $1.1 million in increased product freight charges, $0.9 million in higher incentive compensation, $1.1 million of post-approval product clinical study costs, for which there was no amount present in the prior year period, and $0.65 million related to the separation of an executive level employee.

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Impax Division

The following table sets forth results of operations for the Impax Division for the years ended December 31, 2010 and 2009:

	Year Ended						Increase/
	December 31			December 31			(Decrease)
(in $000’s)	2010			2009			$			%
Promotional Partner revenue	$	14,073		$	13,448			625			5	%
Research Partner revenue		769			—			769		nm
Total revenue		14,842			13,448			1,394			10	%
Cost of revenues		12,083			12,043			40			0	%
Gross profit		2,759			1,405			1,354			96	%
Operating expenses:
Research and development		41,912			24,576			17,336			71	%
Selling, general and administrative		3,510			3,469			41			1	%
Total operating expenses		45,422			28,045			17,377			62	%
Loss from operations	$	(42,663	)	$	(26,640	)		(16,023	)		(60	)%
nm-not meaningful

Revenues

Total revenues were $14.8 million for the year ended December 31, 2010, an increase of 10% compared to the prior year, principally related to the commencement of physician detailing services under our co-promotion agreement with Pfizer Inc. which commenced on July 1, 2009 (these services were initially provided to Wyeth, now a wholly-owned subsidiary of Pfizer, prior to an amendment to the co-promotion agreement). The Promotional Partner revenue earned by us during the first six month of 2009 was earned under the terms of a promotional services agreement with a subsidiary of Shire Laboratories, Inc., which expired on June 30, 2009. In addition, we recognized $0.8 million of Research Partner revenue related to a development and co-promotion agreement with Endo Pharmaceuticals, Inc., which was entered into in June 2010, and, accordingly, there were no similar revenues in the prior year.

Cost of Revenues

Cost of revenues was $12.1 million for the year ended December 31, 2010, with no individually significant changes from the prior year.

Gross Profit

Gross profit for the year ended December 31, 2010 was $2.8 million, an increase of $1.4 million over the prior year attributed primarily to the higher Promotional Partner and Research Partner revenues (as described above).

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Research and Development Expenses

Total research and development expenses for the year ended December 31, 2010 were $41.9 million, an increase of 71%, as compared to $24.6 million in the prior year, with the $17.3 million increase principally driven by research and development expenses related to our branded product initiatives, including increases of $13.9 million for clinical trial studies, $1.0 million on employee compensation, $0.6 million on active pharmaceutical ingredients used in research related activities, $0.5 million on label supplies for IPX066 bottles & kits, $0.4 million on outside labor and $0.3 million on shipping costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the year ended December 31, 2010 were $3.5 million, a 1% increase compared to $3.5 million for the prior year with no individually significant changes from 2009.

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Corporate and other

The following table sets forth corporate general and administrative expenses, as well as other items of income and expense presented below Income from operations for the years ended December 31, 2010 and 2009:

	Year Ended						Increase/
	December 31			December 31			(Decrease)
(in $000’s)	2010			2009			$			%
Litigation settlement	$	—		$	9,318			(9,318	)		(100	)%
General and administrative expenses		33,871			25,352			8,519			34	%
Total operating expenses		33,871			34,670			(799	)		(2	)%
Loss from operations		(33,871	)		(34,670	)		799			2	%
Other (expense) income, net		(315	)		57			(372	)		(653	)%
Interest income		1,037			753			284			38	%
Interest expense		(167	)		(246	)		79			32	%
Loss before income taxes		(33,316	)		(34,106	)		790			2	%
Provision for income taxes	$	143,521		$	21,006			122,515			583	%

Litigation settlement

The $9.3 million of Litigation settlement expense for the year ended December 31, 2009 included legal and other professional fee expenses incurred by us in defense of a suit related to our (previously marketed) Lipram UL products which we settled in January 2010, and accordingly there were no similar amounts in the year ended December 31, 2010.

General and administrative expenses

General and administrative expenses for the year ended December 31, 2010 were $33.9 million, a 34% increase over the prior year, attributable principally to an increase in compensation-related expenses of $2.9 million, an increase in legal fees of $1.9 million, higher insurance costs related to increasing levels of business activity of $1.3 million, and an increase in system implementation and integration expenses of $1.6 million. In addition, in the prior year there was a $0.7 million reduction in general and administrative expenses related to the August 2009 repayment-in-full of a subordinated promissory note.

Other (expense) income, net

Other (expense) income, net was $ (0.3) million and $0.1 million for the years ended December 30, 2010 and 2009, respectively, and contained no individually-significant items in either year.

Interest Income

Interest income for the year ended December 31, 2010 was $1.0 million, a 38% increase as compared to the prior year due primarily due to higher average balances of cash and cash equivalents and short-term investments partially offset by lower overall interest rates.

Interest Expense

Interest expense in the year ended December 31, 2010 declined $0.08 million to $0.17 million, compared to the prior year due to the absence of interest bearing debt resulting from the repurchase, on the contractual June 15, 2009 prepayment option date, of the $12.75 million remaining outstanding balance of our 3.5% convertible senior subordinated debentures, otherwise due in June 2012 (“3.5% Debentures”).

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Income Taxes

During the year ended December 31, 2010, we recorded a tax provision of $143.5 million for U.S. domestic federal and state income taxes and for income taxes in jurisdictions outside the United States, including approximately $12.9 million for an estimated tax provision related to state and local income taxes, net of a federal tax benefit, as applicable. The tax provision for the year ended December 31, 2010 includes approximately $2.7 million of the estimated value of the federal research and development tax credit. The tax provision for the year ended December 31, 2009 included approximately $2.5 million of the estimated value of the federal research and development tax credit. The tax provision for the year ended December 31, 2010 also includes an estimate of approximately $0.3 million related to uncertain tax positions, as compared to the tax provision for the prior year ended December 31, 2009 which included an approximate $6.1 net reduction in the accrual for uncertain tax positions, resulting from the completion, in the quarter ended December 31, 2009, of our analyses and documentation of our federal and state research and development tax credits. Also in the year ended December 31, 2009, the tax provision included the reversal of a valuation allowance on the deferred tax asset related to net operating losses at our wholly-owned subsidiary Impax Laboratories (Taiwan), Inc. We reversed the valuation allowance related to these net operating losses as a result of retroactive changes in Taiwan tax law published in the second quarter of 2009. The effective tax rate of 36.4% for the year ended December 31, 2010 was lower than the prior year (adjusted) effective tax rate of 38.2% (which excludes the effect of the uncertain tax position reserve adjustment noted above) — resulting principally from a lower state and local income tax composite statutory rate due to changes in the mix of jurisdictional apportionment, a higher federal domestic manufacturing deduction due to higher sales of our (domestic United States) manufactured products, including our tamsulosin products in the contractual exclusivity period (as discussed above), and a reduced unfavorable impact of the net share-based compensation adjustment due to higher deductible (actual) equity incentive transactions relative to the amount of non-deductible (GAAP) share-based compensation charges, offset slightly by an adjustment to decrease the value of net deferred tax assets resulting from the aforementioned lower state and local income tax composite statutory rate.

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Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Overview:

The following table sets forth our summarized, consolidated results of operations for the years ended December 31, 2009 and 2008:

	Year Ended				Increase/
	December 31		December 31		(Decrease)
(in $000’s)	2009		2008		$		%
Total revenues	$	358,409	$	210,071	$	148,338		71	%
Gross profit		188,096		118,102		69,994		59	%
Income from operations		70,413		3,923		66,490		nm
Income before income taxes		70,977		26,009		44,968		173	%
Provision for income taxes		21,006		10,069		10,937		109	%
		49,971		15,940		34,031		213	%
Non-controlling interest		90		47		43		91	%
Net income	$	50,061	$	15,987	$	34,074		213	%

nm — not meaningful

Net Income

Net income for the year ended December 31, 2009 was $50.1 million, an increase of $34.1 million, or 213%, as compared to net income of $16.0 million for the year ended December 31, 2008, resulting principally from increased Global Product sales, net, lower selling, general and administrative expenses and a reduced overall effective tax rate, partially offset by a decrease in Rx Partner revenue and OTC Partner revenue, and higher research and development expenses. Additionally, as discussed below, the decrease in Rx Partner revenue was the result of the cessation of the sale of our generic version of OxyContin^® pursuant to a litigation settlement agreement in 2008. The cessation of the sale of our generic version of OxyContin^®, and no revenue from such sales in the year ended December 31, 2009 as compared to the same period in 2008, materially affected the Rx Partner revenues for the year ended December 31, 2009.

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Global Division

The following table sets forth results of operations for the Global Division for the years ended December 31, 2009 and 2008:

	Year Ended				Increase/
	December 31		December 31		(Decrease)
(in $000’s)	2009		2008		$			%
Revenues
Global Product sales, net	$	287,079	$	96,006	$	191,073			199	%
Private Label product sales		5,513		2,596		2,917			112	%
Rx Partner		33,835		81,778		(47,943	)		(59	)%
OTC Partner		6,842		15,946		(9,104	)		(57	)%
Research Partner		11,680		833		10,847			nm
Other		12		21		(9	)		(43	)%
Total revenues		344,961		197,180		147,781			75	%
Cost of revenues		158,270		80,724		77,546			96	%
Gross profit		186,691		116,456		70,235			60	%
Operating expenses:
Research and development		38,698		42,930		(4,232	)		(10	)%
Patent litigation		5,379		6,472		(1,093	)		(17	)%
Selling, general and administrative		10,891		11,445		(554	)		(5	)%
Total operating expenses		54,968		60,847		(5,879	)		(10	)%
Income from operations	$	131,723	$	55,609		76,114			137	%

nm — not meaningful

Revenues

Total Global Division revenues for the year ended December 31, 2009, were $345.0 million, an increase of 75% over the same period in 2008.

Global Product sales, net, were $287.1 million, an increase of 199% primarily due to sales of our authorized generic Adderall XR^® products, indicated for the treatment of attention-deficit hyperactivity disorder, and our fenofibrate products, a cholesterol-lowering drug. We commenced sales of our generic Adderall XR^® products in October 2009; accordingly, there were no sales of these products in the prior year period. The increased sales of our fenofibrate products in 2009 resulted from a general increase in demand for generic versions of cholesterol-lowering drugs combined with the September 2008 cessation of U.S. sales of fenofibrate products by an unrelated third-party pharmaceutical company.

Private Label product sales were $5.5 million, an increase of 112% primarily due to sales of generic loratadine /pseudoephedrine as a result of a new supply agreement which first became effective in 2008.

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Rx Partner revenues were $33.8 million, down 59%, primarily attributable to reduced sales of our generic OxyContin^® and our generic Wellbutrin^® XL 300mg products. While the reduction of revenue for generic Wellbutrin^® XL 300mg resulted from increased marketplace competition, the decrease in our sales of generic OxyContin^® resulted from a litigation settlement agreement. In this regard, our generic OxyContin^® product was one of only two generic versions of OxyContin^® in the marketplace during the second and fourth quarters of 2007 and in January 2008, when we ceased further sales of this product. The period-over-period comparison of Rx Partner revenue was principally impacted by the absence in the year ended December 31, 2009 of revenue recognized from sales of generic OxyContin^® under the DAVA Agreement which ended in January 2008. During the year ended December 31, 2009 and 2008, revenue recognized from the sale of generic OxyContin^® under the DAVA Agreement was $0 and $40.8 million, respectively. The cessation of the sale of our generic version of OxyContin^®, and no revenue from such sales in the year ended December 31, 2009 as compared to the same period in 2008, materially affected the Rx Partner revenues for the year ended December 31, 2009.

OTC Partner revenues were $6.8 million, a decrease of 57%, primarily attributable to the expiration of our obligation to supply Schering-Plough with product on December 31, 2008. The loss of this revenue for the year ended December 31, 2009, was only partially offset by revenue from Private Label product sales.

Research Partner revenues were $11.7 million, an increase of $10.8 million, primarily driven by a full twelve months of revenue recognition of the $40.0 million upfront payment received in December 2008, as compared to one month of revenue recognition of the upfront payment in 2008, and the pro rata revenue recognition of three milestone payments aggregating $12.0 million, received at various times during 2009, including $5.0 million in May 2009, $5.0 million received in September 2009, and $2.0 million received in December 2009.

Cost of Revenues

Cost of revenues was $158.3 million for the year ended December 31, 2009, an increase of 96% primarily related to the higher sales of our authorized generic Adderall XR^® and fenofibrate products.

Gross Profit

Gross profit for the year ended December 31, 2009 was $186.7 million or approximately 54% of total revenues, as compared to $116.5, or 59% of total revenue in the prior period. Gross profit in our Global Division increased primarily due to higher sales which was driven by our authorized generic Adderall XR^® and fenofibrate product lines, offset by lower Rx Partner revenue due to the cessation, in the prior year period, of sales of our generic version of OxyContin^®, as well as lower manufacturing efficiencies, and an increase in inventory carrying-value reserves.

Research and Development Expenses

Total research and development expenses for the year ended December 31, 2009 were $38.7 million, a decrease of 10%. Generic project activity decreased $4.2 million primarily due to decreased spending on bioequivalence studies of $2.7 million, and a $2.2 million decrease in legal fees related to patent expenses.

Patent Litigation Expenses

Patent litigation expenses for the years ended December 31, 2009 and 2008 were $5.4 million and $6.5 million, respectively, a decrease of $1.1 million, principally resulting from lower overall expenses as a result of the settlement of one litigation matter in 2008, resulting in the absence of expenses related to that matter in the year ended December 31, 2009, partially offset by higher expenses in the year ended December 31, 2009 resulting from increased activity related to existing litigation matters, as well as new litigation matters which began in 2009.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the years ended December 31, 2009 and 2008 were $10.9 million and $11.4 million, respectively, a 5% decrease attributable principally to a $1.4 million charge for severance expenses related to the separation of an executive-level employee in the prior year period, partially offset by increased professional fees related to business development efforts of $0.7 million, and $0.2 million of general and administrative expenses related to our Taiwan facility which were not present in the prior year period.

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Impax Division

The following table sets forth results of operations for the Impax Division for the years ended December 31, 2009 and 2008:

	Year Ended						Increase/
	December 31			December 31			(Decrease)
(in $000’s)	2009			2008			$			%
Promotional Partner revenue	$	13,448		$	12,891			557			4	%
Cost of revenues		12,043			11,245			798			7	%
Gross profit		1,405			1,646			(241	)		(15	)%
Operating expenses:
Research and development		24,576			16,307			8,269			51	%
Selling, general and administrative		3,469			2,671			798			30	%
Total operating expenses		28,045			18,978			9,067			48	%
Loss from operations	$	(26,640	)	$	(17,332	)		(9,308	)		(54	)%

Revenues

Promotional Partner revenue was $13.4 million for the year ended December 31, 2009; an increase of 4% compared to $12.9 million for the year ended December 31, 2008. The change from the prior year period was primarily the result of the commencement of physician detailing services under our co-promotion agreement with Pfizer Inc. on July 1, 2009, while the term of the promotional services agreement with a subsidiary of Shire Laboratories, Inc., ended on June 30, 2009.

Cost of Revenues

Cost of revenues was $12.0 million for the year ended December 31, 2009 an increase of 7% from the same period in the prior year related to higher sales force expenses. The increase was primarily the result of credits in the prior period results for incentive compensation payments which were not earned; these credits are not present in the results for the year ended December 31, 2009.

Gross Profit

Gross profit for the year ended December 31, 2009 was $1.4million a decrease of 15% attributed to the higher sales force compensation expenses noted above.

Research and Development Expenses

Total research and development expenses for the year ended December 31, 2009 were $24.6 million, an increase of 51% compared to $16.3 million for the prior year period. Expenses related to our brand-product pipeline increased $8.3 million including an increase of $4.4 million on clinical studies, $2.5 million related to higher spending on additional research personnel, and $0.9 million on outside services.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the year ended December 31, 2009 were $3.5 million, a 30% increase compared to $2.7 million for the prior year period attributable principally to the addition of executive level personnel.

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Corporate and other

The following table sets forth corporate general and administrative expenses, as well as other items of income and expense presented below Income from operations for the years ended December 31, 2009 and 2008:

	Year Ended						Increase/
	December 31			December 31			(Decrease)
(in $000’s)	2009			2008			$			%
				(as adjusted)
Litigation settlement	$	9,318		$	—			9,318		nm		%
General and administrative expenses		25,352			34,354			(9,002	)		(26	)%
Total operating expenses		34,670			34,354			316			1	%
Loss from operations		(34,670	)		(34,354	)		(316	)		(1	)%
Change in fair value of common stock purchase warrant		—			1,234			(1,234	)		(100	)%
Other income, net		57			21,529			(21,472	)		(100	)%
Loss on repurchase of 3.5% Debentures		—			(113	)		113			100	%
Interest income		753			4,218			(3,465	)		(82	)%
Interest expense		(246	)		(4,782	)		4,536			95	%
Loss before income taxes		(34,106	)		(12,268	)		(21,838	)		(178	)%
Provision for income taxes	$	21,006		$	10,069			10,937			109	%

nm — not meaningful

Litigation settlement

In January 2010, we entered into an agreement to settle a suit related to our Lipram UL products. Under the terms of the agreement, we agreed to reimburse the plaintiff for litigation costs, which was paid by us in January 2010. We recorded an accrued expense for this payment in the year ended December 31, 2009. The $9.3 million of Litigation settlement expense included the payment noted above, as well as legal and other professional fees incurred by us in defense of the suit.

General and administrative expenses

General and administrative expenses for the year ended December 31, 2009 were $25.4 million, a 26% decrease attributable principally to a decrease in professional fees of $5.6 million, of which $3.7 million was related to the examination and review of our financial statements in conjunction with the filing of our registration statement on Form 10 with the SEC and $1.9 million of which was related to lower spending on corporate legal matters. In addition to the lower professional fees noted above, we also had lower management consulting fees of $1.1 million, and $0.7 million related to the adjustment of accrued settlement-related charges in conjunction with the August 2009 repayment-in-full of a subordinated promissory note.

Other income, net

Other income, net was $0.1 million and $21.5 million for the years ended December 31, 2009 and 2008, respectively. The prior year period included $25.0 million received under an antitrust claim settlement, partially offset by the accrual of $3.5 million for litigation settlement charges related to the settlement of the 2004 securities class actions in the U.S. District Court for the Northern District of California. There was no such activity in the year ended December 31, 2009.

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Interest Income

Interest income for the year ended December 31, 2009 declined $3.5 million to $0.8 million, compared to the prior year period due to lower overall interest rates and lower average cash and short-term investment balances. The lower average cash and short-term investment balances in the year ended December 31, 2009 resulted from the use of cash and short-term investments to repurchase, on the holders’ June 15, 2009 prepayment option date, the $12.75 million remaining outstanding balance of our 3.5% Debentures and the August 2009 $6.9 million repayment-in-full of a subordinated promissory note.

Interest Expense

Interest expense for the year ended December 31, 2009 declined $4.5 million to $0.2 million, compared to the prior year period due to reduced amounts of average debt outstanding as a result of the June 2009 repurchase of our 3.5% Debentures and the August 2009 repayment-in-full of a subordinated promissory note, as noted above in the discussion of Interest income for the year ended December 31, 2009.

Income Taxes

During the year ended December 31, 2009, we recorded a tax provision of $21.0 million for U.S. domestic and foreign income taxes, which included a net reduction in the accrual for uncertain tax positions of $6.1 million. In the year ended December 31, 2008, we recorded a tax provision of $10.1 million, which included an accrual for uncertain tax positions of $1.1 million. In the quarter ended December 31, 2009 we completed a study of our federal and state research and development credits, and based upon the results of our study reduced our accrual for uncertain tax positions related to those credits by $6.1 million. The tax provision for the year ended December 31, 2009 included the effect of the reversal of a valuation allowance on the deferred tax asset related to net operating losses at our wholly owned subsidiary Impax Laboratories (Taiwan), Inc. We reversed the valuation allowance related to these net operating losses as a result of retroactive changes in Taiwan tax law published in the second quarter of 2009. The tax provision for the years ended December 31, 2009 and 2008 included the effect of the research and development tax credit, which was reinstated on October 3, 2008, for a two year period retroactive to January 1, 2008. The effective tax rate for the year ended December 31, 2009, excluding the $6.1 million net reduction in the accrual for uncertain tax positions noted above, was 38.2%, and was higher than the effective tax rate of 34.7% for the year ended December 31, 2008, which excludes the accrual for uncertain tax positions of $1.1 million. While we recorded comparable amounts of research and development credits in each of the two years ended December 31, 2009 and 2008; $2.5 million and $2.2 million respectively, the impact of those credits on the effective tax rate for year ended December 31, 2009 was significantly less due to the higher level of income before tax in the year ended December 31, 2009, thereby resulting in a higher effective tax rate in the year ended December 31, 2009.

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Liquidity and Capital Resources

We have historically funded our operations with the proceeds from the sale of debt and equity securities, and more recently, with cash from operations. Currently, our principal source of liquidity is cash from operations, consisting of the proceeds from the sales of our products and provision of services.

We expect to incur significant operating expenses, including research and development activities and patent litigation expenses, for the foreseeable future. We estimate research and development expenses will be approximately $87.0 million and patent litigation expenses will be approximately $13.0 million for the next 12 months. We also anticipate incurring capital expenditures of approximately $69.0 million during the next 12 months, principally for continued improvements and expansion of our research and development and manufacturing facilities in the State of California, our packaging and distribution facilities in the Commonwealth of Pennsylvania, and our facility in Jhunan Taiwan In addition, we are generally required to make cash expenditures to manufacture and/or acquire finished product inventory in advance of selling the finished product to our customers and collecting payment for such product sales, which may result in significant periodic uses of cash.

We believe our existing cash and cash equivalents and short-term investment balances, together with cash expected to be generated from operations, and our bank revolving line of credit, will be sufficient to meet our financing requirements through the next 12 months. We may, however, seek additional financing through alliance, collaboration, and/or licensing agreements, as well as from the equity and /or debt capital markets to fund the planned capital expenditures, our research and development plans, potential acquisitions, and potential revenue shortfalls due to delays in new product introductions.

Cash and Cash Equivalents

At December 31, 2010, we had $91.8 million in cash and cash equivalents, an increase of $60.0 million as compared to December 31, 2009. As more fully discussed below, the increase in cash and cash equivalents during the year ended December 31, 2010 was primarily driven by $249.8 million of cash provided by operations, which included a decrease in accounts receivable, partially offset by an increase in prepaid expenses and other assets of $12.1 million and a decrease in accounts payable and accrued expenses to be paid in subsequent periods of $17.9 million. The net increase in cash was also impacted by $17.7 million received from the exercise of stock options and employee stock purchase plan contributions, while being offset by net purchases of short term investments of $197.4 million and $16.3 million of purchases of property, plant, and equipment, during the year ended December 31, 2010.

Cash Flows

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009.

Net cash provided by operating activities for the year ended December 31, 2010 was $249.8 million, an increase of $257.9 million as compared to the prior year $8.2 million net cash used in operating activities.

The year-over-year increase in net cash provided by operating activities resulted principally from a higher net income, a decrease in accounts receivable, partially offset by an increase in prepaid expenses and other assets and a decrease in accounts payable and accrued expenses. The decrease in accounts receivable to $82.1 million at December 31, 2010, resulted in a $103.5 million source of cash, compared to the same period in the prior year when accounts receivable resulted in a $142.8 million use of cash flows. The higher level of prepaid and other assets resulted in a $12.1 million use of cash in the current year, compared to a $2.2 million source of cash in the prior year; while lower accounts payable and accrued expenses resulted in a year-over-year decrease of $75.0 million in cash flows. The decreased level of accounts receivable at December 31, 2010 was primarily the result of amounts owed by our customers related to sales from the launch of our authorized generic Adderall XR^® products (launched in October 2009). Cash provided by operating activities during the current year was also positively impacted by sales from the launch of our tamsulosin product in March 2010, of which we commenced sales with a contractual eight week exclusivity period starting on March 2, 2010, during which time we were able to achieve high market-share penetration. Tamsulosin product sales after the contractual exclusivity period noted above did not remain at this level, as additional competing generic versions of the product entered the market in late April 2010 at the conclusion of our contractual exclusivity period. This additional competition has resulted in both price erosion and reduction of our market-share. See “— Results of Operations — Year Ended December 31, 2010 Compared to Year Ended December 31, 2009” above for additional discussion on our sales of tamsulosin in the year ended December 31, 2010.

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Net cash used by investing activities for the year ended December 31, 2010, amounted to $213.6 million, an increase of $191.8 million as compared to the $21.8 million use of cash flows in investing activities in the prior year, with the change due to a year-over-year $190.0 million net increase in the purchase of short-term investments, and $2.6 million in higher expenditures on property, plant and equipment. Net purchases of short-term investments during the year ended December 31, 2010 resulted in a $197.4 million use of cash flows, as compared to a $7.4 million use of cash flows from net purchases of short-term investments during the prior year. Purchases of property, plant and equipment for the year ended December 31, 2010 amounted to $16.3 million as compared to $13.7 million for the prior year. We expect continued investment in facilities, equipment, and information technology projects supporting our quality initiatives to ensure we have appropriate levels of technology infrastructure to manage and grow our business.

Net cash provided by financing activities for the year ended December 31, 2010 was approximately $23.9 million, representing an increase of $31.5 million as compared to the $7.6 million of net cash used in financing activities in the prior year. The year-over-year increase in net cash provided by financing activities was primarily due to an increase in cash proceeds received from the exercise of stock options and contributions to our employee stock purchase plan of $17.7 million for the year ended December 31, 2010, as compared to $5.1 million received in the prior year. In addition, on the contractual June 15, 2009 prepayment option date, at the request of the holders, we repurchased the remaining $12.75 million principal amount of our 3.5% Debentures at 100% of face value, plus accrued interest resulting in a net use of cash in financing activities in the prior year, with no corresponding use of cash in the year ended December 31, 2010.

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008.

At December 31, 2009, we had $31.8 million in cash and cash equivalents, a decrease of $37.5 million as compared to December 31, 2008. As more fully discussed below, the decrease in cash and cash equivalents during the year ended December 31, 2009 was primarily driven by $8.2 million of cash used in operations, which included the payment of $3.4 million related to the settlement of a securities class action, as well as the payment of $6.9 million to repay-in-full the remaining outstanding balance of a subordinated promissory note. The decrease in cash was also driven by $12.75 million used to repurchase, at the option of holders, the remaining outstanding balance of our 3.5% Debentures, and $13.7 million invested in property, plant and equipment.

Net cash used in operating activities for the year ended December 31, 2009 was $8.2 million, a decrease of $72.7 million from net cash provided by operating activities in the prior year period.

The period-over-period decrease in net cash provided by operating activities resulted principally from a higher accounts receivable balance, the change in deferred revenue and product manufacturing cost, and the change in deferred income taxes. Accounts receivable increased to $185.9 million at December 31, 2009, resulting in a $142.8 million use of cash flows, compared to the same period in the prior year when accounts receivable provided a $7.6 million source of cash flows. The increased level of accounts receivable at December 31, 2009 was primarily due to higher product sales as the result of the launch of our mixed amphetamines salts products in October 2009. In addition, accounts receivable decreased during the twelve months ended December 31, 2008 primarily as the result of lower profit share amounts receivable from our Rx Partners. Additionally, the change in revenue deferrals of $102.0 million, less the change in deferred product manufacturing cost of $24.0 million, resulted in a $78.0 million net decrease of deferrals related to our alliance and collaboration agreements. The net decrease of deferrals related to our alliance and collaboration agreements was principally due to lower sales of our generic OxyContin^® and generic Wellbutrin XL^® products, marketed under our Rx Partner alliance agreements. A $14.2 million change in deferred income taxes, resulting principally from a lower deferred tax benefit corresponding to the lower net deferrals related to our alliance and collaboration agreements, also contributed to the period-over-period change. The decrease in cash flows resulting from the items noted above was partially offset by higher levels of both accounts payable and accrued expenses, resulting in a $57.6 million period-over-period increase in cash flows, as well as higher levels of accrued profit sharing and royalty payable, resulting in a period-over-period increase of $53.6 million in cash flows.

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Net cash used in investing activities for the year ended December 31, 2009, amounted to $21.8 million, an increase of $54.1 million in net cash used in investing activities, as compared to the $32.3 million source of cash flows from investing activities in the prior year period, with the change primarily due to a period-over-period $65.6 million net decrease in the maturity of short-term investments, partially offset by $12.2 million in lower expenditures on property, plant and equipment. Net purchases of short-term investments during the twelve months ended December 31, 2009 resulted in a $7.4 million use of cash flows, as compared to a $58.2 million source of cash flows provided by net maturities of short-term investments during the same period in the prior year. Purchases of property, plant and equipment for the twelve months ended December 31, 2009 amounted to $13.7 million as compared to $25.9 million for the prior year period. The 2009 purchases of property, plant and equipment included capital expenditures of approximately $3.8 million for our Taiwan facility, which construction was completed in 2009. In addition, we expect continued investment in facilities, equipment, and information technology projects supporting our quality initiatives to ensure we have appropriate levels of technology infrastructure to manage and grow our global business.

Net cash used in financing activities for the year ended December 31, 2009 was approximately $7.6 million, representing a decrease of $57.5 million in net cash used in financing activities, as compared to $65.1 million net cash used in financing activities for the prior year period. The period-over-period decrease in net cash used in financing activities was primarily due to repurchases of the 3.5% Debentures in August 2008 and September 2008. During August 2008 and September 2008, at the request of the holders, we made aggregate cash payments of $59.9 million to repurchase, at a discount, an aggregate of $62.25 million in principal face value of our 3.5% Debentures. Additionally, during the prior year period, we made aggregate payments of $5.2 million to Cathay Bank to repay in full two term loans. The decrease in the amount of debt repaid from the prior-year period compared to the year ended December 31, 2009 was partially offset by repayments of debt in the current-year period of $12.75 million to repurchase, at the request of the holders, the remaining 3.5% Debentures at face value plus accrued interest, in June 2009, as well as $6.9 million to repay-in-full the remaining outstanding balance of a subordinated promissory note. Finally, we received cash from the exercise of employee stock options of approximately $5.1 million and $0.2 million in the twelve months ended December 31, 2009 and 2008, respectively.

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Outstanding Debt Obligations

Senior Lenders; Wells Fargo Bank, N.A.

On February 11, 2011, we entered into a Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as a lender and as administrative agent (the “Administrative Agent”). The Credit Agreement provides us with a revolving line of credit in the aggregate principal amount of up to $50.0 million (the “Revolving Credit Facility”). Under the Revolving Credit Facility, up to $10.0 million is available for letters of credit, the outstanding face amounts of which reduce availability under the Revolving Credit Facility on a dollar for dollar basis. Proceeds under the Credit Agreement may be used for working capital, general corporate and other lawful purposes.

Borrowings under the Credit Agreement are secured by substantially all of our personal property assets pursuant to a Security Agreement (the “Security Agreement”) entered into by us and the Administrative Agent. As further security, we also pledged to the Administrative Agent, 65% of our equity interest in Impax Laboratories (Taiwan), Inc. and must similarly pledge all or a portion of our equity interest in future subsidiaries.

Under the Credit Agreement, among other things:

• The outstanding principal amount of all revolving credit loans, together with accrued and unpaid interest thereon, will be due and payable on the maturity date, which will occur four years following the February 11, 2011 closing date.

• Borrowings under the Revolving Credit Facility will bear interest, at our option, at either an Alternate Base Rate (as defined in the Credit Agreement) plus the applicable margin in effect from time to time ranging from 0.5% to 1.5%, or a LIBOR Rate (as defined in the Credit Agreement) plus the applicable margin in effect from time to time ranging from 1.5% to 2.5%. We are also required to pay an unused commitment fee ranging from 0.25% to 0.45% per annum based on the daily average undrawn portion of the Revolving Credit Facility. The applicable margin described above and the unused commitment fee in effect at any given time will be determined based on the Company’s Total Net Leverage Ratio (as defined in the Credit Agreement), which is based upon our consolidated total debt, net of unrestricted cash in excess of $100 million, compared to Consolidated EBITDA (as defined in the Credit Agreement) for the immediately preceding four quarters.

• We may prepay any outstanding loan under the Revolving Credit Facility without premium or penalty.

• We are required under the Credit Agreement and the Security Agreement to comply with a number of affirmative, negative and financial covenants. Among other things, these covenants (i) require us to provide periodic reports, notices of material events and information regarding collateral, (ii) restrict our, subject to certain exceptions and baskets, to incur additional indebtedness, grant liens on assets, undergo fundamental changes, change the nature of its business, make investments, undertake acquisitions, sell assets, make restricted payments (including the ability to pay dividends and repurchase stock) or engage in affiliate transactions, and (iii) requires us to maintain a Total Net Leverage Ratio (which is, generally, our total funded debt, net of unrestricted cash in excess of $100 million, over our EBITDA for the preceding four quarters) of less than 3.75 to 1.00, a Senior Secured Leverage Ratio (which is, generally, our total senior secured debt over our EBITDA for the preceding four quarters) of less than 2.50 to 1.00 and a Fixed Charge Coverage Ratio (which is, generally, our EBITDA for the preceding four quarters over the sum of cash interest expense, cash tax payments, scheduled funded debt payments and capital expenditures during such four quarter period) of at least 2.00 to 1.00 (with each such ratio as more particularly defined as set forth in the Credit Agreement).

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• The Credit Agreement contains customary events of default (subject to customary grace periods, cure rights and materiality thresholds), including, among others, failure to pay principal, interest or fees, violation of covenants, material inaccuracy of representations and warranties, cross-default and cross-acceleration of material indebtedness and other obligations, certain bankruptcy and insolvency events, certain judgments, certain events related to the Employee Retirement Income Security Act of 1974, as amended, and a change of control.

• Following an event of default under the Credit Agreement, the Administrative Agent would be entitled to take various actions, including the acceleration of amounts due under the Credit Agreement and seek other remedies that may be taken by secured creditors.

We have not yet borrowed any amounts under the Revolving Credit Facility.

Effective as of February 11, 2011, the Revolving Credit Facility replaced our existing credit agreement, the Amended and Restated Loan and Security Agreement, dated as of December 15, 2005, as amended (the “Existing Credit Agreement”), between us and the Administrative Agent (as successor by merger to Wachovia Bank, National Association), and the commitments under the Existing Credit Agreement have been terminated. The Existing Credit Agreement, intended for working capital and general corporate purposes, was collateralized by eligible accounts receivable, inventory, and machinery and equipment, subject to limitations and other terms. There were no amounts outstanding under the Existing Credit Agreement as of December 31, 2010 and 2009, respectively. The Existing Credit Agreement was scheduled to expire on April 1, 2011. During the years ended December 31, 2010 and 2009, we paid unused line fees of $177,000 and $172,000, respectively, related to the Existing Credit Agreement.

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3.5% Debentures

On June 27, 2005, we sold $75.0 million of 3.5% convertible senior subordinated debentures due 2012 (“3.5% Debentures”) to a qualified institutional buyer. Each 3.5% Debenture was issued at a price of $1,000 and was convertible into share of our common stock at an initial conversion price of $20.69 per share. The 3.5% Debentures were senior subordinated, unsecured obligations and ranked pari passu with our accounts payable and other liabilities, and were subordinate to certain senior indebtedness, including our credit agreement with Wells Fargo. The 3.5% Debentures bore interest at the rate of 3.5% per annum. Interest on the 3.5% Debentures was payable on June 15 and December 15 of each year, beginning December 15, 2005. While the 3.5% Debentures had a contractual maturity date of June 15, 2012 and could not be redeemed by us prior to maturity, holders of the 3.5% Debentures had the right to require us to repurchase all or any part of their 3.5% Debentures on June 15, 2009 at a repurchase price equal to 100% of the principal amount of the 3.5% Debentures, plus accrued and unpaid interest and liquidated damages, if any, up to but excluding the repurchase date.

In August and September 2008, we repurchased at a discount an aggregate of $62.25 million face value principal amount of the 3.5% Debentures at the request of the holders, paying $59.92 million, plus $433,000 of accrued interest. Proceeds to fund the repurchase of the 3.5% Debentures were generated from the liquidation of our short-term investments. In the year ended December 31, 2008, we recorded a net loss on the 3.5% Debentures repurchases of $113,000, net of a $318,000 write-off of related unamortized deferred finance costs. On June 15, 2009, at the request of the holders, we repurchased the remaining $12.75 million principal amount of the 3.5% Debentures at 100% of face value plus accrued interest. Accordingly, as all of the 3.5% Debentures had been repurchased, there was no amount outstanding as of December 31, 2009.

Subordinated Promissory Note

In August 2009, we repaid-in-full the remaining balance of a subordinated promissory note in the amount of $6.9 million of principal, plus $51,000 of accrued interest. Initially, the subordinated promissory note was issued in June 2006 in the amount of $11.0 million, with an interest rate of 6.0% per annum, and 24 quarterly installment payments of $549,165, commencing in March 2007.

Vendor Financing Agreement

In November 2009, we repaid in-full the remaining outstanding principal and interest due in connection with a vendor financing agreement related to software licenses. Under the vendor financing agreement, we were required to make two monthly installments of $0 and thirty-four monthly principal and interest installments of $12,871 commencing December 2006 and ending in November 2009.

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Commitments and Contractual Obligations

Our contractual obligations as of December 31, 2010 were as follows:

	Payments Due by Period
			Less						More
			Than 1		1-3		3-5		Than 5
($ in 000s)	Total		Year		Years		Years		Years
Contractual Obligations (a)
Credit Facilities and Long-Term Debt	$	—	$	—	$	—	$	—	$	—
Interest Expense Payable — Long-Term Debt		—		—		—		—		—
Open Purchase Order Commitments		18,570		18,570		—		—		—
Operating Leases(b)		5,866		1,469		2,774		1,623		—
Construction Contracts(c)		2,060		2,060		—		—		—
Total	$	26,496	$	22,099	$	2,774	$	1,623	$	—

(a)	Liabilities for uncertain tax positions FASB ASC Topic 740, Sub-topic 10, were excluded as we are not able to make a reasonably reliable estimate of the amount and period of related future payments. As of December 31, 2010, we had a $1.6 million provision for uncertain tax positions.
(b)	We lease office, warehouse, and laboratory facilities under non-cancelable operating leases through December 2015. We also lease certain equipment under various non-cancelable operating leases with various expiration dates through September 2015.
(c)	Construction contracts are related to ongoing expansion activities at our manufacturing facility in Taiwan.

Off Balance-Sheet Arrangements

We have not entered into any off-balance arrangements other than a $500,000 letter of credit entered into in the ordinary course of business. In February 2009, this letter of credit was allowed to expire as it was deemed no longer necessary by one of our suppliers.

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Recent Accounting Pronouncements

In April 2008, the FASB issued an accounting standard which amended the factors to be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset, referred to as FASB ASC Topic 350. The intent of the accounting standard was to improve the consistency between the useful life of a recognized intangible asset under FASB ASC Topic 350 and the period of expected cash flows used to measure the fair value of the asset under FASB ASC Topic 805 and other GAAP. The FASB ASC Topic 350 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. Upon becoming effective the FASB ASC Topic 350 did not have a material impact on our consolidated financial statements.

In May 2008, the FASB issued an accounting standard related to convertible debt instruments which may be settled in cash upon conversion (including partial cash settlement), referred to as FASB ASC Topic 470. The FASB ASC Topic 470 requires the issuing entity of such instruments to separately account for the liability and equity components to represent the issuing entity’s nonconvertible debt borrowing interest rate when interest charges are recognized in subsequent periods. The provisions of FASB ASC Topic 470 must be applied retrospectively for all periods presented even if the instrument has matured, has been extinguished, or has been converted as of the effective date. The application of FASB ASC Topic 470 to our $75 million, 3.5% Debentures required the retrospective restatement of all reporting periods beginning January 1, 2007. The Summary of Significant Accounting Policies and the Long-Term Debt footnotes in our consolidated financial statements contain additional details about our adoption of FASB ASC Topic 470.

In June 2008, the FASB issued an accounting standard which provides for unvested share-based payment awards containing non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method, referred to as FASB ASC Topic 260. The FASB ASC Topic 260, as amended, was effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. Upon becoming effective, FASB ASC Topic 260 did not have a material impact on our consolidated financial statements.

In April 2009, the FASB issued an accounting standard to amend previously issued accounting standards related to the determination of fair value, referred to as FASB ASC Topic 820. As amended, FASB ASC Topic 820 provides additional guidance for estimating fair value when the volume and level of activity for an asset or liability has significantly decreased, and also includes guidance on identifying circumstances to indicate a transaction is not orderly. The FASB ASC Topic 820, as amended, is effective for interim and annual reporting periods ending after June 15, 2009, and is applied prospectively, with early adoption permitted for periods ending after March 15, 2009. Upon becoming effective, FASB ASC Topic 820, as amended, did not have an impact on our consolidated financial statements.

In April 2009, the FASB issued an accounting standard to amend FASB ASC Topic 825 to require publicly traded companies disclose information about fair value of financial instruments in interim financial statements, as well as in annual financial statements. The FASB ASC Topic 825 is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. Upon becoming effective, FASB ASC Topic 825, as amended, did not have a material impact on our consolidated financial statements.

In April 2009, the FASB issued an accounting standard to amend the accounting standards for investments in debt and equity securities, referred to as FASB ASC Topic 320. The accounting standard amendment clarified the factors considered in determining if a decline in the fair value of a debt security is other than temporary. Generally, if the fair value of a debt security is less than its amortized cost, and it is more-likely-than-not the debt security will be sold or be required to be sold, then an other-than-temporary impairment shall be considered to have occurred. An other-than-temporary impairment is recognized equal to the entire difference between the debt security’s amortized cost and its fair value as of the balance sheet date. The FASB ASC Topic 320, as amended, is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. Upon becoming effective, FASB ASC Topic 320, as amended, did not have an impact on our consolidated financial statements.

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In May 2009, the FASB issued an accounting standard establishing the general rules of accounting for and disclosure of events occurring after the balance sheet date but before the financial statements are issued, referred to as FASB ASC Topic 855. The FASB ASC Topic 855 requires the disclosure of the date through which an entity has evaluated subsequent events and whether such date represents the date the financial statements were issued, or were available to be issued. The FASB ASC Topic 855 is effective for interim or annual reporting periods ending after June 15, 2009, and is applied prospectively. Our adoption of FASB ASC Topic 855 did not have a material impact on our consolidated financial statements.

In September 2009, the FASB approved an update to the accounting standard related to multiple-deliverable revenue arrangements currently within the scope of FASB ASC Topic 605-25. The updated accounting standard provides principles and guidance to be used to determine whether a revenue arrangement has multiple deliverables, and if so, how those deliverables should be separated. If multiple deliverables exist, the updated standard requires revenue received under the arrangement to be allocated using the estimated selling price of the deliverables if vendor-specific objective evidence or third-party evidence of selling price is not available. The updated accounting standard is effective for revenue arrangements entered into or materially modified in fiscal years beginning on, or after June 15, 2010, with early application permitted. We adopted the updated guidance of ASC 605-25 in the three months ended September 30, 2010. As required, we applied the updated guidance of ASC 605-25 retrospectively from the beginning of our fiscal year of adoption, as of January 1, 2010. Accordingly, the updated guidance of ASC 605-25 will apply to all multiple-element revenue arrangements entered into or materially modified by us from January 1, 2010 forward. The application of the updated guidance did not have any impact on our revenue recognition during the three and six months ended June 30, 2010. The updated guidance of ASC 605-25 was initially applied to the Teva Agreement during the three months ended September 30, 2010. For a discussion of the impact of FASB ASC Topic 605-25 on the Teva Agreement, see “Item 15. Exhibits and Financial Statement Schedules — Note 13 to Consolidated Financial Statements.”

In January 2010, the FASB issued Accounting Standards Update No. 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary — a Scope Clarification. This update provides amendments to Subtopic 810-10, and related guidance within US GAAP, to clarify the scope of the decrease in ownership provisions. For those entities that have already adopted Statement 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should be applied retrospectively to the first period that an entity adopted Statement 160. Upon becoming effective this update did not have an impact on our consolidated financial statements.

In March 2010, the FASB issued Accounting Standards Update No. 2010-17, Milestone Method of Revenue Recognition (Topic 605). This update addresses accounting for arrangements in which a vendor satisfies its performance obligations over time, with all or a portion of the consideration contingent on future events, referred to as “milestones.” The Milestone Method of Revenue Recognition is limited to arrangements which involve research or development activities. A milestone is defined as an event for which, at the date the arrangement is entered into, there is substantive uncertainty whether the event will be achieved, and the achievement of the event is based in whole or in part on either the vendor’s performance or a specific outcome resulting from the vendor’s performance. In addition, the achievement of the event would result in additional payments being due to the vendor. The Milestone Method of Revenue Recognition allows a vendor to adopt an accounting policy to recognize arrangement consideration that is contingent on the achievement of a substantive milestone in its entirety in the period the milestone is achieved. The Milestone Method of Revenue Recognition is effective on a prospective basis, with an option for retrospective application, for milestones achieved in fiscal years and interim periods within those fiscal years beginning on or after June 15, 2010. Early adoption is permitted. If an entity elects early application in a period that is not the first reporting period of its fiscal year, then the guidance must be applied retrospectively from the beginning of that fiscal year. We will determine the impact of the new accounting standard as we achieve milestones, and earn payments under either new or existing revenue arrangements.

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In December 2010, the FASB issued Accounting Standards Update No. 2010-27, Fees Paid to the Federal Government by Pharmaceutical Manufacturers (Subtopic 720-50), which provides guidance on the annual fee paid by pharmaceutical manufacturers to the U.S. Treasury in accordance with the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act (the “Acts”). The Acts impose an annual fee on the pharmaceutical manufacturing industry for each calendar year beginning on or after January 1, 2011. An entity’s portion of the annual fee is payable no later than September 30 of the applicable calendar year and is not tax deductible. The annual fee ranges from $2.5 billion to $4.1 billion in total, a portion of which will be allocated to individual entities on the basis of the amount of their branded prescription drug sales for the preceding year as a percentage of the industry’s branded prescription drug sales for the same period. An entity’s portion of the annual fee becomes payable to the U.S. Treasury once a pharmaceutical manufacturing entity has a gross receipt from branded prescription drug sales to any specified government program or in accordance with coverage under any government program for each calendar year beginning on or after January 1, 2011. The liability related to the annual fee imposed by the Acts shall be estimated and recorded in full upon the first qualifying sale with a corresponding deferred cost that is amortized to expense using a straight-line method of allocation unless another method better allocates the fee over the calendar year that it is payable. The guidance in Subtopic 720-50 becomes effective for calendar years beginning after December 31, 2010. We will determine the impact of the new accounting standard upon application of the provisions of Subtopic 720-50 as described above.

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Our cash and cash equivalents, and short-term investments include a portfolio of high credit quality securities, including U.S. government securities, treasury bills, short-term commercial paper, and high rated money market funds. Our entire portfolio matures in less than one year. The carrying value of the portfolio approximates the market value at December 31, 2010. We had no debt outstanding as of December 31, 2010.

Our portfolio is subject to interest rate risk. Based on the average duration of our investments as of December 31, 2010 and 2009, an increase of one percentage point in interest rates would have resulted in increases in interest income of approximately $1.6 million and $0.6 million, respectively.

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents, short-term investments and accounts receivable. We limit our credit risk associated with cash and cash equivalents and short-term investments by placing investments with high credit quality securities, including U.S. government securities, treasury bills, short-term commercial paper and high rated money market funds high quality money market funds, corporate debt and short-term commercial paper and in securities backed by the U.S. government. We limit our credit risk with respect to accounts receivable by performing credit evaluations when deemed necessary. We do not require collateral to secure amounts owed to us by our customers.

We had no debt outstanding as of December 31, 2010. Our only remaining debt instrument at December 31, 2010 was the Wells Fargo revolving credit facility, which would be subject to variable interest rates and principal payments should we decide to borrow against it. We estimate the fair value of our fixed rate long-term debt to be $0 at both December 31, 2010 and 2009, respectively.

We do not use derivative financial instruments and have no material foreign currency exchange, except for the carrying value of our investment in our wholly-owned subsidiary Impax Laboratories (Taiwan), Inc., or commodity price risks.

Item 8. Financial Statements and Supplementary Data

The consolidated financial statements and schedule listed in the Index to Financial Statements beginning on page F-1 are filed as part of this Annual Report on Form 10-K and incorporated by reference herein.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

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Item 9A. Controls and Procedures

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) designed to ensure information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based upon this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, were effective as of December 31, 2010.

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Management Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles used in the United States (GAAP). Internal control over financial reporting includes those policies and procedures which (i) pertain to the maintenance of records, in reasonable detail, to accurately and fairly record the transactions and dispositions of our assets; (ii) provide reasonable assurance transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets which could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of internal control over financial reporting effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010, the end of our fiscal year. Management based its assessment on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included evaluation of such elements as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment. Based on the assessment, management has concluded our internal control over financial reporting was effective as of the end of the fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP. The effectiveness of our internal control over financial reporting as of December 31, 2010, has been audited by Grant Thornton, LLP, an independent registered public accounting firm, as stated in their report which is included immediately below.

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Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Impax Laboratories, Inc.

We have audited Impax Laboratories, Inc. and Subsidiaries’ (a Delaware Corporation) (the “Company”) internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Impax Laboratories, Inc. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Impax Laboratories, Inc. and Subsidiaries as of December 31, 2010 and 2009 and the related consolidated statements of operations, changes in stockholders’ equity, comprehensive income and cash flows for each of the three years in the period ended December 31, 2010 and our report dated February 25, 2011 expressed an unqualified opinion.

/s/ GRANT THORNTON LLP

Philadelphia, Pennsylvania
February 25, 2011

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Changes in Internal Control over Financial Reporting

During the quarter ended December 31, 2010, there were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Code of Ethics

We have adopted a Code of Business Conduct and Ethics (“Code of Ethics”) that applies to all of our directors and employees, including our Chief Executive Officer, Chief Financial Officer and any other accounting officer, controller or persons performing similar functions. The Code of Ethics is available on our website (www.impaxlabs.com) and accessible via the “Investor Relations” page. Any amendments to, or waivers of, the Code of Ethics will be disclosed on our website within four business days following the date of such amendment or waiver.

Additional information required by this item is incorporated by reference to our definitive proxy statement for the Annual Meeting of Stockholders to be held on May 10, 2011 (“Proxy Statement”), except information concerning our executive officers which is set forth in “Part 1” and which is incorporated herein by reference.

Item 11. Executive Compensation

The information required by this item is incorporated by reference to the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is incorporated by reference to the Proxy Statement, except information concerning the equity compensation plans table which is set forth in “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” and which is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is incorporated by reference to the Proxy Statement.

Item 14. Principal Accounting Fees and Services

The information required by this item is incorporated by reference to the Proxy Statement.

91

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)(1) Consolidated Financial Statements

The consolidated financial statements listed in the Index to Financial Statements beginning on page F-1 are filed as part of this Annual Report on Form 10-K.

(a)(2) Financial Statement Schedules

The financial statement schedule listed in the Index to Financial Statements on page F-1 is filed as part of this Annual Report on Form 10-K.

92

(a)(3) Exhibits

Exhibit No.	Description of Document
3.1.1	Restated Certificate of Incorporation, dated August 30, 2004.(1)
3.1.2	Certificate of Designation of Series A Junior Participating Preferred Stock, as filed with the Secretary of State of Delaware on January 21, 2009.(2)
3.2	Amended and Restated Bylaws, effective June 29, 2009.(3)
4.1	Specimen of Common Stock Certificate.(4)
4.2	Form of Debenture (incorporated by reference to Exhibit A to the Indenture, dated as of June 27, 2005, between the Company and HSBC Bank USA, National Association, as Trustee, listed on Exhibit 4.3)
4.3	Indenture, dated as of June 27, 2005, between the Company and HSBC Bank USA, National Association, as Trustee.(4)
4.4	Supplemental Indenture, dated as of July 6, 2005, between the Company and HSBC Bank USA, National Association, as Trustee.(4)
4.5	Registration Rights Agreement, dated as of June 27, 2005, between the Company and the Initial Purchasers named therein.(4)
4.6	Promissory Note dated June 7, 2006, issued by the Company to Solvay Pharmaceuticals, Inc.(4)
4.7	Preferred Stock Rights Agreement, dated as of January 20, 2009, by and between the Company and StockTrans, Inc., as Rights Agent.(2)
10.1.1	Amended and Restated Loan and Security Agreement, dated as of December 15, 2005, between the Company and Wachovia Bank, National Association.(4)
10.1.2	First Amendment, dated October 14, 2008, to Amended and Restated Loan and Security Agreement, dated December 15, 2005, between the Company and Wachovia Bank, National Association.(5)
10.1.3	Second Amendment to Amended and Restated Loan and Security Agreement, effective as of December 31, 2008, by and among the Company and Wachovia Bank, National Association.(6)
10.1.4	Third Amendment to Amended and Restated Loan and Security Agreement, effective as of March 31, 2009, by and among the Company and Wachovia Bank, National Association.(7)
10.1.5	Fourth Amendment to Amended and Restated Loan and Security Agreement, effective as of March 12, 2010, by and among the Company and Wachovia Bank, National Association, a Wells Fargo Company.(8)
10.1.6	Fifth Amendment to Amended and Restated Loan and Security Agreement, effective as of June 30, 2010, by and among the Company and Wells Fargo Bank, National Association, successor by merger to Wachovia Bank, National Association.(9)
10.1.7	Sixth Amendment to Amended and Restated Loan and Security Agreement, effective as of September 30, 2010, by and among the Company and Wells Fargo Bank, National Association, successor by merger to Wachovia Bank, National Association.(10)
10.1.8	Seventh Amendment to Amended and Restated Loan and Security Agreement, effective as of January 31, 2011, by and among the Company and Wells Fargo Bank, National Association, successor by merger to Wachovia Bank, National Association.
10.2	Purchase Agreement, dated June 26, 2005, between the Company and the Purchasers named therein.(4)
10.3.1	Impax Laboratories Inc. 1999 Equity Incentive Plan.*(6)
10.3.2	Form of Stock Option Grant under the Impax Laboratories, Inc. 1999 Equity Incentive Plan.*(6)
10.4	Impax Laboratories Inc. 2001 Non-Qualified Employee Stock Purchase Plan.*(4)
10.5.1	Impax Laboratories Inc. Amended and Restated 2002 Equity Incentive Plan.*(11)
10.5.2	Form of Stock Option Grant under the Impax Laboratories, Inc. Amended and Restated 2002 Equity Incentive Plan.*(6)

93

Exhibit No.	Description of Document
10.5.3	Form of Stock Bonus Agreement under the Impax Laboratories, Inc. Amended and Restated 2002 Equity Incentive Plan.*(6)
10.6.1	Impax Laboratories Inc. Executive Non-Qualified Deferred Compensation Plan, amended and restated effective January 1, 2008.*(8)
10.6.2	Amendment to Impax Laboratories Inc. Executive Non-Qualified Deferred Compensation Plan, effective as of January 1, 2009.* (8)
10.7.1	Employment Agreement, dated December 14, 1999, by and between the Company and Larry Hsu, Ph.D.*(5)
10.7.2	Amendment No. 1, dated May 19, 2009, to Employment Agreement, dated December 14, 1999, by and between the Company and Larry Hsu, Ph.D.*(12)
10.7.3	Employment Agreement, dated as of January 1, 2010, between the Company and Larry Hsu, Ph.D.*(13)
10.8	Employment Agreement, dated as of January 1, 2010, between the Company and Charles V. Hildenbrand.*(13)
10.9	Employment Agreement, dated as of January 1, 2010, between the Company and Arthur A. Koch, Jr.*(13)
10.10	Employment Agreement, dated as of January 1, 2010, between the Company and Michael J. Nestor.*(13)
10.11.1	Offer of Employment Letter, effective as of January 5, 2009, between the Company and Christopher Mengler.*(6)
10.11.2	Employment Agreement, dated as of January 1, 2010, between the Company and Christopher Mengler, R.Ph.*(13)
10.11.3	Separation Agreement and General Release, dated October 19, 2010, by and between the Company and Christopher Mengler, R.Ph.*(14)
10.12	License and Distribution Agreement, dated as of January 19, 2006, between the Company and Shire LLC.**(15)
10.13	Joint Development Agreement, dated as of November 26, 2008, between the Company and Medicis Pharmaceutical Corporation.**(15)
10.14	License, Development and Commercialization Agreement, dated as of December 15, 2010, by and between the Company and Glaxo Group Limited.***
10.15	Supply Agreement, dated as of December 15, 2010, by and between the Company and Glaxo Group Limited.***
11.1	Statement re computation of per share earnings (incorporated by reference to Note 17 to the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K).
21.1	Subsidiaries of the registrant.
23.1	Consent of Grant Thornton LLP.

94

Exhibit No.	Description of Document
31.1	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certifications of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*	Management contract, compensatory plan or arrangement.
**	Confidential treatment granted for certain portions of this exhibit pursuant to Rule 24b-2 under the Exchange Act, which portions are omitted and filed separately with the SEC.
***	Confidential treatment requested for certain portions of this exhibit pursuant to Rule 24b-2 under the Exchange Act, which portions are omitted and filed separately with the SEC.
(1)	Incorporated by reference to Amendment No. 5 to the Company’s Registration Statement on Form 10 filed on December 23, 2008.
(2)	Incorporated by reference to the Company’s Current Report on Form 8-K filed on January 22, 2009.
(3)	Incorporated by reference to the Company’s Current Report on Form 8-K filed on July 2, 2009.
(4)	Incorporated by reference to the Company’s Registration Statement on Form 10 filed on October 10, 2008.
(5)	Incorporated by reference to Amendment No. 2 to the Company’s Registration Statement on Form 10 filed on December 2, 2008.
(6)	Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
(7)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.
(8)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010.
(9)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010.
(10)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010.
(11)	Incorporated by reference to the Company’s Definitive Proxy Statement on Schedule 14A filed on April 14, 2010.
(12)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009.
(13)	Incorporated by reference to the Company’s Current Report on Form 8-K filed on January 14, 2010.
(14)	Incorporated by reference to the Company’s Current Report on Form 8-K filed on October 22, 2010.
(15)	Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

95

Impax Laboratories, Inc.
INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2010 and 2009	F-3
Consolidated Statements of Operations for each of the three years in the period ended December 31, 2010	F-4
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) and Consolidated Statements of Comprehensive Income for each of the three years in the period ended December 31, 2010	F-5
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2010	F-6
Notes to Consolidated Financial Statements for each of the three years in the period ended December 31, 2010	F-8
Schedule II, Valuation and Qualifying Accounts	S-1

F-1

Impax Laboratories, Inc.

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Impax Laboratories, Inc.

We have audited the accompanying consolidated balance sheets of Impax Laboratories, Inc. (a Delaware corporation) and Subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, changes in stockholders’ equity, comprehensive income, and cash flows for each of the three years in the period ended December 31, 2010. Our audits of the basic consolidated financial statements included the financial statement schedule, listed in the index appearing under Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Impax Laboratories, Inc. and Subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Notes 2 and 13 to the consolidated financial statements, the Company has adopted the new accounting guidance related to revenue recognition for multiple-element arrangements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 25, 2011 expressed an unqualified opinion.

/s/ Grant Thornton LLP  

Philadelphia, Pennsylvania
February 25, 2011

F-2

IMPAX LABORATORIES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	December 31,			December 31,
	2010			2009
ASSETS
Current assets:
Cash and cash equivalents	$	91,796		$	31,770
Short-term investments		256,605			58,599
Accounts receivable, net		82,054			185,854
Inventory, net		44,549			49,130
Current portion of deferred product manufacturing costs-alliance agreements		2,012			11,624
Current portion of deferred income taxes		39,271			32,286
Prepaid expenses and other current assets		4,407			4,748
Total current assets		520,694			374,011
Property, plant and equipment, net		106,280			101,650
Deferred product manufacturing costs-alliance agreements		8,223			96,619
Deferred income taxes, net		5,069			48,544
Other assets		25,478			12,358
Goodwill		27,574			27,574
Total assets	$	693,318		$	660,756
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	18,812		$	23,295
Accrued expenses		72,788			62,055
Accrued income taxes payable		2,393			31,627
Accrued profit sharing and royalty expenses		14,147			53,695
Current portion of deferred revenue-alliance agreements		18,276			33,196
Total current liabilities		126,416			203,868
Deferred revenue-alliance agreements		44,195			224,522
Other liabilities		14,558			10,139
Total liabilities	$	185,169		$	438,529
Commitments and contingencies (Notes 19 and 20)
Stockholders’ equity:
Preferred Stock, $0.01 par value, 2,000,000 shares authorized, 0 shares outstanding at December 31, 2010 and 2009	$	—		$	—
Common stock, $0.01 par value, 90,000,000 shares authorized and 64,721,041 and 62,210,089 shares issued at December 31, 2010 and 2009, respectively		647			622
Additional paid-in capital		255,440			223,239
Treasury stock — 243,729 shares		(2,157	)		(2,157	)
Accumulated other comprehensive income (loss)		2,811			(524	)
Retained earnings		251,246			828
		507,987			222,008
Noncontrolling interest		162			219
Total stockholders’ equity		508,149			222,227
Total liabilities and stockholders’ equity	$	693,318		$	660,756

The accompanying notes are an integral part of these consolidated financial statements.

F-3

IMPAX LABORATORIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except share and per share data)

	Years Ended December 31
	2010			2009			2008
Revenues:
Global Product sales, net	$	622,889		$	287,079		$	96,006
Private Label Product sales		2,074			5,513			2,596
Rx Partner		217,277			33,835			81,778
OTC Partner		8,888			6,842			15,946
Research Partner		14,308			11,680			833
Promotional Partner		14,073			13,448			12,891
Other		—			12			21
Total revenues		879,509			358,409			210,071
Cost of revenues		340,246			170,313			91,969
Gross profit		539,263			188,096			118,102
Operating expenses:
Research and development		86,223			63,274			59,237
Patent litigation		6,384			5,379			6,472
Litigation settlement		—			9,318			—
Selling, general and administrative		53,332			39,712			48,470
Total operating expenses		145,939			117,683			114,179
Income from operations		393,324			70,413			3,923
Change in fair value of common stock purchase warrant		—			—			1,234
Loss on repurchase of 3.5% Debentures		—			—			(113	)
Other (expense) income, net		(315	)		57			21,529
Interest income		1,037			753			4,218
Interest expense		(167	)		(246	)		(4,782	)
Income before income taxes		393,879			70,977			26,009
Provision for income taxes		143,521			21,006			10,069
Net income before noncontrolling interest		250,358			49,971			15,940
Add back loss attributable to noncontrolling interest		60			90			47
Net income	$	250,418		$	50,061		$	15,987
Net Income per share:
Basic	$	4.04		$	0.83		$	0.27
Diluted	$	3.82		$	0.82		$	0.26
Weighted average common shares outstanding:
Basic		62,037,908			60,279,602			59,072,752
Diluted		65,565,132			61,080,184			60,782,721

The accompanying notes are an integral part of these consolidated financial statements.

F-4

IMPAX LABORATORIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

AND CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2010

(amounts in thousands)

										Retained			Accumulated
					Additional					Earnings/			Other
	Common Stock				Paid-In		Treasury			(Accumulated			Comprehensive			Noncontrolling
Stockholders’ Equity	Shares		Par Value		Capital		Stock			Deficit)			Income			Interest			Total
Balance at December 31, 2007		58,822	$	591	$	202,715	$	(2,157	)	$	(65,220	)	$	(26	)		145		$	136,048
2008
Exercise of common stock purchase warrants and stock options, issuance of restricted stock and sale of common stock under ESPP		994		10		1,029														1,039
Share-based compensation expense						5,817														5,817
Issuance of common stock		76		1		643														644
Reversal of deferred tax liability on 3.5% Debenture conversion option as a result of repurchase						924														924
Purchase of noncontrolling interest shares																	202			202
Currency translation adjustments														(969	)					(969	)
Net income											15,987									15,987
Other																	(42	)		(42	)
Balance at December 31, 2008		59,892	$	602	$	211,128	$	(2,157	)	$	(49,233	)	$	(995	)		305		$	159,650
2009
Exercise of stock options issuance of restricted stock and sale of common stock under ESPP		2,074		20		4,507														4,527
Share-based compensation expense						7,391														7,391
Tax benefit related to exercise of employee stock options						213														213
Currency translation adjustments														471						471
Net income											50,061									50,061
Other																	(86	)		(86	)
Balance at December 31, 2009		61,966	$	622	$	223,239	$	(2,157	)	$	828		$	(524	)		219		$	222,227
2010
Exercise of stock options issuance of restricted stock and sale of common stock under ESPP		2,495		25		15,004														15,029
Share-based compensation expense						10,693														10,693
Issuance of common stock in settlement of royalty obligation		16		—		332														332
Tax benefit related to exercise of employee stock options						6,172														6,172
Currency translation adjustments														3,335						3,335
Net income											250,418									250,418
Other																	(57	)		(57	)
Balance at December 31, 2010		64,477	$	647	$	255,440	$	(2,157	)	$	251,246		$	2,811			162		$	508,149

	Years Ended December 31,
Comprehensive Income	2010		2009		2008
Net income	$	250,418	$	50,061	$	15,987
Currency translation adjustments		3,335		471		(969	)
Comprehensive income	$	253,753	$	50,532	$	15,018

The accompanying notes are an integral part of these consolidated financial statements.

F-5

IMPAX LABORATORIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

	Years Ended December 31,
	2010			2009			2008
Cash flows from operating activities:
Net income	$	250,418		$	50,061		$	15,987
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		12,649			11,266			9,588
Amortization of 3.5% Debentures discount and deferred financing costs		—			307			2,416
Amortization of Credit Agreement deferred financing costs		25			75			74
Bad debt expense		277			229			568
Deferred income taxes (benefit)		42,662			(10,379	)		3,816
Tax benefit related to the exercise of employee stock options		(6,172	)		(213	)		—
Change in accrual for uncertain tax positions		280			(6,308	)		1,397
Loss, net on repurchase of 3.5% Debentures		—			—			113
Deferred revenue — Alliance Agreements		35,704			49,255			151,275
Deferred product manufacturing costs — Alliance Agreements		(10,640	)		(26,018	)		(50,018	)
Deferred revenue recognized — Alliance Agreements		(230,951	)		(52,357	)		(98,557	)
Amortization deferred product manufacturing costs — Alliance Agreements		108,648			24,497			37,690
Accrued profit sharing and royalty expense		101,247			53,912			360
Profit sharing and royalty payments		(140,794	)		(469	)		(656	)
Payments on exclusivity period fee		—			(6,000	)		(12,000	)
Accrued litigation settlement expense		—			5,865			3,500
Payments on accrued litigation settlements		(5,865	)		(11,495	)		(2,197	)
Share-based compensation expense		10,714			7,391			5,817
Fair value of shares issued under severance arrangement		—			—			561
Accretion of interest income on short-term investments		(638	)		(519	)		(2,867	)
Change in fair value of stock purchase warrants					—			(1,234	)
Changes in assets and liabilities:
Accounts receivable		103,523			(142,777	)		7,629
Inventory		4,581			(16,825	)		(4,737	)
Prepaid expenses and other assets		(12,092	)		2,179			(4,184	)
Accounts payable and accrued expenses		(17,896	)		57,059			(517	)
Other liabilities		4,081			3,107			737
Net cash provided by (used in) operating activities	$	249,761		$	(8,157	)	$	64,564
Cash flows from investing activities:
Purchase of short-term investments		(403,086	)		(66,626	)		(202,133	)
Maturities of short-term investments		205,718			59,256			260,324
Acquisition of ANDA intellectual property rights		—			(750	)		—
Purchases of property, plant and equipment		(16,267	)		(13,667	)		(25,863	)
Net cash (used in) provided by investing activities	$	(213,635	)	$	(21,787	)	$	32,328

F-6

IMPAX LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(dollars in thousands)

	Years Ended December 31,
	2010		2009			2008
Cash flows from financing activities:
Repayment of long-term debt		—		(12,887	)		(65,234	)
Tax benefit related to the exercise of employee stock options		6,172		213			—
Proceeds from exercise of stock options and purchases under the ESPP		17,728		5,113			155
Net cash provided by (used in) financing activities	$	23,900	$	(7,561	)	$	(65,079	)
Net increase (decrease) in cash and cash equivalents	$	60,026	$	(37,505	)	$	31,813
Cash and cash equivalents, beginning of period	$	31,770	$	69,275		$	37,462
Cash and cash equivalents, end of period	$	91,796	$	31,770		$	69,275

Supplemental disclosure of non-cash investing and financing activities:

	Years Ended December 31,
(in $000s)	2010		2009		2008
Cash paid for interest	$	167	$	622	$	2,970
Cash paid for income taxes	$	129,763	$	415	$	8,381

The Company issued 0, 0 and 106,642 shares of common stock as the result of cashless exercises of common stock purchase warrants for the years ended December 31, 2010, 2009 and 2008, respectively.

Unpaid vendor invoices of approximately $3,119,000, $4,730,000 and $1,247,000 which were accrued as of December 31, 2010, 2009 and 2008, respectively, are excluded from the purchase of property, plant, and equipment and the change in accounts payable and accrued expenses.

The accompanying notes are an integral part of these consolidated financial statements.

F-7

IMPAX LABORATORIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2010, 2009, 2008

1. THE COMPANY

Impax Laboratories, Inc. (“Impax” or “Company”) is a technology-based, specialty pharmaceutical company. The Company has two reportable segments, referred to as the “Global Pharmaceuticals Division”, (“Global Division”) and the “Impax Pharmaceuticals Division”, (“Impax Division”).

The Global Division develops, manufactures, sells, and distributes generic pharmaceutical products primarily through four sales channels: the “Global Products” sales channel, for generic pharmaceutical prescription products the Company sells directly to wholesalers, large retail drug chains, and others; the “Private Label” sales channel, for generic pharmaceutical over-the-counter (“OTC”) and prescription products the Company sells to unrelated third-party customers who in-turn sell the product to third parties under their own label; the “Rx Partner” sales channel, for generic prescription products sold through unrelated third-party pharmaceutical entities under their own label pursuant to alliance agreements; and the “OTC Partner” sales channel, for sales of generic pharmaceutical OTC products sold through unrelated third-party pharmaceutical entities under their own label pursuant to alliance agreements. The Company also generates revenue from research and development services provided under a joint development agreement with an unrelated third party pharmaceutical company, and reports such revenue under the caption “Research partner” revenue on the consolidated statement of operations. The Company provides these services through the research and development group in the Global Division.

The Company’s Impax Division is engaged in the development of proprietary brand pharmaceutical products through improvements to already approved pharmaceutical products to address central nervous system (“CNS”) disorders. The Impax Division is also engaged in the co-promotion through a direct sales force focused on marketing to physicians, primarily in the CNS community, pharmaceutical products developed by other unrelated third-party pharmaceutical entities.

The Company marketed a total of 93 generic pharmaceutical products as of December 31, 2010, which represented dosage variations of 29 different pharmaceutical compounds marketed under the Company’s Global Products label; plus a total of 16 generic prescription pharmaceuticals, representing dosage variations of 4 different pharmaceutical compounds sold to unrelated third-party pharmaceutical entities pursuant to the Rx Partners Alliance Agreements; and to the OTC Partners Alliance Agreements.

The Company had 36 applications for approval of new generic products under review by the U.S. Food and Drug Administration (“FDA”) as of December 31, 2010, 2 of which have been tentatively approved, and 62 additional generic products in various stages of research and development, for which applications have not yet been filed.

In California, the Company utilizes a combination of owned and leased facilities mainly located in Hayward. The Company’s primary properties in California consist of a leased office building used as the Company’s corporate headquarters, in addition to three properties it owns, including two research and development center facilities, and a manufacturing facility. Additionally, the Company leases three facilities in Hayward, and Fremont, utilized for additional research and development, administrative services, and equipment storage. In Pennsylvania, the Company owns a packaging, warehousing, and distribution center located in Philadelphia, and leases a facility in New Britain used for sales and marketing, finance, and administrative personnel, as well as providing additional warehouse space. Outside the Unites States, in Taiwan, the Company owns a manufacturing facility.

F-8

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) and the rules and regulations of the U.S. Securities & Exchange Commission (SEC) requires the use of estimates and assumptions, based on complex judgments considered reasonable, affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant judgments are employed in estimates used in determining values of tangible and intangible assets, legal contingencies, tax assets and tax liabilities, fair value of share-based compensation related to equity incentive awards issued to employees and directors, and estimates used in applying the Company’s revenue recognition policy including those related to accrued chargebacks, rebates, product returns, Medicare, Medicaid, and other government rebate programs, shelf-stock adjustments, and the timing and amount of deferred and recognized revenue and deferred and amortized product manufacturing costs related to alliance and collaboration agreements. Actual results may differ from estimated results. Certain prior year amounts have been reclassified to conform to the current year presentation.

Principles of Consolidation

The consolidated financial statements of the Company include the accounts of the operating parent company, Impax Laboratories, Inc., its wholly owned subsidiary, Impax Laboratories (Taiwan) Inc., and an equity investment in Prohealth Biotech, Inc. (“Prohealth”), in which the Company held a 57.54% majority ownership interest at December 31, 2010. All significant intercompany accounts and transactions have been eliminated.

Cash and Cash Equivalents

The Company considers all short-term investments with maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are stated at cost, which, for cash equivalents, approximates fair value due to their short-term maturity. The Company is potentially subject to financial instrument concentration of credit risk through its cash and cash equivalents. The Company maintains cash and cash equivalents with several major financial institutions. Such amounts frequently exceed Federal Deposit Insurance Corporation (“FDIC”) limits.

Short-Term Investments

Short-term investments represent investments in fixed rate financial instruments with maturities of greater than three months but less than 12 months at the time of purchase. The Company’s short-term investments are held in U.S. Treasury securities, corporate bonds, and high grade commercial paper, which are not insured by the FDIC. They are stated at amortized cost, which approximates fair value due to their short-term maturity, generally based upon observable market values of similar securities.

Fair Value of Financial Instruments

The Company’s deferred compensation liability is carried at the value of the amount owed to participants, and is derived from observable market data by reference to hypothetical investments. The carrying values of other financial assets and liabilities such as accounts receivable, accounts payable and accrued expenses approximate their fair values due to their short-term nature.

F-9

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Contingencies

In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, covering a wide range of matters, including, among others, patent litigation, shareholder lawsuits, and product liability. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ^TM (“ASC”) Topic 450, “Contingencies”, the Company records accruals for such loss contingencies when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. The Company, in accordance with FASB ASC Topic 450, does not recognize gain contingencies until realized. A discussion of contingencies is included in the “Commitments and Contingencies,” and “Legal and Regulatory Matters” footnotes below.

Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from amounts deemed to be uncollectible from its customers; these allowances are for specific amounts on certain accounts based on facts and circumstances determined on a case-by-case basis.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are cash, cash equivalents, short-term investments, and accounts receivable. The Company limits its credit risk associated with cash, cash equivalents and short-term investments by placing its investments with high quality money market funds, corporate debt, and short-term commercial paper and in securities backed by the U.S. Government. The Company limits its credit risk with respect to accounts receivable by performing credit evaluations when deemed necessary. The Company does not require collateral to secure amounts owed to it by its customers.

The following tables present the percentage of total accounts receivable and gross revenues represented by the Company’s five largest customers as of and for the years ended December 31, 2010, 2009 and 2008:

Percent of Total Accounts Receivable	2010			2009			2008
Customer #1		28.3	%		19.9	%		22.9	%
Customer #2		18.4	%		18.7	%		20.4	%
Customer #3		15.0	%		43.8	%		20.4	%
Customer #4		—	%		—	%		13.5	%
Customer #5		—	%		—	%		6.0	%
Customer #6		13.5	%		3.6	%		—	%
Customer #7		2.9	%		2.7	%		—	%
Total-Five largest customers		78.1	%		88.7	%		83.2	%

Percent of Gross Revenues	2010			2009			2008
Customer #1		19.9	%		22.2	%		18.0	%
Customer #2		—	%		5.7	%		14.0	%
Customer #3		—	%		—	%		13.9	%
Customer #4		14.1	%		26.5	%		11.6	%
Customer #5		14.2	%		15.3	%		10.9	%
Customer #6		6.5	%		3.9	%		—	%
Customer #7		3.4	%		—	%		—	%
Total-Five largest customers		58.1	%		73.6	%		68.4	%

During the years ended December 31, 2010, 2009 and 2008, the Company’s top ten products accounted for 83%, 70% and 65%, respectively, of Global Product sales, net.

F-10

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Inventory

Inventory is stated at the lower of cost or market. Cost is determined using a standard cost method, and the cost flow assumption is first in, first out (“FIFO”) flow of goods. Standard costs are revised annually, and significant variances between actual costs and standard costs are apportioned to inventory and cost of goods sold based upon inventory turnover. Costs include materials, labor, quality control, and production overhead. Inventory is adjusted for short-dated, unmarketable inventory equal to the difference between the cost of inventory and the estimated value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by the Company, additional inventory write-downs may be required. Consistent with industry practice, the Company may build pre-launch inventories of certain products which are pending required FDA approval and/or resolution of patent infringement litigation, when, in the Company’s assessment, such action is appropriate to increase the commercial opportunity and FDA approval is expected in the near term and/or the litigation will be resolved in the Company’s favor. The Company accounts for all costs of idle facilities, excess freight and handling costs, and wasted materials (spoilage) as a current period charge in accordance with GAAP.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost. Maintenance and repairs are charged to expense as incurred and costs of improvements and renewals are capitalized. Costs incurred in connection with the construction or major renovation of facilities, including interest directly related to such projects, are capitalized as construction in progress. Depreciation is recognized using the straight-line method based on the estimated useful lives of the related assets, which are 40 years for buildings, 15 years for building improvements, 7 to 10 years for equipment, and 3 to 5 years for office furniture and equipment. Land and construction-in-progress are not depreciated.

F-11

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Goodwill

In accordance with FASB ASC Topic 350, “Goodwill and Other Intangibles”, rather than recording periodic amortization, goodwill is subject to an annual assessment for impairment by applying a fair value based test. Under FASB ASC Topic 350, if the fair value of the reporting unit exceeds the reporting unit’s carrying value, including goodwill, then goodwill is considered not impaired, making further analysis not required.

The Company considers the Global Division and the Impax Division operating segments to each be a reporting unit as this is the lowest level for which discrete financial information is available. The Company attributes the entire carrying amount of goodwill to the Global Division.

The Company concluded the carrying value of goodwill was not impaired as of December 31, 2010 and 2009 as the fair value of the Global Division exceeded its carrying value at each date. The Company performs its annual goodwill impairment test in the fourth quarter of each year. The Company estimated the fair value of the Global Division using a discounted cash flow model for both the reporting unit and the enterprise. In addition, on a quarterly basis, the Company performs a review of its business operations to determine whether events or changes in circumstances have occurred which could have a material adverse effect on the estimated fair value of the reporting unit, and thus indicate a potential impairment of the goodwill carrying value. If such events or changes in circumstances were deemed to have occurred, the Company would perform an interim impairment analysis, which may include the preparation of a discounted cash flow model, or consultation with one or more valuation specialists, to determine the impact, if any, on the Company’s assessment of the reporting unit’s fair value. The Company has not to date deemed there to have been any significant adverse changes in the legal, regulatory, or general economic environment in which the Company conducts its business operations.

Debt

As required, FASB ASC Topic 470, the amended accounting standard for debt with conversion and other options, was applied on a retrospective basis beginning with the year ended December 31, 2007. The adoption of FASB ASC Topic 470 resulted in an increase to accumulated deficit of $4,415,000 to $190,630,000 at January 1, 2007. The following table presents the effect of the adoption of FASB ASC Topic 470 on net income and net income per share for the three years ended December 31, 2010, 2009 and 2008:

	Twelve Months Ended:
	December 31,		December 31,			December 31,
(in $000’s except per share amounts)	2010		2009			2008
Additional interest expense	$	—	$	253		$	2,183
Reduction in gain on extinguishment of debt		—		—			(1,432	)
Benefit for income taxes		—		(89	)		(902	)
Decrease in net income	$	—	$	(164	)	$	(2,713	)
Decrease in Net income per share:
Basic	$	—	$	—		$	(0.05	)
Diluted	$	—	$	—		$	(0.04	)

F-12

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Recognition

The Company recognizes revenue when the earnings process is complete, which under SEC Staff Accounting Bulletin No. 104, Topic No. 13, “Revenue Recognition” (“SAB 104”), is when revenue is realized or realizable and earned, there is persuasive evidence a revenue arrangement exists, delivery of goods or services has occurred, the sales price is fixed or determinable, and collectability is reasonably assured.

The Company accounts for revenue arrangements with multiple deliverables in accordance with FASB ASC Topic 605-25, revenue recognition for arrangements with multiple elements, which addresses the determination of whether an arrangement involving multiple deliverables contains more than one unit of accounting. A delivered item within an arrangement is considered a separate unit of accounting only if both of the following criteria are met:

• the delivered item has value to the customer on a stand alone basis; and

• if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in the control of the vendor.

Under FASB ASC Topic 605-25, if both of the criteria above are not met, then separate accounting for the individual deliverables is not appropriate. Revenue recognition for arrangements with multiple deliverables constituting a single unit of accounting is recognizable generally over the greater of the term of the arrangement or the expected period of performance, either on a straight-line basis or on a modified proportional performance method. Prior to the application of the updated guidance of FASB ASC Topic 605-25 for multiple element arrangements in 2010 (see the “Alliance and Collaboration Agreements” footnote below for a detailed discussion), delivered items within the Company’s arrangements were not considered a separate unit of accounting as the fair value of the undelivered elements could not be objectively or reliably determined.

The Company accounts for milestones related to research and development activities in accordance with FASB ASC Topic 605-28, milestone method of revenue recognition. FASB ASC Topic 605-28 allows for the recognition of consideration, which is contingent on the achievement of a substantive milestone, in its entirety in the period the milestone is achieved. A milestone is considered to be substantive if all of the following criteria are met:, including the milestone is commensurate with either: (1) the performance required to achieve the milestone, or (2) the enhancement of the value of the delivered items resulting from the performance required to achieve the milestone; the milestone relates solely to past performance; and, the milestone is reasonable relative to all of the deliverables and payment terms within the agreement.

F-13

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Global Product sales, net:

The “Global Product sales, net” line item of the statement of operations, includes revenue recognized related to shipments of pharmaceutical products to the Company’s customers, primarily drug wholesalers and retail chains. Gross sales revenue is recognized at the time title and risk of loss passes to the customer — generally when product is received by the customer. Included in Global Product revenue are deductions from the gross sales price, including deductions related to estimates for chargebacks, rebates, returns, shelf-stock, and other pricing adjustments. The Company records an estimate for these deductions in the same period when revenue is recognized. A summary of each of these deductions is as follows:

Returns

The Company allows its customers to return product (i) if approved by authorized personnel in writing or by telephone with the lot number and expiration date accompanying any request and (ii) if such products are returned within six months prior to or until twelve months following, the products’ expiration date.

The Company estimates a provision for product returns as a percentage of gross sales based upon historical experience of Global Division Global Product sales. The sales return reserve is estimated using a historical lag period, which is the time between when the product is sold and when it is ultimately returned, and return rates, adjusted by estimates of the future return rates based on various assumptions, which may include changes to internal policies and procedures, changes in business practices, and commercial terms with customers, competitive position of each product, amount of inventory in the wholesaler supply chain, the introduction of new products, and changes in market sales information. The Company also considers other factors, including significant market changes which may impact future expected returns, and actual product returns. The Company monitors actual returns on a quarterly basis and may record specific provisions for returns it believes are not covered by historical percentages.

Rebates and Chargebacks

The Company maintains various rebate programs with its Global Division Global Products sales channel customers in an effort to maintain a competitive position in the marketplace and to promote sales and customer loyalty. The rebates generally take the form of a credit memo to reduce the invoiced gross sales amount charged to a customer for products shipped. A provision for rebate deductions is estimated and recorded at the time of product shipment. The primary factors the Company considers when estimating the provision for rebates are the average historical experience of aggregate credits issued, the mix of products shipped and the historical relationship of rebates as a percentage of total Global Product sales, gross, the contract terms and conditions of the various rebate programs in effect at the time of shipment, and the amount of inventory on hand at the three major drug wholesalers with which we do business. The Company also monitors aggregate actual rebates granted and compares them to the estimated provision for rebates to assess the reasonableness of the rebate reserve at each quarterly balance sheet date.

The Company has agreements establishing contract prices for certain products with certain indirect customers, such as managed care organizations, hospitals and government agencies that purchase products from drug wholesalers. The contract prices are lower than the prices the customer would otherwise pay to the wholesaler, and the difference is referred to as a chargeback, which generally takes the form of a credit issued by the Company to reduce the gross sales amount we invoiced to the wholesaler. A provision for chargeback deductions is estimated and recorded at the time products are shipped by the Company to the wholesalers. The primary factors considered when estimating the provision for chargebacks are the average historical chargeback credits given, the mix of products shipped, and the amount of inventory on hand at the three major drug wholesalers with which the Company does business. The Company also monitors aggregate actual chargebacks granted and compares them to the estimated provision for chargebacks to assess the reasonableness of the chargeback reserve at each quarterly balance sheet date.

F-14

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Shelf-Stock Adjustments

Based upon competitive market conditions, the Company may reduce the selling price of certain products. The Company may issue a credit against the sales amount to customers based upon their remaining inventory of the product in question, provided the customer agrees to continue to make future purchases of product from the Company. This type of customer credit is referred to as a shelf-stock adjustment, which is the difference between the sales price and the revised lower sales price, multiplied by an estimate of the number of product units on hand at a given date. Decreases in selling prices are discretionary decisions made by the Company in response to market conditions, including estimated launch dates of competing products and estimated declines in market price. The Company records an estimate for shelf-stock adjustments in the period it agrees to grant such a credit to a customer.

Medicaid

As required by law, the Company provides a rebate on drugs dispensed under the Medicaid program. The Company determines its estimated Medicaid rebate accrual primarily based on historical experience of claims submitted by the various states and any new information regarding changes in the Medicaid program which may impact the Company’s estimate of Medicaid rebates. In determining the appropriate accrual amount, the Company considers historical payment rates and processing lag for outstanding claims and payments. The Company records estimates for Medicaid rebates as a deduction from gross sales, with corresponding adjustments to accrued liabilities.

Cash Discounts

The Company offers cash discounts to its customers, generally 2% of the sales price, as an incentive for paying within invoice terms, which generally range from 30 to 90 days. An estimate of cash discounts is recorded in the same period when revenue is recognized.

F-15

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Private Label Product sales

The Company recognizes revenue from Private Label Product sales in accordance with SAB 104. Revenue from direct product sales is recognized at the time title and risk of loss pass to customers. Revenue received from Private Label product sales is not subject to deductions for chargebacks, rebates, returns, shelf-stock adjustments, and other pricing adjustments. Additionally, Private Label product sales do not have upfront, milestone, or lump-sum payments and do not contain multiple deliverables under FASB ASC Topic 605.

Rx Partner and OTC Partner:

The “Rx Partner” and “OTC Partner” line items of the statement of operations include revenue recognized under alliance and collaboration agreements between the Company and unrelated third-party pharmaceutical companies. The Company has entered into these alliance agreements to develop marketing and/or distribution relationships with its partners to fully leverage its technology platform.

The Rx Partners and OTC Partners alliance agreements obligate the Company to deliver multiple goods and/or services over extended periods. Such deliverables include manufactured pharmaceutical products, exclusive and semi-exclusive marketing rights, distribution licenses, and research and development services, among others. In exchange for these deliverables, the Company receives payments from its alliance agreement partners for product shipments, and may also receive royalty, profit sharing, and/or upfront or periodic milestone payments. Revenue received from the alliance agreement partners for product shipments under these agreements is not subject to deductions for chargebacks, rebates, product returns, and other pricing adjustments. Royalty and profit sharing amounts the Company receives under these agreements are calculated by the respective alliance agreement partner, with such royalty and profit share amounts generally based upon estimates of net product sales or gross profit which include estimates of deductions for chargebacks, rebates, product returns, and other adjustments the alliance agreement partners may negotiate with their customers. The Company records the alliance agreement partner’s adjustments to such estimated amounts in the period the alliance agreement partner reports the amounts to the Company.

The Company applied the updated guidance of ASC 605-25 “Multiple Element Arrangements” to the Strategic Alliance Agreement with Teva Pharmaceuticals Curacao N.V., a subsidiary of Teva Pharmaceutical Industries Limited (“Teva Agreement”) during the year ended December 31, 2010 — see “— Note 13 Alliance and Collaboration Agreements — Strategic Alliance Agreement with Teva” for a detailed discussion of the application of the updated guidance to the Teva Agreement. Rx Partner revenue is related to the Teva Agreement. All consideration received under the Teva Agreement is contingent, and therefore cannot be allocated to the deliverables. The Company looks to the underlying delivery of goods and /or services which give rise to the payment of consideration under the Teva Agreement to determine the appropriate revenue recognition. Consideration received as a result of research and development-related activities performed under the Teva Agreement are initially deferred and recorded as a liability captioned “Deferred revenue-alliance agreements.” The Company recognizes the deferred revenue on a straight-line basis over the Company’s expected period of performance of such services. Consideration received as a result of the manufacture and delivery of products under the Teva Agreement is recognized at the time title and risk of loss passes to the customer — generally when product is received by Teva. The Company recognizes profit share as current period revenue when earned.

F-16

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

OTC Partner revenue is related to the Company’s alliance agreements with Merck & Co., Inc. (formerly Shering-Plough Corporation) and Pfizer Inc. (formerly Wyeth) with respect to supply of over-the-counter pharmaceutical products and related research and development services. The Company initially defers all revenue earned under its OTC Partner alliance agreements. The deferred revenue is recorded as a liability captioned “Deferred revenue — alliance agreements.” The Company also defers its direct product manufacturing costs to the extent such costs are reimbursable by the OTC Partners. These deferred product manufacturing costs are recorded as an asset captioned “Deferred product manufacturing costs — alliance agreements.” The product manufacturing costs in excess of amounts reimbursable by the OTC Partners are recognized as current period cost of revenue. The Company recognizes revenue as OTC Partner revenue and amortizes deferred product manufacturing costs as cost of revenues — as the Company fulfills its contractual obligations. Revenue is recognized and associated costs are amortized over the respective alliance agreements’ term of the arrangement or the Company’s expected period of performance, using a modified proportional performance method. Under the modified proportional performance method of revenue recognition utilized by the Company, the amount recognized in the period of initial recognition is based upon the number of years elapsed under the respective alliance agreement relative to the estimated total length of the recognition period. Under this method, the amount of revenue recognized in the year of initial recognition is determined by multiplying the total amount realized by a fraction, the numerator of which is the then current year of the alliance agreement and the denominator of which is the total estimated life of the alliance agreement. The amount recognized during each remaining year is an equal pro rata amount. Finally, cumulative revenue recognized is limited to the extent of cash collected and/or the fair value received. The result of the Company’s modified proportional performance method is a greater portion of the revenue is recognized in the initial period with the remaining balance being recognized ratably over either the remaining life of the arrangement or the Company’s expected period of performance of each respective alliance agreement.

F-17

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Research Partner:

The “Research Partner” line item of the statement of operations includes revenue recognized under development agreements with unrelated third-party pharmaceutical companies. The development agreements generally obligate the Company to provide research and development services over multiple periods. In exchange for this service, the Company received upfront payments upon signing of each development agreement and is eligible to receive contingent milestone payments, based upon the achievement of contractually specified events. Additionally, the Company may also receive royalty payments from the sale, if any, of a successfully developed and commercialized product under one of these development agreements. Revenue received from the provision of research and development services, including the upfront payment and the contingent milestone payments, if any, will be deferred and recognized on a straight line basis over the expected period of performance of the research and development services. Royalty fee income, if any, will be recognized by the Company as current period revenue when earned.

Promotional Partner:

The “Promotional Partner” line item of the statement of operations includes revenue recognized under promotional services agreements with unrelated third-party pharmaceutical companies. The promotional services agreements obligate the Company to provide physician detailing sales calls to promote its partners’ branded drug products over multiple periods. In exchange for this service, the Company has received fixed fees generally based on either the number of sales force representatives utilized in providing the services, or the number of sales calls made (up to contractual maximum amounts). The Company recognizes revenue from providing physician detailing services as those services are provided and as performance obligations are met and contingent payments, if any, at the time when they are earned.

Shipping and Handling Fees and Costs

Shipping and handling fees related to sales transactions are recorded as selling expense. Shipping costs were $2,203,000, $647,000 and $599,000 for the years ended December 31, 2010, 2009 and 2008, respectively.

Research and Development

Research and development activities are expensed as incurred and consist of self-funded research and development costs and costs associated with work performed by other participants under collaborative research and development agreements.

Derivatives

The Company does not engage in hedging transactions for trading or speculative purposes or to hedge exposure to currency or interest rate fluctuations. From time to time, the Company may engage in transactions that result in embedded derivatives (e.g. convertible debt securities). In accordance with FASB ASC Topic 815, derivatives and hedging, the Company records the embedded derivative at fair value on the balance sheet and records any related gains or losses in current earnings in the statement of operations.

F-18

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes

The Company provides for income taxes using the asset and liability method as required by FASB ASC Topic 740, income taxes. This approach recognizes the amount of federal, state, local taxes, and foreign taxes payable or refundable for the current year, as well as deferred tax assets and liabilities for the future tax consequences of events recognized in the consolidated financial statements and income tax returns. Deferred income tax assets and liabilities are adjusted to recognize the effects of changes in tax laws or enacted tax rates in the period during which they are signed into law. Under FASB ASC Topic 740, a valuation allowance is required when it is more likely than not all or some portion of the deferred tax assets will not be realized through generating sufficient future taxable income.

FASB ASC Topic 740, Sub-topic 10, tax positions, defines the criterion an individual tax position must meet for any part of the benefit of the tax position to be recognized in financial statements prepared in conformity with generally accepted accounting principles. Under FASB ASC Topic 740, Sub-topic 10, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based solely on the technical merits of the tax position. The tax benefits recognized in the financial statements from such a tax position should be measured based on the largest benefit having a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority. Additionally, FASB ASC Topic 740, Sub-topic 10 provides guidance on measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. In accordance with the disclosure requirements of FASB ASC Topic 740, Sub-topic 10, the Company’s policy on income statement classification of interest and penalties related to income tax obligations is to include such items as part of total interest expense and other expense, respectively.

Share-Based Compensation

The Company accounts for stock-based employee compensation arrangements in accordance with provisions of FASB ASC Topic 718, stock compensation. Under FASB ASC Topic 718, the Company recognizes the grant date fair value of stock-based employee compensation as expense on a straight-line basis over the vesting period of the grant. The Company uses the Black Scholes option pricing model to determine the grant date fair value of employee stock options; the fair value of restricted stock awards is equal to the closing price of the Company’s stock on the date such award was granted.

Litigation Settlements

In November 2008, the Company entered into an agreement to settle its antitrust claim related to the Company’s Fenofibrate Tablets, 160mg and 54mg, and Fenofibrate Capsules, 67mg 134mg, and 200mg, each generic to TriCor^®. Under this litigation settlement, the Company received $25,000,000 in December 2008, which was recorded in other income (expense), net in the consolidated statement of operations.

F-19

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Earnings per Share

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares adjusted for the dilutive effect of common stock equivalents outstanding during the period.

Other Comprehensive Income

The Company follows the provisions of FASB ASC Topic 220, comprehensive income, which establishes standards for the reporting and display of comprehensive income and its components. Comprehensive income is defined to include all changes in equity during a period except those resulting from investments by owners and distributions to owners. However, effective with its majority equity investment in Prohealth Biotech, Inc. and the formation of its wholly owned subsidiary Impax Laboratories (Taiwan) Inc., the Company recorded foreign currency translation gains and losses, which are reported as comprehensive income (loss). Foreign currency translation gains (losses) for the years ended December 31, 2010, 2009 and 2008 were $3,335,000, $471,000 and $ (969,000), respectively.

Deferred Financing Costs

The Company capitalizes direct costs incurred with obtaining debt financing, which are included in other assets on the consolidated balance sheet. Deferred financing costs, including costs incurred in obtaining debt financing, are amortized to interest expense over the term of the underlying debt on a straight-line basis, which approximates the effective interest method. The Company recognized amortized deferred financing costs of $25,000, $135,000 and $412,000, in the years ended December 31, 2010, 2009, and 2008, respectively.

Foreign Currency Translation

The Company translates the assets and liabilities of the Taiwan dollar functional currency of its majority-owned affiliate Prohealth Biotechnology, Inc. and its wholly-owned subsidiary Impax Laboratories (Taiwan), Inc. into the U.S. dollar reporting currency using exchange rates in effect at the end of each reporting period. The revenue and expense of these entities are translated using an average of the rates in effect during the reporting period. Gains and losses from these translations are recorded as currency translation adjustments included in the consolidated statements of comprehensive income and the consolidated statements of changes in shareholders’ equity.

F-20

3. RECENT ACCOUNTING PRONOUNCEMENTS

In April 2008, the FASB issued an accounting standard which amended the factors to be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset, referred to as FASB ASC Topic 350. The intent of the accounting standard was to improve the consistency between the useful life of a recognized intangible asset under FASB ASC Topic 350 and the period of expected cash flows used to measure the fair value of the asset under FASB ASC Topic 805 and other GAAP. The FASB ASC Topic 350 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. Upon becoming effective the FASB ASC Topic 350 did not have a material impact on the Company’s consolidated financial statements.

In May 2008, the FASB issued an accounting standard related to convertible debt instruments which may be settled in cash upon conversion (including partial cash settlement), referred to as FASB ASC Topic 470. The FASB ASC Topic 470 requires the issuing entity of such instruments to separately account for the liability and equity components to represent the issuing entity’s nonconvertible debt borrowing interest rate when interest charges are recognized in subsequent periods. The provisions of FASB ASC Topic 470 must be applied retrospectively for all periods presented even if the instrument has matured, has been extinguished, or has been converted as of the effective date. The application of FASB ASC Topic 470 to the Company’s $75 million, 3.5% convertible senior subordinated debentures due 2012 (“3.5% Debentures”) required the retrospective restatement of all reporting periods beginning January 1, 2007. See “Note 2, Summary of Significant Accounting Policies” and “Note 12, “Long-Term Debt” for additional details about the Company’s adoption of FASB ASC Topic 470.

In June 2008, the FASB issued an accounting standard which provides for unvested share-based payment awards containing non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method, referred to as FASB ASC Topic 260. The FASB ASC Topic 260, as amended, is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. Upon becoming effective, FASB ASC Topic 260 did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued an accounting standard to amend previously issued accounting standards related to the determination of fair value, referred to as FASB ASC Topic 820. As amended, FASB ASC Topic 820 provides additional guidance for estimating fair value when the volume and level of activity for an asset or liability has significantly decreased, and also includes guidance on identifying circumstances to indicate a transaction is not orderly. The FASB ASC Topic 820, as amended, is effective for interim and annual reporting periods ending after June 15, 2009, and is applied prospectively, with early adoption permitted for periods ending after March 15, 2009. Upon becoming effective, FASB ASC Topic 820, as amended, did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued an accounting standard to amend FASB ASC Topic 825 to require publicly traded companies disclose information about fair value of financial instruments in interim financial statements, as well as in annual financial statements. The FASB ASC Topic 825 is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. Upon becoming effective, FASB ASC Topic 825, as amended, did not have an impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued an accounting standard to amend the accounting standards for investments in debt and equity securities, referred to as FASB ASC Topic 320. The accounting standard amendment clarified the factors considered in determining if a decline in the fair value of a debt security is other than temporary. Generally, if the fair value of a debt security is less than its amortized cost, and it is more-likely-than-not the debt security will be sold or be required to be sold, then an other-than-temporary impairment shall be considered to have occurred. An other-than-temporary impairment is recognized equal to the entire difference between the debt security’s amortized cost and its fair value as of the balance sheet date. The FASB ASC Topic 320, as amended, is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. Upon becoming effective, FASB ASC Topic 320, as amended, did not have an impact on the Company’s consolidated financial statements.

F-21

3. RECENT ACCOUNTING PRONOUNCEMENTS (continued)

In May 2009, the FASB issued an accounting standard establishing the general rules of accounting for and disclosure of events occurring after the balance sheet date but before the financial statements are issued, referred to as FASB ASC Topic 855. The FASB ASC Topic 855 requires the disclosure of the date through which an entity has evaluated subsequent events and whether such date represents the date the financial statements were issued, or were available to be issued. The FASB ASC Topic 855 is effective for interim or annual reporting periods ending after June 15, 2009, and is applied prospectively. The Company’s adoption of FASB ASC Topic 855 did not have a material impact on the Company’s consolidated financial statements.

In September 2009, the FASB approved an update to the accounting standard related to multiple-element revenue arrangements currently within the scope of FASB ASC Topic 605-25. The updated ASC 605-25 provides principles and guidance to be used to determine whether a revenue arrangement has multiple deliverables, and if so, how those deliverables should be separated. If multiple deliverables exist, the updated standard requires revenue received under the arrangement to be allocated using the estimated selling price of the deliverables if vendor-specific objective evidence or third-party evidence of selling price is not available. The updated accounting standard is effective for revenue arrangements entered into or materially modified in fiscal years beginning on, or after June 15, 2010, with early application permitted. The Company adopted the updated guidance of ASC 605-25 in the three months ended September 30, 2010. As required, the Company applied the updated guidance of ASC 605-25 retrospectively from the beginning of the Company’s fiscal year of adoption as of January 1, 2010. Accordingly, the updated guidance of ASC 605-25 applies to all multiple-element revenue arrangements entered into or materially modified from January 1, 2010 forward. The application of the updated guidance did not have any impact on the Company’s revenue recognition during the three and six months ended June 30, 2010. The updated guidance of ASC 605-25 was applied to the Teva Agreement beginning with the three months ended September 30, 2010. For a discussion of the impact of FASB ASC Topic 605-25 on the Teva Agreement, see “Note 13 — Alliance and Collaboration Agreements — Strategic Alliance Agreement with Teva.”

In January 2010, the FASB issued Accounting Standards Update No. 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary — a Scope Clarification. This update provides amendments to Subtopic 810-10, and related guidance within US GAAP, to clarify the scope of the decrease in ownership provisions. For those entities that have already adopted Statement 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should be applied retrospectively to the first period that an entity adopted Statement 160. Upon becoming effective this update did not have an impact on the Company’s consolidated financial statements.

In March 2010, the FASB issued Accounting Standards Update No. 2010-17, Revenue Recognition-Milestone Method of Revenue Recognition (Topic 605), which addresses accounting for arrangements in which a vendor satisfies its performance obligations over time, with all or a portion of the consideration contingent on future events, referred to as “milestones.” The Milestone Method of Revenue Recognition is limited to arrangements which involve research or development activities. A milestone is defined as an event for which, at the date the arrangement is entered into, there is substantive uncertainty whether the event will be achieved, and the achievement of the event is based in whole or in part on either the vendor’s performance or a specific outcome resulting from the vendor’s performance. In addition, the achievement of the event would result in additional payments being due to the vendor. The Milestone Method of Revenue Recognition allows a vendor to adopt an accounting policy to recognize arrangement consideration that is contingent on the achievement of a substantive milestone in its entirety in the period the milestone is achieved. The Milestone Method of Revenue Recognition is effective on a prospective basis, with an option for retrospective application for milestones achieved in fiscal years and interim periods within those fiscal years beginning on or after June 15, 2010. Early adoption is permitted. If an entity elects early application in a period that is not the first reporting period of its fiscal year, then the guidance must be applied retrospectively from the beginning of that fiscal year. The Company will determine the impact of the new accounting standard as it achieves milestones, and earns payments under either new or existing revenue arrangements.

F-22

3. RECENT ACCOUNTING PRONOUNCEMENTS (continued)

In December 2010, the FASB issued Accounting Standards Update No. 2010-27, Fees Paid to the Federal Government by Pharmaceutical Manufacturers (Subtopic 720-50), which provides guidance on the annual fee paid by pharmaceutical manufacturers to the U.S. Treasury in accordance with the Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation Act (the “Acts”). The Acts impose an annual fee on the pharmaceutical manufacturing industry for each calendar year beginning on or after January 1, 2011. An entity’s portion of the annual fee is payable no later than September 30 of the applicable calendar year and is not tax deductible. The annual fee ranges from $2.5 billion to $4.1 billion in total, a portion of which will be allocated to individual entities on the basis of the amount of their branded prescription drug sales for the preceding year as a percentage of the industry’s branded prescription drug sales for the same period. An entity’s portion of the annual fee becomes payable to the U.S. Treasury once a pharmaceutical manufacturing entity has a gross receipt from branded prescription drug sales to any specified government program or in accordance with coverage under any government program for each calendar year beginning on or after January 1, 2011. The liability related to the annual fee imposed by the Acts shall be estimated and recorded in full upon the first qualifying sale with a corresponding deferred cost that is amortized to expense using a straight-line method of allocation unless another method better allocates the fee over the calendar year that it is payable. The guidance in Subtopic 720-50 becomes effective for calendar years beginning after December 31, 2010. The Company will determine the impact of the new accounting standard upon application of the provisions of Subtopic 720-50 as described above.

F-23

4. INVESTMENTS

Investments consist of commercial paper, corporate bonds, medium-term notes, government sponsored enterprise obligations and certificates of deposit. The Company’s policy is to invest in only high quality “AAA-rated” or investment-grade securities. Investments in debt securities are accounted for as ‘held-to-maturity’ and are recorded at amortized cost, which approximates fair value, generally based upon observable market values of similar securities. The Company has historically held all investments in debt securities until maturity, and has the ability and intent to continue to do so. All of the Company’s investments have remaining contractual maturities of less than 12 months and are classified as short-term. Upon maturity the Company uses a specific identification method.

A summary of short-term investments as of December 31, 2010 and December 31, 2009 follows:

			Gross		Gross
(in $000’s)	Amortized		Unrecognized		Unrecognized			Fair
December 31, 2010	Cost		Gains		Losses			Value
Commercial paper	$	168,260	$	36	$	(7	)	$	168,289
Government sponsored enterprise obligations		56,866		40		(1	)		56,905
Corporate bonds		18,316		15		(13	)		18,318
Certificates of deposit		13,163		13		—			13,176
Total short-term investments	$	256,605	$	104	$	(21	)	$	256,688

			Gross		Gross
(in $000’s)	Amortized		Unrecognized		Unrecognized			Fair
December 31, 2009	Cost		Gains		Losses			Value
Commercial paper	$	13,387	$	4	$	(1	)	$	13,390
Government sponsored enterprise obligations		41,953		32		(1	)		41,984
Corporate bonds		3,021		1		(1	)		3,021
Certificates of deposit		238		—		—			238
Total short-term investments	$	58,599	$	37	$	(3	)	$	58,633

F-24

5. ACCOUNTS RECEIVABLE

The composition of accounts receivable, net is as follows:

	December 31,			December 31,
(in $000’s)	2010			2009
Gross accounts receivable	$	123,941		$	254.094
Less: Rebate reserve		(20,892	)		(37,781	)
Less: Chargeback reserve		(14,918	)		(21,448	)
Less: Other deductions		(6,077	)		(9,011	)
Accounts receivable, net	$	82,054		$	185,854

A roll forward of the chargeback and rebate reserves activity for the years ended December 31, 2010, 2009 and 2008 is as follows:

(in $000’s)	December 31,			December 31			December 31
Rebate reserve	2010			2009			2008
Beginning balance	$	37,781		$	4,800		$	3,603
Provision recorded during the period		91,063			72,620			20,361
Credits issued during the period		(107,952	)		(39,639	)		(19,164	)
Ending balance	$	20,892		$	37,781		$	4,800

(in $000’s)	December 31,			December 31			December 31
Chargeback reserve	2010			2009			2008
Beginning balance	$	21,448		$	4,056		$	2,977
Provision recorded during the period		181,566			126,105			50,144
Credits issued during the period		(188,096	)		(108,713	)		(49,065	)
Ending balance	$	14,918		$	21,448		$	4,056

Other deductions include allowance for uncollectible amounts and cash discounts. The Company maintains an allowance for doubtful accounts for estimated losses resulting from amounts deemed to be uncollectible from its customers, with such allowances for specific amounts on certain accounts. The Company recorded an allowance for uncollectible amounts of $539,000 and $372,000 at December 31, 2010 and December 31, 2009, respectively.

F-25

6. INVENTORY

Inventory, net of carrying value reserves at December 31, 2010 and 2009 consisted of the following:

	December 31,		December 31,
(in $000’s)	2010		2009
Raw materials	$	27,871	$	30,758
Work in process		2,575		2,768
Finished goods		20,545		17,051
Total inventory, net	$	50,991	$	50,577
Less: Non-current inventory, net		6,442		1,447
Total inventory-current, net	$	44,549	$	49,130

Inventory carrying value reserves amounted to $5,294,000 and $4,646,000 at December 31, 2010 and 2009, respectively.

To the extent inventory is not scheduled to be utilized in the manufacturing process and/or sold within twelve months of the balance sheet date, it is included as a component of other non-current assets. Amounts classified as non-current inventory consist of raw materials, net of valuation reserves. Raw materials generally have a shelf life of approximately three to five years, while finished goods generally have a shelf life of approximately two years.

The Company recognizes pre-launch inventories at the lower of its cost or the expected net selling price. Cost is determined using a standard cost method, which approximates actual cost, and assumes a FIFO flow of goods. Costs of unapproved products are the same as approved products and include materials, labor, quality control, and production overhead. The carrying value of unapproved inventory less reserves, was approximately $2,117,000 and $8,702,000 at December 31, 2010 and 2009, respectively. When the Company concludes FDA approval is expected within approximately six months, the Company will generally begin to schedule manufacturing process validation studies as required by the FDA to demonstrate the production process can be scaled up to manufacture commercial batches. Consistent with industry practice, the Company may build quantities of pre-launch inventories of certain products pending required final FDA approval and /or resolution of patent infringement litigation, when, in the Company’s assessment, such action is appropriate to increase the commercial opportunity, FDA approval is expected in the near term, and/or the litigation will be resolved in the Company’s favor. The capitalization of unapproved pre-launch inventory involves risks, including, among other items, FDA approval of product may not occur; approvals may require additional or different testing and/or specifications than used for unapproved inventory, and, in cases where the unapproved inventory is for a product subject to litigation, the litigation may not be resolved or settled in favor of the Company. If any of these risks were to materialize and the launch of the unapproved product delayed or prevented, then the net carrying value of unapproved inventory may be partially or fully reserved. Generally, the selling price of a generic pharmaceutical product is at discount from the corresponding brand product selling price. Typically, a generic drug is easily substituted for the corresponding brand product, and once a generic product is approved, the pre-launch inventory is typically sold within the next three months. If the market prices become lower than the product inventory carrying costs, then the pre-launch inventory value is reduced to such lower market value. If the inventory produced exceeds the estimated market acceptance of the generic product and becomes short-dated, a carrying value reserve will be recorded. In all cases, the carrying value of the Company’s pre-launch product inventory is lower than the respective estimated net selling prices.

F-26

7. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net consisted of the following:

	December 31,			December 31,
(in $000’s)	2010			2009
Land	$	2,270		$	2,270
Buildings and improvements		82,836			77,778
Equipment		70,785			59,612
Office furniture and equipment		9,077			7,425
Construction-in-progress		3,958			4,880
Property, plant and equipment, gross	$	168,926		$	151,965
Less: Accumulated depreciation		(62,646	)		(50,315	)
Property, plant and equipment, net	$	106,280		$	101,650

Depreciation expense was $12,649,000, $11,266,000 and $9,588,000 for the years ended December 30, 2010, 2009 and 2008, respectively.

F-27

8. ACCRUED EXPENSES

The following table sets forth the Company’s accrued expenses:

	December 31,		December 31
(in $000’s)	2010		2009
Payroll-related expenses	$	16,796	$	15,274
Product returns		33,755		22,114
Medicaid rebates		12,475		9,759
Physician detailing sales force fees		2,308		2,449
Legal and professional fees		3,143		3,660
Litigation settlements		—		5,865
Shelf stock price protection		281		225
Other		4,030		2,709
Total accrued expenses	$	72,788	$	62,055

Product Returns

The Company maintains a return policy to allow customers to return product within specified guidelines. The Company estimates a provision for product returns as a percentage of gross sales based upon historical experience for sales made through its Global Products sales channel. Sales of product under the Private Label, the Rx Partner, and the OTC Partner alliance and collaboration agreements generally are not subject to returns. A roll forward of the return reserve activity for the years ended December 31, 2010, 2009 and 2008 is as follows:

(in $000’s)	December 31,			December 31			December 31
Returns Reserve	2010			2009			2008
Beginning balance	$	22,114		$	13,675		$	14,261
Provision related to sales recorded in the period		15,821			11,847			5,719
Credits issued during the period		(4,180	)		(3,408	)		(6,305	)
Ending balance	$	33,755		$	22,114		$	13,675

Accrued Litigation Settlement Expenses

In January 2010, the Company entered into an agreement to settle a suit related to the Company’s Lipram UL products. Under the terms of this agreement, the Company agreed to reimburse the plaintiff for litigation costs, which were paid by the Company in January 2010. The Company recorded an accrued expense for this payment in the year ended December 31, 2009, which was included, along with legal and professional fees incurred by us, on the Litigation settlement line in the consolidated statement of operations.

F-28

9. FAIR VALUE OF COMMON STOCK PURCHASE WARRANTS

Common Stock Purchase Warrants

In connection with a May 2003 private financing, the Company issued 878,815 common stock purchase warrants, each of which entitled the holder to purchase one share of the Company’s common stock at an exercise price of $7.421 per share for five years from the date of issuance. During 2008, all of the remaining 604,887 warrants outstanding at January 1, 2008 were exercised and, accordingly, no common stock purchase warrants were outstanding as of December 31, 2008.

Consistent with the guidance in FASB ASC Topic 815, the common stock purchase warrants were classified as liabilities, as there were certain conditions attached to the warrants which may have required cash settlement. Accordingly, the warrants were accounted for at fair value and changes in fair value were recognized as a component of “other income” at each quarter end period over the life of the respective warrants. The Company used a Black-Scholes option pricing model to value the common stock purchase warrants, with the key valuation assumptions for the period beginning on January 1, 2008 and ending on the May 2008 warrant expiration date being the terms of the warrants and the actual price of the Company’s common stock at the end of each quarter, as well as a volatility rate in the range of 43.0% to 49.0%, calculated based on changes in the price of the Company’s common stock, and a risk-free interest rate in the range of 1.25% to 1.5%, corresponding with the rate on Treasury securities with a time frame approximately the same as the common stock purchase warrants’ remaining time to expiration as of each valuation date, and a zero percent dividend yield. The expected life of the common stock purchase warrants was estimated based on the time-to-expiration at each balance sheet date. During the period January 1, 2008 to the May 2008 expiration date, the estimated fair value of the common stock purchase warrants ranged from $1.91 per share on March 31, 2008 to $1.63 per share on May 7, 2008.

F-29

10. INCOME TAXES

The Company is subject to federal, state and local income taxes in the United States and income taxes in Taiwan, R.O.C. The provision for income taxes is comprised of the following:

	For the Years Ended December 31,
(in $000’s)	2010		2009			2008
Current:
Federal taxes	$	96,560	$	29,550		$	6,315
State taxes		10,471		1,715			(62	)
Total current tax expense		107,031		31,265			6,253
Deferred:
Federal taxes	$	27,138	$	(11,520	)	$	4,938
State taxes		9,140		1,995			(1,122	)
Foreign taxes		212		(734	)		—
Total deferred tax expense (benefit)		36,490		(10,259	)		3,816
Provision for income taxes	$	143,521	$	21,006		$	10,069

A reconciliation of the difference between the tax provision at the federal statutory rate and actual income taxes on income before income taxes, which includes federal, state, and other income taxes, is as follows:

	For the Years Ended December 31,
(in $000’s)	2010					2009					2008
Income before income taxes	$	393,879				$	70,977				$	26,009
Tax provision at the federal statutory rate		137,858		35.0	%		24,842		35.0	%		9,103		35.0	%
Increase (decrease) in tax rate resulting from:
State and local taxes, net of federal benefit		12,873		3.3	%		3,628		5.1	%		25		0.1	%
Research and development credits		(2,700	)	(0.7	)%		(2,546	)	(3.6	)%		(2,228	)	(8.6	)%
Share-based compensation		979		0.2	%		1,824		2.6	%		1,438		5.5	%
Domestic manufacturing deduction		(6,563	)	(1.7	)%		(700	)	(1.0	)%		(531	)	(2.0	)%
Change in warrant fair value		—		—	%		—		—	%		(432	)	(1.6	)%
Provision for uncertain tax positions		203		0.1	%		(6,084	)	(8.6	)%		1,050		4.0	%
Other, net		871		0.2	%		294		0.4	%		1,311		4.9	%
Change in valuation allowance		—		—	%		(252	)	(0.3	)%		333		1.4	%
Provision for income taxes	$	143,521		36.4	%	$	21,006		29.6	%	$	10,069		38.7	%

F-30

10. INCOME TAXES (continued)

Deferred income taxes result from temporary differences between the financial statement carrying values and the tax bases of the Company’s assets and liabilities. Deferred tax assets principally result from deferred revenue related to certain of the Company’s alliance and collaboration agreements (see “Note 13 — Alliance and Collaboration Agreements” below for a discussion of the Company’s alliance and collaboration agreements), certain accruals and reserves currently not deductible for tax purposes, and state net operating loss carryforwards. Deferred tax liabilities principally result from deferred product manufacturing costs related to the OTC Partners alliance agreements and the use of accelerated depreciation methods for income tax purposes. The components of the Company’s deferred tax assets and liabilities are as follows:

	December 31,
(in $000’s)	2010		2009
Deferred tax assets:
Deferred revenues	$	15,970	$	99,160
Accrued expenses		28,752		21,115
Inventory reserves		2,874		2,936
Net operating loss carryforwards		1,317		1,648
Depreciation and amortization		458		492
Other		4,212		3,674
Deferred tax assets	$	53,583	$	129,025
Deferred tax liabilities:
Tax depreciation and amortization in excess of book amounts	$	3,862	$	3,919
Deferred manufacturing costs		3,916		42,591
Other		1,465		1,685
Deferred tax liabilities	$	9,243	$	48,195
Deferred tax assets, net	$	44,340	$	80,830

The breakdown between current and long-term deferred tax assets and tax liabilities is as follows:

	December 31,
(in $000’s)	2010			2009
Current deferred tax assets	$	41,506		$	38,337
Current deferred tax liabilities		(2,235	)		(6.551	)
Current deferred tax assets, net		39,271			32,286
Non-current deferred tax assets		12,077			91,037
Non-current deferred tax liabilities		(7,008	)		(42,493	)
Non-current deferred tax assets, net		5,069			48,544
Deferred tax assets, net	$	44,340		$	80,830

The Company had foreign net operating loss (NOL) carryforwards of approximately $3.7 million and $4.0 million as of December 31, 2010 and 2009, respectively, with a ten year carryforward period. The expiration dates and amounts are $1.0 million and $2.7 million for 2018 and 2019, respectively. There were state net operating loss (NOL) carryforwards of $ 9,228,000 and $12,229,000 as of December 31, 2010 and 2009, respectively, with a twenty year carryforward period as of December 31, 2010, and utilization expiration dates occurring between the years 2021 and 2023, summarized as follows:

(in $000’s)
Year	Amount
2021	$	3,498,722
2022		1,954,768
2023		3,775,188
Total	$	9,228,678

F-31

10. INCOME TAXES (continued)

FASB ASC 740 provides for a single comprehensive model to address uncertain tax positions by establishing the minimum recognition threshold and a measurement attribute for the financial statement impact of tax positions taken or expected to be taken on an entity’s income tax returns. A reconciliation of the accrued reserve for uncertain tax positions is as follows:

(in $000’s)
Balance at January 1, 2010	$	1,207
Increase/(decrease) based on prior year tax positions		108
Increase/(decrease) based on current year tax positions		172
Interest expense		93
Balance at December 31, 2010	$	1,580

The Company has recognized a tax provision for uncertain tax positions related to federal and state research and development tax credits and inter-company loan interest income. The Company is not able to determine whether there will be any significant increase or decrease in the accrued reserve for uncertain tax positions over the next 12 months. The Company recognizes interest and penalties related to income tax matters as a part of total interest expense and other expense, respectively. At December 31, 2010, the Company had $215,000 of accrued interest expense related to its accrued reserve for uncertain tax positions. The Company did not accrue penalties at December 31, 2010 as it has taken the appropriate steps to mitigate exposure to penalties related to its uncertain tax positions. The Company is currently under audit by the United States Internal Revenue Service for the tax years ended December 31, 2009 and 2008 and by the State of California Franchise Tax Board for the tax years ended December 31, 2006 and 2005.

F-32

11. REVOLVING LINE OF CREDIT

On February 11, 2011, the Company entered into a Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as a lender and as administrative agent (the “Administrative Agent”). The Credit Agreement provides the Company with a revolving line of credit in the aggregate principal amount of up to $50,000,000 (the “Revolving Credit Facility”). Under the Revolving Credit Facility, up to $10,000,000 is available for letters of credit, the outstanding face amounts of which reduce availability under the Revolving Credit Facility on a dollar for dollar basis. Proceeds under the Credit Agreement may be used for working capital, general corporate and other lawful purposes.

The Company’s borrowings under the Credit Agreement are secured by substantially all of the personal property assets of the Company pursuant to a Security Agreement (the “Security Agreement”) entered into by the Company and the Administrative Agent. As further security, the Company also pledged to the Administrative Agent, 65% of the Company’s equity interest in Impax Laboratories (Taiwan), Inc. and must similarly pledge all or a portion of its equity interest in future subsidiaries.

Under the Credit Agreement, among other things:

• The outstanding principal amount of all revolving credit loans, together with accrued and unpaid interest thereon, will be due and payable on the maturity date, which will occur four years following the February 11, 2011 closing date.

• Borrowings under the Revolving Credit Facility will bear interest, at the Company’s option, at either an Alternate Base Rate (as defined in the Credit Agreement) plus the applicable margin in effect from time to time ranging from 0.5% to 1.5%, or a LIBOR Rate (as defined in the Credit Agreement) plus the applicable margin in effect from time to time ranging from 1.5% to 2.5%. The Company is also required to pay an unused commitment fee ranging from 0.25% to 0.45% per annum based on the daily average undrawn portion of the Revolving Credit Facility. The applicable margin described above and the unused commitment fee in effect at any given time will be determined based on the Company’s Total Net Leverage Ratio (as defined in the Credit Agreement), which is based upon the Company’s consolidated total debt, net of unrestricted cash in excess of $100 million, compared to Consolidated EBITDA (as defined in the Credit Agreement) for the immediately preceding four quarters.

• The Company may prepay any outstanding loan under the Revolving Credit Facility without premium or penalty.

• The Company is required under the Credit Agreement and the Security Agreement to comply with a number of affirmative, negative and financial covenants. Among other things, these covenants (i) require the Company to provide periodic reports, notices of material events and information regarding collateral, (ii) restrict the Company’ ability, subject to certain exceptions and baskets, to incur additional indebtedness, grant liens on assets, undergo fundamental changes, change the nature of its business, make investments, undertake acquisitions, sell assets, make restricted payments (including the ability to pay dividends and repurchase stock) or engage in affiliate transactions, and (iii) require the Company to maintain a Total Net Leverage Ratio (which is, generally, our total funded debt, net of unrestricted cash in excess of $100 million, over our EBITDA for the preceding four quarters) of less than 3.75 to 1.00, a Senior Secured Leverage Ratio (which is, generally, our total senior secured debt over our EBITDA for the preceding four quarters) of less than 2.50 to 1.00 and a Fixed Charge Coverage Ratio (which is, generally, our EBITDA for the preceding four quarters over the sum of cash interest expense, cash tax payments, scheduled funded debt payments and capital expenditures during such four quarter period) of at least 2.00 to 1.00 (with each such ratio as more particularly defined as set forth in the Credit Agreement).

F-33

11. REVOLVING LINE OF CREDIT (continued)

• The Credit Agreement contains customary events of default (subject to customary grace periods, cure rights and materiality thresholds), including, among others, failure to pay principal, interest or fees, violation of covenants, material inaccuracy of representations and warranties, cross-default and cross-acceleration of material indebtedness and other obligations, certain bankruptcy and insolvency events, certain judgments, certain events related to the Employee Retirement Income Security Act of 1974, as amended, and a change of control.

• Following an event of default under the Credit Agreement, the Administrative Agent would be entitled to take various actions, including the acceleration of amounts due under the Credit Agreement and seek other remedies that may be taken by secured creditors.

The Company has not yet borrowed any amounts under the Revolving Credit Facility.

Effective as of February 11, 2011, the Revolving Credit Facility replaced the Company’s existing credit agreement, the Amended and Restated Loan and Security Agreement, dated as of December 15, 2005, as amended (the “Existing Credit Agreement”), between the Company and the Administrative Agent (as successor by merger to Wachovia Bank, National Association), and the commitments under the Existing Credit Agreement have been terminated. The Existing Credit Agreement, intended for working capital and general corporate purposes, was collateralized by eligible accounts receivable, inventory, and machinery and equipment, subject to limitations and other terms. There were no amounts outstanding under the Existing Credit Agreement as of December 31, 2010 and 2009, respectively. The Existing Credit Agreement was scheduled to expire on April 1, 2011. During the years ended December 31, 2010 and 2009, the Company paid unused line fees of $ 177,000 and $172,000, respectively, related to the Existing Credit Agreement.

F-34

12. LONG-TERM DEBT

3.5% Convertible Senior Subordinated Debentures

On June 27, 2005, the Company sold $75,000,000 of 3.5% convertible senior subordinated debentures due 2012 (“3.5% Debentures”) to a qualified institutional buyer. Each 3.5% Debenture was issued at a price of $1,000 and was convertible into Company common stock at an initial conversion price of $20.69 per share. The 3.5% Debentures were senior subordinated, unsecured obligations of the Company and ranked pari passu with the Company’s accounts payable and other liabilities, and were subordinate to certain senior indebtedness, including the Company’s credit agreement. The 3.5% Debentures bore interest at the rate of 3.5% per annum. Interest on the 3.5% Debentures was payable on June 15 and December 15 of each year, beginning December 15, 2005. While the 3.5% Debentures had a contractual maturity date of June 15, 2012 and could not be redeemed by the Company prior to maturity, holders of the 3.5% Debentures had the right to require the Company to repurchase all or any part of their 3.5% Debentures on June 15, 2009 at a repurchase price equal to 100% of the principal amount of the 3.5% Debentures, plus accrued and unpaid interest and liquidated damages, if any, up to but excluding the repurchase date.

In August and September 2008, the Company repurchased at a discount an aggregate of $ 62,250,000 face value principal amount of the 3.5% Debentures at the request of the holders. The Company paid $59,916,000, plus $433,000 of accrued interest expense. Proceeds to fund the repurchase of the 3.5% Debentures were generated from the liquidation of the Company’s short-term investments. In the year ended December 31, 2008, the Company recorded a net loss on the 3.5% Debentures repurchases of $113,000, net of a $318,000 write-off of related unamortized deferred finance costs. On June 15, 2009, at the request of the holders, the Company repurchased the remaining $12,750,000 principal amount of the 3.5% Debentures at 100% of face value plus accrued interest. Accordingly, as all of the 3.5% Debentures had been repurchased by the Company, there was no amount outstanding as of December 31, 2010.

F-35

12. LONG-TERM DEBT (continued)

Adoption of FASB ASC Topic 470

In May 2008, the FASB issued an accounting standard related to convertible debt instruments which may be settled in cash upon conversion (including partial cash settlement), referred to as FASB ASC Topic 470. The FASB ASC Topic 470 requires the issuing entity of such instruments to separately account for the liability and equity components to represent the issuing entity’s nonconvertible debt borrowing interest rate when interest charges are recognized in subsequent periods. The provisions of FASB ASC Topic 470 must be applied retrospectively for all periods presented even if the instrument has matured, has been extinguished, or has been converted as of its effective date.

Under FASB ASC Topic 470, interest expense is computed on the basis of the Company’s borrowing rate on debt without the conversion feature. The provisions of FASB ASC Topic 470 are applicable to the Company’s 3.5% Debentures as they have a cash settlement feature. The Company adopted FASB ASC Topic 470 on January 1, 2009, and applied its provisions to the consolidated financial statements on a retrospective basis, with the restatement of all reporting periods beginning January 1, 2007.

As noted above, the provisions of FASB ASC Topic 470 require issuers of debt securities to separate affected securities into two accounting components, including (i) the debt component, representing the issuer’s contractual obligation to pay principal and interest, and (ii) the equity component, representing the holder’s option to convert the debt security into equity of the issuer or, if the issuer elects, an equivalent amount of cash.

Upon initial recognition, the proceeds received from the issuance of the 3.5% Debentures were allocated between the debt component and the equity component, with such allocation based upon an estimate of the fair value of a debt instrument containing all embedded features of the debt being evaluated, except for the conversion option. Under FASB ASC Topic 470, the difference between the face value of the debt and the estimated fair value is deemed to be the accounting value of the conversion option and is recorded as the equity component, with the offset recorded as a (contra-liability) debt discount. The debt discount is amortized as interest expense over the estimated life of the debt instrument using the effective interest method.

The Company estimated the fair value of the 3.5% Debentures, excluding the conversion option, to be $63,487,000 on June 27, 2005, the date the 3.5% Debentures were sold, using a credit rating analysis. The difference of $11,513,000 between the $75,000,000 face value of the 3.5% Debentures and the estimated fair value is the value of the conversion option, which resulted in a debt discount reduction to the net carrying value of the debt and the establishment of the value of the conversion option as a component of stockholders’ equity. Aggregate transaction costs of $2,238,000 were incurred by the Company in relation to the issuance of the 3.5% Debentures, of which $343,000 was allocated to the conversion option. The total value allocated to the conversion option as a component of stockholder’s equity was $11,170,000.

Notwithstanding their stated June 2012 maturity date, at their June 2005 issuance date, the Company had expected the 3.5% Debentures to actually mature on the June 2009 prepayment date. Accordingly, as the Company concluded it was probable the prepayment option would be exercised by the holders of the 3.5% Debentures, the fair value of the 3.5% Debentures was computed using a 48 month discount period — i.e. representing the time from their issue date to the June 15, 2009 prepayment date discussed above.

The Company amortized the $11,513,000 discount on the 3.5% Debentures over the expected life of 48 months using the effective interest method; accordingly, the discount was fully amortized as of June 15, 2009. The following table summarizes the amount of interest cost recognized for the years ended December 31, 2010, 2009 and 2008:

	Year Ended December 31:
(in $000’s)	2010		2009			2008
Contractual interest	$	—	$	202		$	2,084
Discount amortization		—		241			2,078
Deferred financing cost amortization		—		66			338
Total interest cost	$	—	$	509		$	4,500
Effective interest rate on 3.5% Debentures		—		8.7	%		8.7	%

F-36

13. ALLIANCE AND COLLABORATION AGREEMENTS

License and Distribution Agreement with Shire

In January 2006, the Company entered into a License and Distribution Agreement with an affiliate of Shire Laboratories, Inc. (“Shire License and Distribution Agreement”), under which the Company received a non-exclusive license to market and sell an authorized generic of Shire’s Adderall XR^® product (“AG Product”) subject to certain conditions, but in any event by no later than January 1, 2010. The Company commenced sales of the AG Product in October 2009. Under the terms of the Shire License and Distribution Agreement, Shire is responsible for manufacturing the AG Product, and the Company is responsible for marketing and sales of the AG Product. The Company is required to pay a profit share to Shire on sales of the AG Product, of which the Company accrued a profit share payable to Shire of $100,611,000 and $53,292,000 on sales of the AG Product during the years ended December 31, 2010 and 2009, respectively, with a corresponding charge included in the cost of revenues line on the consolidated statement of operations.

F-37

13. ALLIANCE AND COLLABORATION AGREEMENTS

Strategic Alliance Agreement with Teva

The Company entered into a Strategic Alliance Agreement with Teva Pharmaceuticals Curacao N.V., a subsidiary of Teva Pharmaceutical Industries Limited, in June 2001 (“Teva Agreement”). The Teva Agreement commits the Company to develop and manufacture, and Teva to distribute, a specified number controlled release generic pharmaceutical products (“generic products”), each for a 10-year period. The Company identified the following deliverables under the Teva Agreement: (i) the manufacture and delivery of generic products; (ii) the provision of research and development activities (including regulatory services) related to each product; and (iii) market exclusivity associated with the products.

In July 2010, the Teva Agreement was amended to terminate the provisions of the Teva Agreement with respect to the Omeprazole 10mg, 20mg and 40mg products. Additionally, in exchange for the return of product rights, the Company agreed to pay to Teva a profit share on future sales of the fexofenadine HCI/psuedoephedrine product, if any, but in no event will such profit share payments exceed an aggregate amount of $3,000,000. The significant rights and obligations under the Teva Agreement are as follows:

Product Development, Manufacture and Sales: The Company is required to develop the products, obtain FDA approval to market the products, and manufacture and deliver the products to Teva. The product-linked revenue the Company earns under the Teva Agreement consists of Teva’s reimbursement of all of the Company’s manufacturing costs plus a fixed percentage of defined profits on Teva’s sales to its customers. Manufacturing costs are direct cost of materials plus actual direct manufacturing costs, including packaging material, not to exceed specified limits. The Company invoices Teva for the manufacturing costs when products are shipped to Teva, and Teva is required to pay the invoiced amount within 30 days. Teva has the exclusive right to determine all terms and conditions of the product sales to its customers. Within 30 days of the end of each calendar quarter, Teva is required to provide the Company with a report of its net sales and profits during the quarter and to pay the Company its share of the profits resulting from those sales on a quarterly basis. Net sales are Teva’s gross sales less discounts, rebates, chargebacks, returns, and other adjustments, all of which are based upon fixed percentages, except chargebacks, which are estimated by Teva and subject to a true-up reconciliation.

Cost Sharing: The Teva Agreement required Teva to pay the Company $300,000 at the inception of the Teva Agreement for reimbursement of regulatory expenses previously incurred, and thereafter to pay specified percentages of ongoing regulatory costs incurred in connection with obtaining and maintaining FDA approval, patent infringement litigation and regulatory litigation.

Sale of Common Stock: The Teva Agreement required Teva to purchase $15,000,000 of the Company’s common stock in four equal quarterly installments beginning September 15, 2001. The number of shares purchased in each installment was determined by dividing $3,750,000 by the average closing price of the stock during the ten trading days ending two days prior to the date of Teva’s receipt of the shares (“Designated Share Price”). Pursuant to these provisions, the Company sold a total of 1,462,083 shares of common stock to Teva, with the last sale occurring on June 15, 2002. The stock purchase agreement included the following terms:

• Contingent Stock Repurchase Option. The Teva Agreement divided the products into three categories, referred to as “product tiers.” The Tier 1 products were those pending FDA approval when the Teva Agreement was entered into, whereas Tier 2 and Tier 3 products were those for which applications to the FDA had not as yet been filed at the inception of the Teva Agreement. The Teva Agreement gave the Company the option to repurchase from Teva 243,729 shares of its common stock (one-sixth of the shares initially sold to Teva) for $1.00 contingent upon Teva achieving a commercial sale of either a Tier 2 or Tier 3 product.

F-38

13. ALLIANCE AND COLLABORATION AGREEMENTS (continued)

Advance Deposit: Teva agreed to provide the Company with a $22,000,000 advance deposit payable for the contingent purchase of exclusive marketing rights for the products. The advance deposit included debt-like terms to facilitate repayment to Teva to the extent the contingencies did not occur. Specifically, the advance deposit payable accrued interest at an 8.0% annual rate from the June 2001 Teva Agreement inception date, and required the Company to repay the advance deposit payable no later than January 15, 2004. In addition, the advance deposit included the following provisions:

• Contingent Sale of Market Exclusivity — The Teva Agreement obligated the Company to deliver and Teva to purchase the exclusive marketing rights for four of the covered products for $22,000,000 to the extent the Company achieved specified product development milestones relating to four products. Portions of this $ 22,000,000 purchase price were assigned to milestones based on their negotiated values at the inception of the Teva Agreement. If some, but not all of the milestones were achieved, then exclusive marketing rights would transfer only for those products for which the related milestones were met. To the extent the milestones were not achieved by January 15, 2004 and Teva had not exercised the contingent option to purchase market exclusivity described below, the related exclusive marketing rights would not be transferred to Teva, the Company would be required to repay the corresponding portions of the $22,000,000 advance deposit and Teva would retain non-exclusive marketing rights with respect to the related products. The milestones and related portions to be repaid were: $2,000,000 if tentative FDA approval for one specified product was not obtained by June 15, 2002; $5,000,000 if the same product was not launched by February 15, 2003; $5,000,000 and $4,000,000, respectively, if two additional products were not launched by December 15, 2003; $1,000,000 if tentative FDA approval of a fourth product was not received by January 15, 2003; and $5,000,000 if the same product was not launched by December 15, 2003.

• Contingent Option to Purchase Market Exclusivity — The Company also granted Teva an option to purchase the exclusive marketing rights to the four specified products to the extent the product development milestones were not met. Teva could exercise this right by forgiving repayment of half of the foregoing portions of the $22,000,000 advance deposit payable as assigned in the Teva Agreement to the specified product.

• The Company’s Share Settlement Option — To the extent the Company failed to achieve the milestones and Teva failed to exercise its option to purchase market exclusivity for the four specified products and the Company was thus required to repay the advance deposit, the Company had the option to settle, or repay, the applicable portion of the advance deposit either in cash or with shares of its common stock valued at the Designated Share Price.

• Interest Forgiveness /FDA Approval Provision — Under the terms of the Teva Agreement, when the Company received FDA approval for any three of the covered products, the entire amount of interest payable under the advance deposit would be forgiven. The nominal amount of the accrued interest expected to be incurred over the life of the advance deposit was estimated not to exceed approximately $4,400,000.

Other Provisions: The Teva Agreement also provides for other deliverables by the Company, consisting of research and development activities, including regulatory services.

F-39

13. ALLIANCE AND COLLABORATION AGREEMENTS (continued)

As the July 2010 amendment materially modified the Teva Agreement, the Company elected to apply the updated guidance of FASB ASC 605-25 Multiple Element Arrangements (“ASC 605-25”) to the amended Teva Agreement beginning in the three months ended September 30, 2010.

There are two criteria under the updated guidance of ASC 605-25 for determining if deliverables shall be considered separate units of accounting, including: (i) the deliverable has value to the customer on a standalone basis, and (ii) if the arrangement has a general right of return relative to delivered items, delivery or performance of the undelivered items is considered probable and substantially in the control of the vendor. The Company evaluated the deliverables of the amended Teva Agreement under the updated guidance of ASC 605-25 and determined there are two units of accounting, including: a combined unit consisting of research and development activities plus market exclusivity, and the manufacture and delivery of 10 products (i.e. contract manufacturing). The market exclusivity deliverable does not meet the first criteria for separation as it does not have standalone value to Teva. As the products contemplated by the Teva Agreement were to be developed by the Company, the market exclusivity has no value to Teva without the research and development services needed to complete the products. The contract manufacturing deliverable has standalone value to Teva as it is able to resell the delivered items (i.e. finished product) to third-parties.

The consideration received by the Company from Teva under the Teva Agreement is contingent upon future performance, as such the Company was unable to allocate any of the consideration received to delivered items, and therefore the Company looked to the underlying services which gave rise to the payment of consideration by Teva to determine the appropriate recognition of revenue as follows:

• Research and development related activities (the Combined Unit) — Consideration received as a result of research and development related activities performed under the Teva Agreement will initially be deferred and recognized on the straight-line method over the Company’s expected period of performance of the research and development related services, estimated to be from July 2001 (following the June 2001 effective date of the Teva Agreement) to October 2014 (with FDA approval of the ANDA for the final product under the Teva Agreement).

• Manufacture and delivery of the products — Consideration received as a result of the manufacture and delivery of the products under the Teva Agreement will be recognized under the Company’s revenue recognition policy, as proscribed by SAB 104, as follows:

• Product shipments — The Company will account for the shipment of products under the Teva Agreement as current period revenue in accordance with its revenue recognition policy applicable to its Global Products.

• Profit share — The Company will recognize profit share, if any, as current period revenue when earned.

• Gain on the repurchase of Company stock — This represents additional profit share revenue resulting from the successful December 2006 commercial sale of a Tier 2 or Tier 3 product, and was recognized as revenue in the period earned.

The Company applied the updated guidance of ASC 605-25 to the Teva Agreement on a prospective basis beginning in the quarter ended September 30, 2010. In the year ended December 31, 2010, the application of the updated guidance of ASC 605-25 had the effect of increasing Rx Partner revenue by $196,440,000, and increasing cost of revenues by $95,426,000, and correspondingly, basic earnings per share increased by approximately $1.03. The increase in Rx Partner revenue as a result of applying the updated guidance of ASC 605-25 in the year ended December 31, 2010, represents the recognition of previously deferred revenue which would otherwise have been recognized, under the previous accounting standards, over the remaining life of the Teva Agreement, using a modified proportional performance method. Under the previous accounting standards, Rx Partner revenue would have been $22,255,000, cost of revenues would have been $244,964,000, and basic earnings per share would have been $2.97 in the year ended December 31, 2010.

F-40

13. ALLIANCE AND COLLABORATION AGREEMENTS (continued)

The Company had previously determined, under the previous accounting standards, no single deliverable represented a separate unit of accounting as there was not sufficient objective and reliable evidence of the fair value of any single deliverable. As such, under the previous accounting standards, the Company was required to account for the entirety of the Teva Agreement as a single unit of accounting, resulting in the Company previously deferring revenue earned and product manufacturing costs incurred under the Teva Agreement and then recognizing such deferred revenue and amortizing such deferred manufacturing costs over the estimated life of the Teva Agreement utilizing a modified proportional performance method.

The following tables show the additions to and deductions from the deferred revenue and deferred product manufacturing costs under the Teva Agreement:

										Inception
(in $000’s)	For the Years Ended December 31,									Through
Deferred revenue	2010			2009			2008			Dec 31, 2007
Beginning balance	$	202,032		$	200,608		$	181,149		$	—
Additions:
Product related and cost sharing		10,096			35,245			60,406			321,618
Exclusivity charges		—			—			—			(50,600	)
Other		—			—			—			12,527
Total additions	$	10,096		$	35,245		$	60,406		$	283,545
Less:
Amount recognized	$	(11,278	)	$	(33,821	)	$	(40,947	)	$	(102,396	)
Accounting adjustment		(196,440	)		—			—			—
Total deferred revenue	$	4,410		$	202,032		$	200,608		$	181,149

(in $000’s)										Inception
Deferred product	For the Years Ended December 31,									Through
manufacturing costs	2010			2009			2008			Dec 31, 2007
Beginning balance	$	94,040		$	88,361		$	75,296		$	—
Additions		7,416			24,089			33,621			117,855
Less
Amount recognized		(6,030	)		(18,410	)		(20,556	)		(42,559	)
Accounting adjustment		(95,426	)
Total deferred product manufacturing costs	$	—		$	94,040		$	88,361		$	75,296

The following schedule shows the expected recognition of deferred revenue and amortization of deferred product manufacturing costs (for transactions recorded through December 31, 2010) for the next five years and thereafter under the Teva Agreement:

	Deferred
	Revenue
(in $000s)	Recognition
2011	$	1,151
2012		1,151
2013		1,151
2014		957
2015		—
Thereafter		—
Totals	$	4,410

F-41

13. ALLIANCE AND COLLABORATION AGREEMENTS (continued)

OTC Partner Alliance Agreements

The Company is currently party to two OTC Partner alliance agreements with two unrelated third-party pharmaceutical entities (“OTC Agreements”). The OTC Agreements cover the manufacture, distribution, and marketing of OTC pharmaceutical products. The two OTC Agreements, whose terms are approximately 9 years and 15 years, each commit the Company to manufacture, and the OTC Agreements’ marketing partners to distribute, a single specified generic pharmaceutical product. Both of the OTC Agreements obligate the Company to grant a license to the respective OTC Partner to market the product. Revenue under these OTC Agreements consists of payments upon contract signing, reimbursement of product manufacturing costs or other agreed upon amounts when the Company delivers the product, profit-share or royalty payments based upon the respective OTC Partner’s’ product sales, and, specified milestone payments tied to product development services.

As each of these OTC Agreements contain multiple deliverables the Company applied its accounting policy to determine whether the multiple deliverables within each of the OTC Partner alliance agreements should be accounted for as separate units of accounting or as a single unit of accounting. The Company determined no single deliverable represented a separate unit of accounting given there was not sufficient objective and reliable evidence of the fair value of any single deliverable. When the fair value of a deliverable cannot be determined, it is not possible for the Company to determine whether consideration given by an OTC Partner is in exchange for a given deliverable. The Company concluded the multiple deliverables under each of the OTC Partner alliance agreements represented a single unit of accounting for each agreement.

All revenue under the OTC Agreements is deferred and subsequently recognized over the life of the respective OTC Agreements under the modified proportional performance method. Deferred revenue is recorded as a liability captioned “Deferred revenue-alliance agreement.” The modified proportional performance method better aligns revenue recognition with performance under a long-term arrangement as compared to a straight-line method. Revenue is recognized only to the extent of cumulative cash collected being greater than cumulative revenue recognized.

The Company begins to recognize payments at the inception of the respective OTC Agreement, milestone payments at the time they are earned, reimbursement of product manufacturing costs at the time of product shipment to the respective OTC Partners, and profit-share and royalty payments at the time they are reported to the Company.

The Company also defers its product manufacturing costs to the extent reimbursable by the respective OTC Partner and recognizes them in the same manner as it recognizes the related product revenue. Additionally, under the Teva Agreement, the Company is obligated to share with Teva the profits from the sale of the over-the-counter products sold under the OTC Agreements — up to a maximum of 50%. These deferred direct product manufacturing costs are recorded as an asset captioned “Deferred product manufacturing costs-alliance agreements.”

A summary description of each OTC Partner Alliance Agreement noted above is as follows:

In June 2002, the Company entered into a Development, License and Supply Agreement with Pfizer Inc. (formerly Wyeth) relating to the Company’s Loratadine and Pseudoephedrine Sulfate 5 mg/120 mg 12-hour Extended Release Tablets and Loratadine and Pseudoephedrine Sulfate 10 mg/240 mg 24-hour Extended Release Tablets for the OTC market under the Alavert^® brand. The Company is responsible for developing and manufacturing the products, while Pfizer is responsible for product marketing and sale. The structure of the agreement includes payment upon achievement of milestones and royalties paid to the Company on Pfizer’s sales on a quarterly basis. Pfizer launched this product in May 2003 as Alavert^® D-12 Hour. In February 2005, the agreement was partially cancelled with respect to the 24-hour Extended Release Product due to lower than planned sales volume.

F-42

13. ALLIANCE AND COLLABORATION AGREEMENTS (continued)

In June 2002, the Company entered into a non-exclusive Licensing, Contract Manufacturing and Supply Agreement with Merck & Co., Inc. (formerly Schering-Plough Corporation) relating to the Company’s Loratadine and Pseudoephedrine Sulfate 5 mg/120 mg 12-hour Extended Release Tablets for the OTC market under the Claritin-D 12-hour brand. The structure of the agreement included milestone payments by Merck and an agreed upon transfer price. Shipments under the agreement commenced at the end of January 2003, and Merck launched the product as its OTC Claritin-D 12-hour in March 2003. The Company’s product supply obligations under the agreement ended on December 31, 2008, after which Merck has manufactured the product. The agreement terminates two years after our product supply obligations concluded. During this two year period, Merck has paid the Company a royalty on sales of their manufactured product.

The following table shows the additions to and deductions from deferred revenue and deferred product manufacturing costs under the OTC Agreements:

										Inception
(in $000’s)	For the Years Ended December 31,									Through
Deferred revenue	2010			2009			2008			Dec 31, 2007
Beginning balance	$	16,162		$	21,044		$	20,591		$	—
Additions:
Upfront fees and milestone payments		—			—			—			8,436
Cost sharing and other		—			—			—			1,642
Product related deferrals		4,108			1,960			16,399			65,467
Total additions	$	4,108		$	1,960		$	16,399		$	75,545
Less: amounts recognized:		(8,888	)		(6,842	)		(15,946	)		(54,954	)
Total deferred revenue	$	11,382		$	16,162		$	21,044		$	20,591

(in $000’s)										Inception
Deferred product	For the Years Ended December 31,									Through
manufacturing costs	2010			2009			2008			Dec 31, 2007
Beginning balance	$	14,203		$	18,361		$	17,251		$	—
Additions	$	3,223		$	1,929		$	16,087		$	59,854
Less: amount recognized		(7,191	)		(6,087	)		(14,977	)		(42,603	)
Total deferred product manufacturing costs	$	10,235		$	14,203		$	18,361		$	17,251

The following schedule shows the expected recognition of deferred revenue and amortization deferred product manufacturing costs (for transactions recorded through December 31, 2010 for the next five years and thereafter under the OTC Agreements:

			Deferred
	Deferred		Product
	Revenue		Manufacturing Costs
(in $000s)	Recognition		Amortization
2011	$	2,268	$	2,012
2012		1,450		1,313
2013		1,450		1,313
2014		1,450		1,313
2015		1,450		1,313
Thereafter		3,314		2,971
Total	$	11,382	$	10,235

F-43

13. ALLIANCE AND COLLABORATION AGREEMENTS (continued)

Agreements with Medicis Pharmaceutical Corporation

In November 2008, the Company and Medicis Pharmaceutical Corporation (“Medicis”), entered into a Joint Development Agreement and a License and Settlement Agreement (“License Agreement”).

Joint Development Agreement

The Joint Development Agreement provides for the Company and Medicis to collaborate in the development of a total of five dermatology products, including four of the Company’s generic products and one branded advanced form of Medicis’s SOLODYN^® product. Under the provisions of the Joint Development Agreement the Company received a $40,000,000 upfront payment, paid by Medicis in December 2008. The Company has also received an aggregate $12,000,000 in milestone payments composed of two $5,000,000 milestone payments, paid by Medicis in March 2009 and September 2009, and a $2,000,000 milestone payment received in December 2009. The Company has the potential to receive up to an additional $11,000,000 of contingent milestone payments upon achievement of certain contractually specified clinical and regulatory milestones, as well as the potential to receive royalty payments from sales, if any, by Medicis of its advanced form SOLODYN^® brand product. Finally, to the extent the Company commercializes any of its four generic dermatology products covered by the Joint Development Agreement, the Company will pay to Medicis a gross profit share on sales, if any, of such products.

The Joint Development Agreement results in three items of revenue for the Company, as follows:

1. Research & Development Services

Revenue received from the provision of research and development services, including the $ 40,000,000 upfront payment and the contingent $23,000,000 milestone payments, will be deferred and recognized on a straight-line basis over the expected period of performance of the research and development services. The Company estimates its expected period of performance to provide research and development services is 48 months starting in December 2008 (i.e. when the $40,000,000 upfront payment was received) and ending in November 2012.

Revenue recognition of the contingent milestone fees, if any, will commence when the cash has been received, over the then remaining expected period of performance. The FDA approval of the final submission under the Joint Development Agreement represents the end of the Company’s expected period of performance, as the Company will have no further contractual obligation to perform research and development services under the Joint Development Agreement, and therefore the earnings process will be completed. Deferred revenue is recorded as a liability captioned “Deferred revenue-alliance agreement.” Revenue recognized under the Joint Development Agreement is reported on the consolidated statement of operations, in the line item captioned Research Partner. The Company determined the straight-line method better aligns revenue recognition with performance as the level of research and development services delivered under the Joint Development Agreement are expected to be provided on a relatively constant basis over the period of performance.

2. Royalty Fees Earned — Medicis’s Sale of Advanced Form SOLODYN^® (Brand) Product

Under the Joint Development Agreement, the Company grants Medicis a license for the advanced form of the SOLODYN^® product, with the Company receiving royalty fee income under such license for a period ending eight years after the first commercial sale of the advanced form SOLODYN^® product. Commercial sales of the new SOLODYN^® product, if any, are expected to commence upon FDA approval of Medicis’s NDA. The royalty fee income, if any, from the new SOLODYN^® product, will be recognized by the Company as current period revenue when earned.

F-44

13. ALLIANCE AND COLLABORATION AGREEMENTS (continued)

3. Accounting for Sales of the Company’s Four Generic Dermatology Products

Upon FDA approval of the Company’s ANDA for each of the four generic products covered by the Joint Development Agreement, the Company will have the right (but not the obligation) to begin manufacture and sale of its four generic dermatology products. The Company will sell its manufactured generic products to all Global Division customers in the ordinary course of business through its Global Product sales channel. The Company will account for the sale of the four generic products covered by the Joint Development Agreement as current period revenue according to the Company’s revenue recognition policy applicable to its Global Products. To the extent the Company sells any of the four generic dermatology products covered by the Joint Development Agreement, the Company will pay Medicis a gross profit share, with such profit share payments being accounted for as a current period cost of goods sold charge.

The following table shows the additions to and deductions from deferred revenue under the Joint Development Agreement with Medicis:

(in $000’s)	Years Ended December 31
Deferred revenue	2010			2009			2008
Beginning balance	$	39,487		$	39,167		$	—
Additions:
Up-front fees and milestone payments		—			12,000			40,000
Product related deferrals		—			—			—
Total additions		—			12,000			40,000
Less: amount recognized		(13,539	)		(11,680	)		(833	)
Total deferred revenue	$	25,948		$	39,487		$	39,167

The following schedule shows the expected recognition of deferred revenue (for transactions recorded through December 31, 2010 for the next five years and thereafter under the Joint Development Agreement with Medicis:

	Deferred
	Revenue
(in $000s)	Recognition
2011	$	13,538
2012		12,410
2013		—
2014		—
2015		—
Thereafter		—
Total	$	25,948

F-45

13. ALLIANCE AND COLLABORATION AGREEMENTS (continued)

Supply & Distribution Agreement with DAVA Pharmaceuticals, Inc.

On March 30, 2007, the Company entered into an agreement settling a patent infringement suit brought by Purdue Pharma LP (“Purdue”) against the Company. Under this Purdue settlement agreement, the Company agreed to withdraw its generic version of OxyContin^® from the market by January 2008, and Purdue granted the Company a license permitting it to manufacture and sell its product during specified periods between March 2007 and January 2008, and, additionally, authorized the Company to grant a sublicense to DAVA allowing DAVA to distribute the product during the same periods. While the Company continued to manufacture and sell the product during the authorized periods, the Purdue settlement agreement precludes the Company from re-entering the market after January 2008 until expiration of the last Purdue patents in 2013, or earlier under certain circumstances.

During the year ended December 31, 2008, the increased volume of sales during January 2008, which were otherwise recognizable under the performance conditions of the Company’s revenue recognition policy, would have resulted in an excess of revenues over the amount of cash collected through the date thereof. Therefore the Company further deferred the recognition of those revenues until the cash was collected from DAVA in the second quarter of 2008. The Company recognized revenue of $40,831,000 and amortized $2,157,000 of manufacturing costs during the year ended December 31, 2008. The revenue recognized by the Company during 2008 was composed primarily of profit share earned under the agreement with DAVA.

The following table shows the additions to and deductions from deferred revenue and deferred product manufacturing costs under the Supply and Distribution Agreement with DAVA during the period over which revenue was recognized beginning with the inception of the contract in November 2005 and ending in April 2008, when final cash payment was received for product shipped to DAVA, and for profit share earned, in January 2008.

								Inception
(in $000’s)	For the Years Ended December 31,							Through
Deferred revenue	2010		2009		2008			Dec 31, 2007
Beginning balance	$	—	$	—	$	6,361		$	—
Additions:
Upfront fees and milestone payments		—		—		—			10,000
Product related deferrals		—		—		34,470			117,977
Total additions		—		—		34,470			127,977
Less: amount recognized		—		—		(40,831	)		(121,616	)
Total deferred revenue	$	—	$	—	$	—		$	6,361

(in $000’s)								Inception
Deferred product	For the Years Ended December 31,							Through
manufacturing costs	2010		2009		2008			Dec 31, 2006
Beginning balance	$	—	$	—	$	1,850		$	—
Additions		—		—		307			28,737
Less: amount recognized		—		—		(2,157	)		(26,887	)
Total deferred product manufacturing costs	$	—	$	—	$	—		$	1,850

F-46

13. ALLIANCE AND COLLABORATION AGREEMENTS (continued)

Development and Co-Promotion Agreement with Endo Pharmaceuticals Inc.

In June 2010, the Company and Endo Pharmaceuticals, Inc. (“Endo”) entered into a Development and Co-Promotion Agreement (“Endo Agreement”) under which the Company and Endo have agreed to collaborate in the development and commercialization of a next-generation advanced form of the Company’s lead branded product candidate (“Endo Agreement Product”). Under the provisions of the Endo Agreement, in June 2010, Endo paid to the Company a $10,000,000 up-front payment. The Company has the potential to receive up to an additional $30,000,000 of contingent payments upon achievement of certain specified clinical and regulatory milestones. Upon commercialization of the Endo Agreement Product in the United States, Endo will have the right to co-promote such product to non-neurologists, which will require the Company to pay Endo a co-promotion service fee of up to 100% of the gross profits attributable to prescriptions for the Endo Agreement Product which are written by the non-neurologists.

The $10,000,000 up-front payment is being recognized as revenue on a straight-line basis over a period of 91 months, which is the Company’s estimated expected period of performance of the Endo Agreement Product research and development activities, commencing with the June 2010 effective date of the Endo Agreement and ending in December 2017, the estimated date of FDA approval of the Company’s NDA. The FDA approval of the Endo Agreement Product NDA represents the end of the Company’s expected period of performance, as the Company will have no further contractual obligation to perform research and development activities under the Endo Agreement, and therefore the earnings process will be completed. Deferred revenue is recorded as a liability captioned “Deferred revenue-alliance agreement.” Revenue recognized under the Endo Agreement is reported on the consolidated statement of operations, in the line item captioned Research Partner. The Company determined the straight-line method aligns revenue recognition with performance as the level of research and development activities performed under the Endo Agreement are expected to be performed on a ratable basis over the Company’s estimated expected period of performance.

Upon FDA approval of the Company’s Endo Agreement Product NDA, the Company will have the right (but not the obligation) to begin manufacture and sale of such product. The Company will sell its manufactured branded product to customers in the ordinary course of business through its Impax Pharmaceuticals Division. The Company will account for the sale of the product covered by the Endo Agreement as current period revenue. The co-promotion service fee paid to Endo, as described above, if any, will be accounted for as a current period selling expense as incurred.

License, Development and Commercialization Agreement with Glaxo Group Limited

In December 2010, the Company entered into a License, Development and Commercialization Agreement with Glaxo Group Limited (“GSK”). Under the terms of the agreement with GSK, GSK received an exclusive license to develop and commercialize IPX066 throughout the world, except in the U.S. and Taiwan, and certain follow on products at the option of GSK. GSK paid an $ 11,500,000 up-front payment in December 2010, and the Company is eligible to receive potential additional payments of up to $175.0 million upon the successful achievement of development and commercialization milestones. The up-front payment will be recognized as revenue on a straight-line basis over the Company’s estimated expected period of performance commencing in 2011. The Company will also receive royalty payments on any sales of IPX066 by GSK. The Company and GSK will generally each bear its own development costs associated with its activities under the License, Development and Commercialization Agreement, except that certain development costs, including with respect to follow on products, will be shared, as set forth in the agreement. The License, Development and Commercialization Agreement will continue until GSK no longer has any royalty payment obligations, or if the agreement is terminated earlier in accordance with its terms. The License, Development and Commercialization Agreement may be terminated by GSK for convenience upon 90 days prior written notice, and may also be terminated under certain other circumstances, including material breach, as set forth in the agreement.

F-47

13. ALLIANCE AND COLLABORATION AGREEMENTS (continued)

Co-Promotion Agreement with Pfizer

In March 2010, the Company and Pfizer, Inc. (“Pfizer”) entered into the First Amendment to the Co-Promotion Agreement (originally entered into with Wyeth, now a wholly owned subsidiary of Pfizer) (“Pfizer Co-Promotion Agreement”). Under the terms of the Pfizer Co-Promotion Agreement, effective April 1, 2010, the Company provides physician detailing sales call services for Pfizer’s Lyrica^® product to neurologists. The Company receives a fixed fee, effective January 1, 2010, subject to annual cost adjustment, for providing such physician detailing sales calls within a contractually defined range of an aggregate number of physician detailing sales calls rendered, determined on a quarterly basis. There is no opportunity for the Company to earn incentive fees under the terms of the Pfizer Co-Promotion Agreement. Pfizer is responsible for providing sales training to the Company’s physician detailing sales force personnel. Pfizer owns the product and is responsible for all pricing and marketing literature as well as product manufacture and fulfillment. The Company recognizes the physician detailing sales force fee revenue as the related services are performed and the performance obligations are met. The Company recognized $ 14,073,000, $6,940,000 and $0 in the years ended December 31, 2010, 2009 and 2008, respectively, under the Pfizer Co-Promotion Agreement, with such amounts presented in the captioned line item “Promotional Partner” revenue on the consolidated statement of operations.

As noted above, the Company previously entered into a three year Co-Promotion Agreement with Wyeth, an unrelated third-party pharmaceutical company, prior to Wyeth becoming a wholly-owned subsidiary of Pfizer, under which the Company performed physician detailing sales calls for the Wyeth Pristiq^® product to neurologists, with such services commencing on July 1, 2009, and ending in connection with the Pfizer Co-Promotion Agreement described above. Wyeth paid the Company a service fee, subject to an annual cost adjustment, for each physician detailing sales call. During the term of the (former Wyeth) Co-Promotion Agreement, the Company was required to complete a minimum and maximum number of physician detailing sales calls. Wyeth was responsible for providing sales training to the Company’s sales force. Wyeth owned the product and was responsible for all pricing and marketing literature as well as product manufacture and fulfillment. The Company recognized service fee revenue as the related physician detailing sales call services were performed and the performance obligations were met. The Company did not earn any incentive fee revenue under the terms of the (former Wyeth) Co-Promotion Agreement.

Promotional Services Agreement with Shire

In January 2006, the Company entered into a three year Promotional Services Agreement with an affiliate of Shire Laboratories, Inc. (“Shire Co-Promotion Agreement”), under which the Company was engaged to perform physician detailing sales calls services in support of Shire’s Carbatrol^® product, from July 1, 2006 to June 30, 2009. The Company recognized $0, $6,508,000, and $ 12,891,000 in sales force fee revenue for the years ended December 31, 2010, 2009 and 2008, respectively, under the Shire Co-Promotion Agreement, with such amounts presented in the captioned line item “Promotional Partner” under revenues on the consolidated statement of operations.

F-48

14. EMPLOYEE BENEFIT PLANS

401(k) Defined Contribution Plan

The Company sponsors a 401(k) defined contribution plan covering all employees. Participants are permitted to contribute up to 25% of their eligible annual pre-tax compensation up to established federal limits on aggregate participant contributions. The Company matches 50% of the employee contributions up to a maximum of 3% of employee compensation. Discretionary profit-sharing contributions made by the Company, if any, are determined annually by the Board of Directors. Participants are 100% vested in discretionary profit-sharing and matching contributions made by the Company after three years of service, and are 25% and 50% vested after one and two years of service, respectively. There were approximately $1,162,000, $1,156,000 and $1,036,000 in matching contributions and no discretionary profit-sharing contributions made under this plan for the years ended December 31, 2010, 2009 and 2008, respectively.

Employee Stock Purchase Plan

In February 2001, the Board of Directors of the Company approved the 2001 Non-Qualified Employee Stock Purchase Plan (“ESPP”), with a 500,000 share reservation. The purpose of the ESPP is to enhance employee interest in the success and progress of the Company by encouraging employee ownership of common stock of the Company. The ESPP provides the opportunity to purchase the Company’s common stock at a 15% discount to the market price through payroll deductions or lump sum cash investments. Under the ESPP plan, for the years ended December 31, 2010, 2009 and 2008, the Company sold shares of its common stock to its employees in the amount of 79,560, 72,752 and 2,700, respectively, for net proceeds of approximately $1,082,000, $560,000 and $24,000, respectively.

Deferred Compensation Plan

In February 2002, the Board of Directors of the Company approved the Executive Non-Qualified Deferred Compensation Plan (“ENQDCP”) effective August 15, 2002 covering executive level employees of the Company as designated by the Board of Directors. Participants can defer up to 75% of their base salary and quarterly sales bonus and up to 100% of their annual performance based bonus. The Company matches 50% of employee deferrals up to 10% of base salary and bonus compensation. The maximum total match by the company cannot exceed 5% of total base and bonus compensation. Participants are vested in the employer match contribution at 20% each year, with 100% vesting after five years of employment. Participants can earn a return on their deferred compensation based on hypothetical investments in investment funds. Changes in the market value of the participant deferrals and earnings thereon are reflected as an adjustment to the liability for deferred compensation with an offset to compensation expense. There were approximately $ 525,000, $529,000 and $557,000 in matching contributions under the ENQDCP for the years ended December 31, 2010, 2009 and 2008, respectively.

The deferred compensation liability is a non-current liability recorded at the value of the amount owed to the ENQDCP participants, with changes in the value of such amounts recognized as a compensation expense in the consolidated statement of operations. The calculation of the deferred compensation obligation is derived from observable market data by reference to hypothetical investments selected by the participants. The Company invests in corporate owned life insurance (“COLI”) policies, of which the cash surrender value is included in the caption line item “Other assets” on the consolidated balance sheet. As of December 31, 2010 and 2009, the Company had a cash surrender value asset of $ 12,264,000 and $8,034,000, respectively, and a deferred compensation liability of $ 12,978,000 and $8,932,000, respectively.

F-49

15. SHARE-BASED COMPENSATION

The Company recognizes the fair value of each option and restricted share over its vesting period. Options and restricted shares granted under the Company’s Amended and Restated 2002 Equity Incentive Plan (“2002 Plan”) generally vest over a three or four year period and have a term of ten years.

Impax Laboratories, Inc. 1995 Stock Incentive Plan

Under the 1995 Stock Incentive Plan 0, 0 and 8,400 stock options were outstanding at December 31, 2010, 2009 and 2008, respectively.

Impax Laboratories, Inc. 1999 Equity Incentive Plan

In October 2000, the Company’s stockholders approved an increase in the aggregate number of shares of common stock to be issued pursuant to the Company’s 1999 Equity Incentive Plan from 2,400,000 to 5,000,000 shares. Under the 1999 Equity Incentive Plan, 664,947, 1,286,811, and 2,388,717 stock options were outstanding at December 31, 2010, 2009 and 2008, respectively.

Impax Laboratories, Inc. Amended and Restated 2002 Equity Incentive Plan

Under the Company’s 2002 Plan, the aggregate number of shares of common stock for issuance pursuant to stock option grants and restricted stock awards was increased by the Company’s Board of Directors from 4,000,000 shares to 6,500,000 shares during 2007, from 6,500,000 to 7,900,000 shares during 2008, from 7,900,000 to 9,800,000 during 2009, and from 9,800,000 to 11,800,000 during 2010. The increases during 2009 and 2010 were approved by the Company’s stockholders. Under the 2002 Plan, stock options outstanding were 5,849,729, 6,943,007 and 5,883,123 at December 31, 2010, 2009 and 2008, respectively, and unvested restricted stock awards outstanding were 1,434,759, 1,152,923 and 399,716 at December 31, 2010, 2009 and 2008, respectively.

The stock option activity for all of the Company’s equity compensation plans noted above is summarized as follows:

				Weighted
				Average
				Exercise
	Number of Shares			Price
Stock Options	Under Option			per Share
Outstanding at December 31, 2007		9,047,761		$	9.90
Options granted		539,850		$	8.80
Options exercised		(956,824	)	$	4.18
Options forfeited		(350,547	)	$	9.07
Outstanding at December 31, 2008		8,280,240		$	10.53
Options granted		2,489,141		$	6.96
Options exercised		(1,175,897	)	$	3.69
Options forfeited		(1,363,666	)	$	13.86
Outstanding at December 31, 2009		8,229,818		$	9.87
Options granted		405,600		$	20.22
Options exercised		(1,900,549	)	$	8.62
Options forfeited		(220,193	)	$	11.03
Outstanding at December 31, 2010		6,514,676		$	10.84
Vested and expected to vest at December 31, 2010		6,898,658		$	10.79
Options exercisable at December 31, 2010		3,890,143		$	11.73

F-50

15. SHARE-BASED COMPENSATION (continued)

As of December 31, 2010, stock options outstanding, vested and expected to vest, and exercisable had average remaining contractual lives of 5.43 years, 5.51 years, and 4.77 years, respectively. Also, as of December 31, 2010, stock options outstanding, vested and expected to vest, and exercisable each had aggregate intrinsic values of $61,872,000, $65,786,000, and $ 33,984,000, respectively.

The Company grants restricted stock to certain eligible employees as a component of its long-term incentive compensation program. The restricted stock award grants are made in accordance with the Company’s 2002 Plan. A summary of the non-vested restricted stock awards is as follows:

	Non-Vested			Weighted
	Restricted			Average
	Stock			Grant Date
Restricted Stock Awards	Awards			Fair Value
Non-vested at December 31, 2007		270,341		$	11.45
Granted		210,300		$	8.81
Vested		(64,111	)	$	11.45
Forfeited		(16,814	)	$	11.15
Non-vested at December 31, 2008		399,716		$	10.30
Granted		886,969		$	6.99
Vested		(113,204	)	$	10.25
Forfeited		(20,558	)	$	7.87
Non-vested at December 31, 2009		1,152,923		$	7.72
Granted		727,556		$	18.87
Vested		368,825		$	8.61
Forfeited		76,895		$	10.17
Non-vested at December 31, 2010		1,434,759		$	12.93

As of December 31, 2010, the Company had 2,674,061 shares available for issuance of either stock options or restricted stock awards, including 2,392,153 shares from the 2002 Plan, and 281,908 shares from the 1999 Plan.

As of December 31, 2010, the Company had total unrecognized share-based compensation expense, net of estimated forfeitures, of $27,313,000 related to all of its share-based awards, which will be recognized over a weighted average period of 2.26 years. The intrinsic value of options exercised during the years ended December 31, 2010, 2009 and 2008 was $19,038,000, $3,407,000 and $3,468,000, respectively. The total fair value of restricted shares which vested during the years ended December 31, 2010, 2009 and 2008 was $3,175,000, $1,538,000 and $734,000, respectively.

The Company estimated the fair value of each stock option award on the grant date using the Black-Scholes option pricing model with the following assumptions:

	For the Years Ended December 31,
	2010			2009			2008
Volatility (range)		55.1%-56.4	%		58.3%-64.2	%		64.1%-67.7	%
Volatility (weighted average)		55.9	%		60.4	%		66.8	%
Risk-free interest rate (range)		1.5%-3.1	%		2.1%-2.9	%		1.6%-3.8	%
Risk-free interest rate (weighted average)		2.3	%		2.6	%		3.0	%
Dividend yield		0	%		0	%		0	%
Expected life (years)		6.21			6.25			6.25
Weighted average grant date fair value	$	11.08		$	4.07		$	5.58

F-51

15. SHARE-BASED COMPENSATION (continued)

The Company estimated the fair value of each stock option award on the grant date using the Black-Scholes option pricing model, wherein: expected volatility is based on historical volatility of the Company’s common stock, and of a peer group for the period of time the Company’s common stock was deregistered as described below, over the period commensurate with the expected term of the stock options. The expected term calculation is based on the “simplified” method described in SAB No. 107, Share-Based Payment and SAB No. 110, Share-Based Payment, as the result of the simplified method provides a reasonable estimate in comparison to actual experience. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for an instrument with a maturity that is commensurate with the expected term of the stock options. The dividend yield of zero is based on the fact that the Company has never paid cash dividends on its common stock, and has no present intention to pay cash dividends. Options granted under each of the above plans generally vest from three to four years and have a term of ten years. With limited exceptions, the Company’s shares of common stock traded on the “Pink Sheets” beginning in August 2005 through May 2008. Subsequent to the Company’s May 2008 deregistration, and before its stock was re-listed in March 2009, the Company granted stock options and restricted stock awards. As there were no quoted market prices during the period when the Company’s shares of common stock was not publicly traded, the Company engaged a valuation firm to assist with its determination of the fair value of the shares of common stock at the stock option and restricted stock award grant dates. In this regard, the methods used to arrive at the fair value of the underlying stock price included a regression analysis, along with market multiples and discounted net cash flow analyses. The resulting fair value on each respective grant date was used to establish the stock option exercise price and the fair value of the restricted stock.

The amount of share-based compensation expense recognized by the Company is as follows:

	For the Years Ended December 31,
(in $000’s)	2010		2009		2008
Cost of revenues	$	2,377	$	1,600	$	1,538
Research and development		3,466		2,677		2,273
Selling, general and administrative		4,871		3,114		2,006
Total	$	10,714	$	7,391	$	5,817

The after tax impact of recognizing the share-based compensation expense related to FASB ASC Topic 718 on basic and diluted earnings per common share was $0.14, $0.11 and $0.06 for the years ended December 31, 2010, 2009 and 2008, respectively. The Company recognized a deferred tax benefit of $1,719,000, $899,000 and $782,000 in 2010, 2009 and 2008, respectively; related to share-based compensation expense recorded for non-qualified employee stock options and restricted stock awards. The Company did not recognize any tax benefit in 2007 related to share-based compensation expense because options issued by the Company in that year were designated incentive stock options and there were no disqualifying dispositions of options exercised.

The Company’s policy is to issue new shares to satisfy stock option exercises and to grant restricted share awards. There were no modifications to any stock options during the years ended December 31, 2010, 2009 or 2008.

F-52

16. STOCKHOLDERS’ EQUITY

Preferred Stock

Pursuant to its certificate of incorporation, the Company is authorized to issue 2,000,000 shares, $0.01 par value per share, “blank check” preferred stock, which enables the Board of Directors of the Company, from time to time, to create one or more new series of preferred stock. Each series of preferred stock issued can have the rights, preferences, privileges and restrictions designated by the Company’s Board of Directors. The issuance of any new series of preferred stock could affect, among other things, the dividend, voting, and liquidation rights of the Company’s common stock. During the years ended December 31, 2010, 2009 and 2008, the Company did not issue any preferred stock.

Common Stock

The Company’s Certificate of Incorporation, as amended, authorizes the Company to issue 90,000,000 shares of common stock with $0.01 par value.

Shareholders Rights Plan

On January 20, 2009, the Board of Directors approved the adoption of a shareholder rights plan and declared a dividend of one preferred share purchase right for each outstanding share of common stock of the Company. Under certain circumstances, if a person or group acquires, or announces its intention to acquire, beneficial ownership of 20% or more of the Company’s outstanding common stock, each holder of such right (other than the third party triggering such exercise), would be able to purchase, upon exercise of the right at a $15 exercise price, subject to adjustment, the number of shares of the Company’s common stock having a market value of two times the exercise price of the right. Subject to certain exceptions, if the Company is consolidated with, or merged into, another entity and the Company is not the surviving entity in such transaction or shares of the Company’s outstanding common stock are exchanged for securities of any other person, cash or any other property, or more than 50% of the Company’s assets or earning power is sold or transferred, then each holder of the rights would be able to purchase, upon the exercise of the right at a $15 exercise price, subject to adjustment, the number of shares of common stock of the third party acquirer having a market value of two times the exercise price of the right. The rights expire on January 20, 2012, unless extended by the Board of Directors.

In connection with the shareholder rights plan, the Board of Directors designated 100,000 shares of series A junior participating preferred stock.

F-53

17. EARNINGS PER SHARE

Basic earnings per common share is computed by dividing net earnings by the weighted average common shares outstanding for the period. Diluted earnings per common share is computed by dividing net income (loss) by the weighted average common shares outstanding adjusted for the dilutive effect of stock options, restricted stock awards, stock purchase warrants and convertible debt, excluding anti-dilutive shares.

A reconciliation of basic and diluted earnings per share is as follows:

	For the Years Ended December 31,
(in $000’s, except share and per share amounts)	2010		2009		2008
Numerator:
Net income	$	250,418	$	50,061	$	15,987
Denominator:
Weighted average common shares outstanding		62,037,908		60,279,602		59,072,752
Effect of dilutive options and and common stock purchase warrants		3,527,224		800,582		1,709,969
Diluted weighted average common shares outstanding		65,565,132		61,080,184		60,782,721
Basic net income per share	$	4.04	$	0.83	$	0.27
Diluted net income per share	$	3.82	$	0.82	$	0.26

For the years ended December 31, 2010, 2009 and 2008, the Company excluded 1,024,466, 6,620,769 and 5,641,543, respectively, of stock options from the computation of diluted net income per common share as the effect of these options would have been anti-dilutive.

FASB ASC Topic 260 provides accounting guidance on the treatment of contingently convertible instruments in the calculation of diluted earnings per share. The guidance indicates contingently convertible instruments should be included in diluted earnings per share, regardless of whether the market price trigger (i.e. the contingency) has been met. With respect to the Company’s 3.5% Debentures, however, as the principal portion was required be paid in cash, FASB ASC Topic 260 prohibited the use of the “if-converted” method, but rather proscribes a “treasury stock method” approach to computing potential common shares issuable, wherein the “conversion spread value” functions as the “proceeds” to be used to determine the number of potential common shares issuable given an average share price during the period. With respect to a conversion premium which may be settled in either cash or stock, under FASB ASC Topic 260, diluted earnings per share is computed wherein the diluted earnings per share denominator is adjusted for the conversion premium potential common shares issuable, provided however, such adjustment to the diluted earnings per share denominator has a more dilutive effect compared to adjustment to the corresponding numerator (i.e. income available to common shareholders). Such determination of the greater dilutive effect is required to be performed for each reporting period. With respect to the Company’s 3.5% Debentures potential conversion premium, the adjustment has been to the “numerator” — i.e. the inclusion of the 3.5% Debentures interest expense in the computation of income available to common shareholders, as it had a more dilutive effect than adjustment to the diluted earnings per share denominator, as the conversion spread value of the Company’s 3.5% Debentures has been negative — i.e. the average share price has been less than the conversion price. Accordingly, adjustment to the diluted earnings per share denominator was not necessary.

F-54

18. SEGMENT INFORMATION

The Company has two reportable segments, the “Global Pharmaceuticals Division” (“Global Division”) and the “Impax Pharmaceuticals Division” (“Impax Division”). The Company currently markets and sells its Global Division products within the continental United States of America and the Commonwealth of Puerto Rico.

The Global Division develops, manufactures, sells, and distributes generic pharmaceutical products, primarily through the following sales channels: the Global Products sales channel, for sales of generic prescription products, directly to wholesalers, large retail drug chains, and others; the Private Label Product sales channel, for generic pharmaceutical over-the-counter and prescription products sold to unrelated third-party customers, who in-turn sell the products to third-parties under their own label; the Rx Partner sales channel, for generic prescription products sold through unrelated third-party pharmaceutical entities under their own label pursuant to alliance agreements; and the OTC Partner sales channel, for over-the-counter products sold through unrelated third-party pharmaceutical entities under their own label pursuant to alliance agreements. The Company also generates revenue in its Global Division from research and development services provided under a joint development agreement with an unrelated third-party pharmaceutical company, and reports such revenue under the caption “Research Partner” revenue on the consolidated statement of operations.

The Impax Division is engaged in the development of proprietary branded pharmaceutical products through improvements to already-approved pharmaceutical products to address central nervous system (CNS) disorders. The Impax Division is also engaged in product co-promotion through a direct sales force focused on promoting to physicians, primarily in the CNS community, pharmaceutical products developed by other unrelated third-party pharmaceutical entities. The Company also generates revenue in its Impax Division from research and development services provided under a development and license agreement with another unrelated third-party pharmaceutical company, and reports such revenue under the caption “Research Partner” revenue on the consolidated statement of operations.

The Company’s chief operating decision maker evaluates the financial performance of the Company’s segments based upon segment income (loss) before income taxes. Items below income (loss) from operations are not reported by segment, except litigation settlements, since they are excluded from the measure of segment profitability reviewed by the Company’s chief operating decision maker. Additionally, general and administrative expenses, certain selling expenses, certain litigation settlements, and non-operating income and expenses are included in “Corporate and Other.” The Company does not report balance sheet information by segment since it is not reviewed by the Company’s chief operating decision maker. The accounting policies for the Company’s segments are the same as those described above in “Note 2. Summary of Significant Accounting Policies — Revenue Recognition.” The Company has no inter-segment revenue.

F-55

18. SEGMENT INFORMATION (continued)

The tables below present segment information reconciled to total Company financial results, with segment operating income or loss including gross profit less direct research and development expenses, and direct selling expenses as well as any litigation settlements, to the extent specifically identified by segment:

(in $000’s)	Global		Impax			Corporate			Total
Year Ended December 31, 2010	Division		Division			and Other			Company
Revenues, net	$	864,667	$	14,842		$	—		$	879,509
Cost of revenues		328,163		12,083			—			340,246
Research and development		44,311		41,912			—			86,223
Patent Litigation		6,384		—			—			6,384
Income (loss) before income taxes	$	469,858	$	(42,663	)	$	(33,316	)	$	393,879

	Global		Impax			Corporate			Total
Year Ended December 31, 2009	Division		Division			and Other			Company
Revenues, net	$	344,961	$	13,448		$	—		$	358,409
Cost of revenues		158,270		12,043			—			170,313
Research and development		38,698		24,576			—			63,274
Patent Litigation		5,379		—			—			5,379
Income (loss) before income taxes	$	131,723	$	(26,640	)	$	(34,106	)	$	70,977

	Global		Impax			Corporate			Total
Year Ended December 31, 2008	Division		Division			and Other			Company
Revenues, net	$	197,180	$	12,891		$	—		$	210,071
Cost of revenues		80,724		11,245			—			91,969
Research and development		42,930		16,307			—			59,237
Patent Litigation		6,472		—			—			6,472
Income (loss) before income taxes	$	55,609	$	(17,332	)	$	(12,268	)	$	26,009

Foreign Operations

The Company’s wholly-owned subsidiary, Impax Laboratories (Taiwan) Inc., has constructed a facility in Taiwan which is utilized for manufacturing, research and development, warehouse and administrative functions, with approximately $38,805,000 of net carrying value of assets, composed principally of a building and equipment, included in the Company's consolidated balance sheet at December 31, 2010.

F-56

19. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases office, warehouse and laboratory facilities under non-cancelable operating leases expiring between May 2011 and December 2015. Rent expense for the years ended December 31, 2010, 2009 and 2008 was $1,715,000, $1,893,000 and $1,664,000, respectively. The Company recognizes rent expense on a straight-line basis over the lease period. The Company also leases certain equipment under various non-cancelable operating leases with various expiration dates between February 2011 and September 2015. Future minimum lease payments under the non-cancelable operating leases are as follows:

	Years Ended
(in $000s)	December 31,
2011	$	1,469
2012		1,397
2013		1,377
2014		1,152
2015		471
Thereafter		—
Total minimum lease payments	$	5,866

Purchase Order Commitments

As of December 31, 2010, the Company had approximately $18,570,000 of open purchase order commitments, primarily for raw materials. The terms of these purchase order commitments are less than one year in duration.

Taiwan Facility

The Company has entered into several contracts related to ongoing expansion activities at its Taiwan facility. As of December 31, 2010, the Company had remaining obligations under these contracts of approximately $ 2,060,000.

F-57

20. LEGAL AND REGULATORY MATTERS

Patent Litigation

There is substantial litigation in the pharmaceutical, biological, and biotechnology industries with respect to the manufacture, use, and sale of new products which are the subject of conflicting patent and intellectual property claims. One or more patents typically cover most of the brand name controlled release products for which the Company is developing generic versions.

Under federal law, when a drug developer files an ANDA for a generic drug, seeking approval before expiration of a patent, which has been listed with the FDA as covering the brand name product, the developer must certify its product will not infringe the listed patent(s) and/or the listed patent is invalid or unenforceable (commonly referred to as a “Paragraph IV” certification). Notices of such certification must be provided to the patent holder, who may file a suit for patent infringement within 45 days of the patent holder’s receipt of such notice. If the patent holder files suit within the 45 day period, the FDA can review and approve the ANDA, but is prevented from granting final marketing approval of the product until a final judgment in the action has been rendered in favor of the generic, or 30 months from the date the notice was received, whichever is sooner. Lawsuits have been filed against the Company in connection the Company’s Paragraph IV certifications.

Should a patent holder commence a lawsuit with respect to an alleged patent infringement by the Company, the uncertainties inherent in patent litigation make the outcome of such litigation difficult to predict. The delay in obtaining FDA approval to market the Company’s product candidates as a result of litigation, as well as the expense of such litigation, whether or not the Company is ultimately successful, could have a material adverse effect on the Company’s results of operations and financial position. In addition, there can be no assurance any patent litigation will be resolved prior to the end of the 30-month period. As a result, even if the FDA were to approve a product upon expiration of the 30-month period, the Company may elect to not commence marketing the product if patent litigation is still pending.

Further, under the Teva Agreement, the Company and Teva have agreed to share in fees and costs related to patent infringement litigation associated with the products covered by the Teva Agreement. For the six products with ANDAs already filed with the FDA at the time the Teva Agreement was signed, Teva is required to pay 50% of the fees and costs in excess of $ 7,000,000; for three of the products with ANDAs filed since the Teva Agreement was signed, Teva is required to pay 45% of the fees and costs; and for the remaining three products, Teva is required to pay 50% of the fees and costs. The Company is responsible for the remaining fees and costs relating to these products.

The Company is generally responsible for all of the patent litigation fees and costs associated with current and future products not covered by the Teva Agreement. The company has agreed to share legal expenses under the terms of certain of the alliance and collaboration agreements it has entered into. The Company records the costs of patent litigation as expense when incurred for products it has developed, as well as for products which are the subject of an alliance or collaboration agreement with a third-party.

Although the outcome and costs of the asserted and unasserted claims is difficult to predict, the Company does not expect the ultimate liability, if any, for such matters to have a material adverse effect on its financial condition, results of operations, or cash flows.

F-58

20. LEGAL AND REGULATORY MATTERS (continued)

Patent Infringement Litigation

AstraZeneca AD et al. v. Impax Laboratories, Inc. (Omeprazole)

In litigation commenced against the Company in the U.S. District Court for the District of Delaware in May 2000, AstraZeneca AB alleged the Company’s submission of an ANDA seeking FDA permission to market Omeprazole Delayed Release Capsules, 10mg, 20mg and 40mg, constituted infringement of AstraZeneca’s U.S. patents relating to its Prilosec^® product and sought an order enjoining the Company from marketing its product until expiration of the patents. The case, along with several similar suits against other manufacturers of generic versions of Prilosec^®, was subsequently transferred to the U.S. District Court for the Southern District of New York. In September 2004, following expiration of the 30-month stay, the FDA approved the Company’s ANDA, and the Company and its alliance agreement partner, Teva, commenced commercial sales of the Company’s product. In January 2005, AstraZeneca added claims of willful infringement, for damages, and for enhanced damages on the basis of this commercial launch. Claims for damages were subsequently dropped from the suit against the Company, but were included in a separate suit filed against Teva. In May 2007, the court found the product infringed two of AstraZeneca’s patents and these patents were not invalid. The court ordered FDA approval of the Company’s ANDA be converted to a tentative approval, with a final approval date not before October 20, 2007, the expiration date of the relevant pediatric exclusivity period. In August 2008 the U.S. Court of Appeals for the Federal Circuit affirmed the lower court’s decision of infringement and validity. In January, 2010, AstraZeneca, Teva and the Company entered into a settlement agreement and the suits against both Teva and the Company were dismissed.

Aventis Pharmaceuticals Inc., et al. v. Impax Laboratories, Inc. Fexofenadine/(Pseudoephedrine)

The Company is a defendant in an action brought in March 2002 by Aventis Pharmaceuticals Inc. and others in the U.S. District Court for the District of New Jersey alleging the Company’s proposed Fexofenadine and Pseudoephedrine Hydrochloride tablets, generic to Allegra-D^®, infringe seven Aventis patents and seeking an injunction preventing the Company from marketing the products until expiration of the patents. The case has since been consolidated with similar actions brought by Aventis against five other manufacturers (including generics to both Allegra^® and Allegra-D^®). In March 2004, Aventis and AMR Technology, Inc. filed a complaint and first amended complaint against the Company and one of the other defendants alleging infringement of two additional patents, owned by AMR and licensed to Aventis, relating to a synthetic process for making the active pharmaceutical ingredient, Fexofenadine Hydrochloride and intermediates in the synthetic process. The Company believes it has defenses to the claims based on non-infringement and invalidity.

In June 2004, the court granted the Company’s motion for summary judgment of non-infringement with respect to two of the patents and, in May 2005, granted summary judgment of invalidity with respect to a third patent. The Company will have the opportunity to file additional summary judgment motions in the future and to assert both non-infringement and invalidity of the remaining patents (if necessary) at trial. No trial date has yet been set. In September 2005, Teva Pharmaceuticals, USA launched its Fexofenadine tablet products (generic to Allegra^®), and Aventis and AMR moved for a preliminary injunction to bar Teva’s sales based on four of the patents in suit, which patents are common to the Allegra^® and Allegra-D^® litigations. The district court denied Aventis’s motion in January 2006, finding Aventis did not establish a likelihood of success on the merits, which decision was affirmed on appeal. Discovery is complete and summary judgment motions have been filed. Trial is scheduled to begin April 4, 2011.

F-59

20. LEGAL AND REGULATORY MATTERS (continued)

Endo Pharmaceuticals Inc., et al. v. Impax Laboratories, Inc. (Oxymorphone)

In November 2007, Endo Pharmaceuticals, Inc. and Penwest Pharmaceuticals Co. (together, “Endo”) filed suit against the Company in the U.S. District Court for the District of Delaware, requesting a declaration of the Company’s Paragraph IV Notices with respect to the Company’s ANDA for Oxymorphone Hydrochloride Extended Release Tablets 5 mg, 10 mg, 20 mg and 40 mg, generic to Opana^® ER, are null and void and, in the alternative, alleging patent infringement in connection with the filing of such ANDA. Endo subsequently dismissed its request for declaratory relief and in December 2007 filed another patent infringement suit relating to the same ANDA. In July 2008, Endo asserted additional infringement claims with respect to the Company’s amended ANDA, which added 7.5mg, 15mg and 30mg strengths of the product. The cases were subsequently transferred to the U.S. District Court for the District of New Jersey. The Company and Endo entered into a Settlement and License Agreement, and this matter was dismissed, on June 15, 2010.

Pfizer Inc., et aI. v. Impax Laboratories, Inc. (Tolterodine)

In March 2008, Pfizer Inc., Pharmacia & Upjohn Company LLC, and Pfizer Health AB (collectively, “Pfizer”) filed a complaint against the Company in the U.S. District Court for the Southern District of New York, alleging the Company’s filing of an ANDA relating to Tolterodine Tartrate Extended Release Capsules, 4 mg, generic to Detrol^® LA, infringes three Pfizer patents. The Company filed an answer and counterclaims seeking declaratory judgment of non-infringement, invalidity, or unenforceability with respect to the patents in suit. In April 2008, the case was transferred to the U.S. District Court for the District of New Jersey. On September 3, 2008, an amended complaint was filed alleging infringement based on the Company’s ANDA amendment adding a 2mg strength. For one of the patents-in-suit, U.S. Patent No. 5,382,600, expiring on September 25, 2012 with pediatric exclusivity, the Company agreed by stipulation to be bound by the decision in Pfizer Inc. et al. v. Teva Pharmaceuticals USA, Inc., Case No. 04-1418 (D. N.J.). After the Pfizer court conducted a bench trial, it found the ‘600 patent not invalid on January 20, 2010, and that decision is on appeal to the U.S. Court of Appeals for the Federal Circuit. Discovery is proceeding in the Company’s case, and no trial date has been set.

Boehringer Ingelheim Pharmaceuticals, et al. v. Impax Laboratories, Inc. (Tamsulosin)

In July 2008, Boehringer Ingelheim Pharmaceuticals Inc. and Astellas Pharma Inc. (together, “Astellas”) filed a complaint against the Company in the U.S. District Court for the Northern District of California, alleging patent infringement in connection with the filing of the Company ANDA relating to Tamsulosin Hydrochloride Capsules, 0.4 mg, generic to Flomax^®. After filing its answer and counterclaim, the Company filed a motion for summary judgment of patent invalidity. The District Court conducted hearings on claim construction in May 2009, and summary judgment in June 2009. In October 2009, the parties announced they had entered a settlement agreement allowing the Company to launch its product no later than March 2, 2010. A stipulated consent judgment was entered by the Court and the case was dismissed.

F-60

20. LEGAL AND REGULATORY MATTERS (continued)

Purdue Pharma Products L.P., et al. v. Impax Laboratories, Inc. (Tramadol)

In August 2008, Purdue Pharma Products L.P., Napp Pharmaceutical Group LTD., Biovail Laboratories International, SRL, and Ortho-McNeil-Janssen Pharmaceuticals, Inc. (collectively, “Purdue”) filed suit against the Company in the U.S. District Court for the District of Delaware, alleging patent infringement for the filing of the Company’s ANDA relating to Tramadol Hydrochloride Extended Release Tablets, 100 mg, generic to 100mg Ultram^® ER. In November 2008, Purdue asserted additional infringement claims with respect to the Company’s amended ANDA, which added 200 mg and 300 mg strengths of the product. The Company filed answers and counterclaims to those complaints. In August 2009, one of the patents-in-suit, U.S. Patent No. 6,254,887, was found invalid in another ANDA case relating to Ultram^® ER, Purdue Pharma Products L.P. et al, v. Par Pharmaceutical, Inc. et al., Case No. 07-255 (D. Del.) (“Par action”) The Par action is now on appeal to the U. S. Court of Appeals for the Federal Circuit. On November 16, 2009, the Company and Purdue agreed by stipulation to stay the case until the earlier of the following two events: (a) the Federal Circuit issues a mandate in the Par action or that action is otherwise disposed of, or (b) an undisclosed event. The Federal Circuit affirmed the decision of invalidity in the Par action on June 3, 2010. On September 2, 2010, this matter was dismissed with prejudice.

Eli Lilly and Company v. Impax Laboratories, Inc. (Duloxetine)

In November 2008, Eli Lilly and Company filed suit against the Company in the U.S. District Court for the Southern District of Indiana, alleging patent infringement for the filing of the Company’s ANDA relating to Duloxetine Hydrochloride Delayed Release Capsules, 20 mg, 30 mg, and 60 mg, generic to Cymbalta^®. In February 2009, the parties agreed to be bound by the final judgment concerning infringement, validity and enforceability of the patent at issue in cases brought by Eli Lilly against other generic drug manufacturers that have filed ANDAs relating to this product and proceedings in this case were stayed.

Warner Chilcott, Ltd. et.al. v. Impax Laboratories, Inc. (Doxycycline Hyclate)

In December 2008, Warner Chilcott Limited and Mayne Pharma International Pty. Ltd. (together, “Warner Chilcott”) filed suit against the Company in the U.S. District Court for the District of New Jersey, alleging patent infringement for the filing of the Company’s ANDA relating to Doxycycline Hyclate Delayed Release Tablets, 75 mg and 100 mg, generic to Doryx^®. The Company filed an answer and counterclaim. Thereafter, in March 2009, Warner Chilcott filed another lawsuit in the same jurisdiction, alleging patent infringement for the filing of the Company’s ANDA for the 150 mg strength. Fact discovery closed on January 31, 2011 and no trial date has been set.

Eurand, Inc., et al. v. Impax Laboratories, Inc. (Cyclobenzaprine)

In January 2009, Eurand, Inc., Cephalon, Inc., and Anesta AG (collectively, “Cephalon”) filed suit against the Company in the U.S. District Court for the District of Delaware, alleging patent infringement for the filing of the Company’s ANDA relating to Cyclobenzaprine Hydrochloride Extended Release Capsules, 15 mg and 30 mg, generic to Amrix^®. This matter was settled and dismissed on October 11, 2010. Under the terms of the settlement, the Company obtained the right to launch its product one year prior to expiration of the Eurand patent, which is currently expected to expire in February 2025, or earlier under certain circumstances.

Genzyme Corp. v. Impax Laboratories, Inc. (Sevelamer Hydrochloride)

In March 2009, Genzyme Corporation filed suit against the Company in the U.S. District Court for the District of Maryland, alleging patent infringement for the filing of the Company’s ANDA relating to Sevelamer Hydrochloride Tablets, 400 mg and 800 mg, generic to Renagel^®. The Company has filed an answer and counterclaim. Fact discovery closes on February 28, 2011, and trial is scheduled for September 27, 2012.

F-61

20. LEGAL AND REGULATORY MATTERS (continued)

Genzyme Corp. v. Impax Laboratories, Inc. (Sevelamer Carbonate)

In April 2009, Genzyme Corporation filed suit against the Company in the U.S. District Court for the District of Maryland, alleging patent infringement for the filing of the Company’s ANDA relating to Sevelamer Carbonate Tablets, 800 mg, generic to Renvela^®. The Company has filed an answer and counterclaim. Fact discovery closes on February 28, 2011, and trial is scheduled for September 27, 2012.

The Research Foundation of State University of New York et al. v. Impax Laboratories, Inc. (Doxycycline Monohydrate)

In September 2009, The Research Foundation of State University of New York; New York University; Galderma Laboratories Inc.; and Galderma Laboratories, L.P. (collectively, “Galderma”) filed suit against the Company in the U.S. District Court for the District of Delaware alleging patent infringement for the filing of the Company’s ANDA relating to Doxycycline Monohydrate Delayed-Release Capsules, 40 mg, generic to Oracea^®. The Company filed an answer and counterclaim. In October 2009, the parties agreed to be bound by the final judgment concerning infringement, validity and enforceability of the patent at issue in cases brought by Galderma against another generic drug manufacturer that has filed an ANDA relating to this product and proceedings in this case were stayed. In June 2010, Galderma moved for a preliminary injunction to bar sales by the other generic manufacturer based on two of the patents in suit, which motion was granted by the magistrate judge in a decision finding Galderma had shown a likelihood of success on the merits.

Elan Pharma International Ltd. and Fournier Laboratories Ireland Ltd. v. Impax Laboratories, Inc. and Abbott Laboratories and Laboratories Fournier S.A. v. Impax Laboratories, Inc. (Fenofibrate)

In October 2009, Elan Pharma International Ltd. with Fournier Laboratories Ireland Ltd. and Abbott Laboratories with Laboratories Fournier S.A. filed separate suits against the Company in the U.S. District Court for the District of New Jersey alleging patent infringement for the filing of the Company’s ANDA relating to Fenofibrate Tablets, 48 mg and 145 mg, generic to Tricor^®. The Company has filed an answer and counterclaim. In September 2010, the Court vacated the schedule and ordered a stay in the two matters related to the Company.

Daiichi Sankyo, Inc. et al. v. Impax Laboratories, Inc. (Colesevelam)

In January 2010, Daiichi Sankyo, Inc. and Genzyme Corporation (together, “Genzyme”) filed suit against the Company in the U.S. District Court for the District of Delaware alleging patent infringement for the filing of the Company’s ANDA relating to Colesevelam Hydrochloride Tablets, 625 mg, generic to Welchol^®. The Company has filed an answer and counterclaim. Fact discovery closes July 29, 2011 and no trial date has been scheduled.

Abbott Laboratories, et al. v. Impax Laboratories, Inc. (Choline Fenofibrate)

In March 2010, Abbott Laboratories and Fournier Laboratories Ireland Ltd. (together, “Abbott”) filed suit against the Company in the U.S District Court for the District of New Jersey alleging patent infringement for the filing of the Company’s ANDA related to Choline Fenofibrate Delayed Release Capsules, 45 mg and 135 mg, generic of Trilipix^®. The Company has filed an answer. Fact discovery closes February 4, 2011 and no trial date has been scheduled.

Shionogi Pharma, Inc. and LifeCycle Pharma A/S v. Impax Laboratories, Inc. (Fenofibrate)

In April 2010, Shionogi Pharma, Inc. and LifeCycle Pharma A/S filed suit against the Company in the U.S. District Court for the District of Delaware alleging patent infringement for the filing of the Company’s ANDA relating to Fenofibrate Tablets, 40 and 120 mg, generic to Fenoglide^®. The Company has filed its answer.

F-62

20. LEGAL AND REGULATORY MATTERS (continued)

Genzyme Corp. v. Impax Laboratories, Inc. (Sevelamer Carbonate Powder)

In July 2010, Genzyme Corporation filed suit against the Company in the U.S. District Court for the District of Maryland, alleging patent infringement for the filing of the Company’s ANDA relating to Sevelamer Carbonate Powder, 2.4 g and 0.8 g packets, generic to Renvela^® powder. The Company has filed an answer and counterclaim. Fact discovery closes on February 28, 2011 and trial is scheduled for September 27, 2012.

Schering Corp., et al. v. Impax Laboratories, Inc. (Ezetimibe/Simvastatin)

In August 2010, Schering Corporation and MSP Singapore Company LLC (together, “Schering”) filed suit against the Company in the U.S. District Court for the District of New Jersey alleging patent infringement for the filing of the Company’s ANDA relating to Ezetimibe/Simvastatin Tablets, 10/80 mg, generic to Vytorin ^®. The Company has filed an answer and counterclaim. In December 2010, the parties agreed to be bound by the final judgment concerning validity and enforceability of the patents at issue in cases brought by Schering against other generic drug manufacturers that have filed ANDAs relating to this product and proceedings in this case were stayed.

Abbott Laboratories, et al. v. Impax Laboratories, Inc. (Niacin-Simvastatin)

In November 2010, Abbott Laboratories and Abbott Respiratory LLC filed suit against the Company in the U.S. District Court for the District of Delaware, alleging patent infringement for the filing of the Company’s ANDA relating to Niacin-Simvastatin Tablets, 1000/20 mg, generic to Simcor^®.

Alza Corp., et al. v. Impax Laboratories, Inc., et al. (Methylphenidate)

In November 2010, Alza Corp., Ortho-McNeil-Janssen Pharmaceuticals, Inc. (together, “Alza”) filed suit against the Company in the U.S. District Court for the District of Delaware, alleging patent infringement for the filing of the Company’s ANDA relating to Methylphenidate Hydrochloride Tablets, 54 mg, generic to Concerta^®. The Company has filed its answer.

Daiichi Sankyo, Inc. et al. v. Impax Laboratories, Inc. (Colesevelam Powder)

In November 2010, Daiichi Sankyo, Inc. and Genzyme Corporation (together, “Daiichi”) filed suit against the Company in the U.S. District Court for the District of Delaware alleging patent infringement for the filing of the Company’s ANDA relating to Colesevelam Hydrochloride Powder, 1.875 gm/packet and 3.75 gm/packet, generic to Welchol^® for Oral Suspension. The Company has filed an answer and counterclaim. Fact discovery closes July 29, 2011 and no trial date has been scheduled.

Shire LLC, et al. v. Impax Laboratories, Inc., et al. (Guanfacine)

In December 2010, Shire LLC, Supernus Pharmaceuticals, Inc., Amy F.T. Arnsten, Ph.D., Pasko Rakic, M.D., and Robert D. Hunt, M.D. (together, “Shire”) filed suit against the Company in the U.S. District Court for the Northern District of California alleging patent infringement for the filing of the Company’s ANDA relating to Guanfacine Hydrochloride Tablets, 4 mg, generic to Intuniv^®. In January, 2011 Shire amended its complaint to add the 1 mg, 2 mg, and 3 mg strengths. The Company has filed its answer and counterclaims.

F-63

20. LEGAL AND REGULATORY MATTERS (continued)

Other Litigation Related to Our Business

Axcan Scandipharm Inc. v. Ethex Corp, et al. (Lipram UL)

In May 2007, Axcan Scandipharm Inc., a manufacturer of the Ultrase^® line of pancreatic enzyme products, brought suit against the Company in the U.S. District Court for the District of Minnesota, alleging the Company engaged in false advertising, unfair competition, and unfair trade practices under federal and Minnesota law in connection with the marketing and sale of the Company’s now-discontinued Lipram UL products. The suit seeks actual and consequential damages, including lost profits, treble damages, attorneys’ fees, injunctive relief and declaratory judgments to prohibit the substitution of Lipram UL for prescriptions of Ultrase^®. The District Court granted in part and denied in part the Company’s motion to dismiss the complaint, as well as the motion of co-defendants Ethex Corp. and KV Pharmaceutical Co., holding any claim of false advertising pre-dating June 1, 2001, is barred by the statute of limitations. On January 5, 2010, the parties settled the case, and the case was subsequently dismissed with prejudice.

Budeprion XL Litigation

In June 2009, the Company was named a co-defendant in class action lawsuits filed in California state court in an action titled Kelly v. Teva Pharmaceuticals Indus. Ltd, et al., No. BC414812 (Calif. Superior Crt. L.A. County). Subsequently, additional class action lawsuits were filed in Louisiana (Morgan v. Teva Pharmaceuticals Indus. Ltd, et al., No. 673880 (24th Dist Crt., Jefferson Parish, LA.)), North Carolina (Weber v. Teva Pharmaceuticals Indus., Ltd., et al., No. 07 CV5002556, (N.C. Superior Crt., Hanover County)), Pennsylvania (Rosenfeld v. Teva Pharmaceuticals USA, Inc.. et al., No. 2:09-CV-2811 (E.D. Pa.)), Florida (Henchenski and Vogel v. Teva Pharmaceuticals Industries Ltd., et al., No. 2:09-CV-470-FLM-29SPC (M.D. Fla.)), Texas (Anderson v. Teva Pharmaceuticals Indus., Ltd., et al., No. 3-09CV1200-M (N.D. Tex.)), Oklahoma (Brown et al. v. Teva Pharmaceuticals Inds., Ltd., et al., No. 09-cv-649-TCK-PJC (N.D. OK)), Ohio (Latvala et al. v. Teva Pharmaceuticals Inds., Ltd., et al., No. 2:09-cv-795 (S.D. OH)), Alabama (Jordan v. Teva Pharmaceuticals Indus. Ltd et al., No. CV09-709 (Ala. Cir. Crt. Baldwin County)), and Washington (Leighty v. Teva Pharmaceuticals Indus. Ltd et al., No. CV09-01640 (W. D. Wa.)). All of the complaints involve Budeprion XL, a generic version of Wellbutrin XL^® that is manufactured by the Company and marketed by Teva, and allege that, contrary to representations of Teva, Budeprion XL is less effective in treating depression, and more likely to cause dangerous side effects, than Wellbutrin XL. The actions are brought on behalf of purchasers of Budeprion XL and assert claims such as unfair competition, unfair trade practices and negligent misrepresentation under state law. Each lawsuit seeks damages in an unspecified amount consisting of the cost of Budeprion XL paid by class members, as well as any applicable penalties imposed by state law, and disclaims damages for personal injury. The state court cases have been removed to federal court, and a petition for multidistrict litigation to consolidate the cases in federal court has been granted. These cases and any subsequently filed cases will be heard under the consolidated action entitled In re: Budeprion XL Marketing Sales Practices, and Products Liability Litigation, MDL No. 2107, in the United States District Court for the Eastern District of Pennsylvania. The Company filed a motion to dismiss and a motion to certify that order for interlocutory appeal, both of which were denied. Discovery is proceeding, and no trial date has been scheduled.

Impax Laboratories, Inc. v. Shire LLC and Shire Laboratories, Inc. (generic Adderall XR)

On November 1, 2010, the Company filed suit against Shire LLC and Shire Laboratories, Inc. (collectively “Shire”) in the Supreme Court of the State of New York, alleging breach of contract and other related claims due to Shire’s failure to fill the Company’s orders for the generic Adderall XR product as required by the parties’ Settlement Agreement and License and Distribution Agreement, each signed in January 2006. In addition, the Company has filed a motion for a preliminary injunction and a temporary restraining order seeking to require Shire to fill product orders placed by the Company. The case was removed to the U.S. District Court for the Southern District of New York by Shire based on diversity jurisdiction. Discovery is proceeding, and no trial date has been scheduled.

F-64

21. SUPPLEMENTARY FINANCIAL INFORMATION (unaudited)

Selected (unaudited) financial information for the quarterly periods noted is as follows:

	2010 Quarters Ended:
(in $000’s except per share amounts)	March 31		June 30		September 30		December 31
Revenue:
Global Product sales, gross	$	425,986	$	224,318	$	167,759	$	147,699
Less:
Chargebacks		56,168		49,420		36,065		39,913
Rebates		29,425		16,739		21,630		17,666
Product Returns		7,400		4,596		8,344		(4,519	)
Other credits		23,888		15,925		10,669		9,544
Global Product sales, net		309,105		137,638		91,051		85,095
Private Label Product sales		672		339		528		535
Rx Partner		4,903		5,802		202,799		3,773
OTC Partner		1,765		2,309		2,365		2,449
Research Partner		3,385		3,494		3,714		3,715
Promotional Partner		3,503		3,500		3,535		3,535
Other		—		—		—		—
Total revenues		323,333		153,082		303,992		99,102
Gross profit		243,757		84,190		160,871		50,445
Net income	$	131,485	$	31,348	$	75,163		12,422
Net income per share (basic)	$	2.16	$	0.51	$	1.20	$	0.20
Net income per share (diluted)	$	2.06	$	0.48	$	1.15	$	0.19
Weighted Average:
common shares outstanding:
Basic		61,008,015		61,876,599		62,435,116		62,807,768
Diluted		63,865,678		65,538,805		65,470,341		66,210,101

Quarterly computations of (unaudited) net income per share amounts are made independently for each quarterly reporting period, and the sum of the per share amounts for the quarterly reporting periods may not equal the per share amounts for the year-to-date reporting period.

The Company recorded a reduction to its reserve for product returns of $4.1 million in the fourth quarter of 2010 as a result of actual prescription data showing exclusivity period sales of its tamsulosin products had been fully prescribed to patients. Additionally, the Company recorded a reduction to its reserve for product returns of $3.7 million in the fourth quarter of 2010 related to all Global Products other than its tamsulosin and generic Adderall XR^® products as a result of continued improvement in the Company’s historical experience of actual return credits processed.

F-65

21. SUPPLEMENTARY FINANCIAL INFORMATION (unaudited) (continued)

Selected (unaudited) financial information for the quarterly periods noted is as follows:

	2009 Quarters Ended:
(in $000’s except per share amounts)	March 31		June 30		September 30		December 31
Revenue:
Global Product sales, gross	$	78,696	$	81,764	$	82,514	$	281,540
Less:
Chargebacks		22,638		24,844		21,265		57,358
Rebates		10,819		13,425		9,411		38,965
Returns		3,256		3,100		2,030		3,461
Other credits		2,862		3,008		3,172		17,821
Global Product sales, net		39,121		37,387		46,636		163,935
Private Label Product sales		1,297		2,220		1,752		244
Rx Partner		10,736		11,119		8,328		3,652
OTC Partner		1,858		1,628		1,769		1,587
Research Partner		2,611		2,833		2,962		3,274
Promotional Partner		3,284		3,224		3,499		3,441
Other		6		5		—		1
Total revenues		58,913		58,416		64,946		176,134
Gross profit		32,663		31,132		36,891		87,410
Net income	$	2,219	$	3,013	$	6,685	$	38,144
Net income per share (basic)	$	0.04	$	0.05	$	0.11	$	0.63
Net income per share (diluted)	$	0.04	$	0.05	$	0.11	$	0.61
Weighted Average:
common shares outstanding:
Basic		59,711,133		60,112,308		60,559,064		60,721,808
Diluted		60,222,215		60,552,344		61,247,700		62,288,318

Quarterly computations of (unaudited) net income per share amounts are made independently for each quarterly reporting period, and the sum of the per share amounts for the quarterly reporting periods may not equal the per share amounts for the year-to-date reporting period.

The Company commenced sales of its authorized generic of Shire’s Adderall XR^® product in the fourth quarter of 2009. See the Alliance and Collaboration Agreements footnote above for additional information.

F-66

SCHEDULE II, VALUATION AND QUALIFYING ACCOUNTS

For the Year Ended December 31, 2008
(in $000’s)

Column A	Column B		Column C				Column D			Column E
	Balance at		Charge to		Charge to					Balance at
	Beginning of		Costs and		Other					End of
Description	Period		Expenses		Accounts		Deductions			Period
Deferred tax asset valuation allowance	$	—	$	333	$	—	$	—		$	333
Inventory reserve		3,148		1,257		—		—			4,405
Reserve for bad debts		550		568		—		(290	)		828

For the Year Ended December 31, 2009
(in $000’s)

Column A	Column B		Column C					Column D			Column E
	Balance at		Charge to			Charge to					Balance at
	Beginning of		Costs and			Other					End of
Description	Period		Expenses			Accounts		Deductions			Period
Deferred tax asset valuation allowance	$	333	$	(333	)	$	—	$	—		$	—
Inventory reserve		4,405		241			—		—			4,646
Reserve for bad debts		828		229			—		(685	)		372

For the Year Ended December 31, 2010
(in $000’s)

Column A	Column B		Column C				Column D			Column E
	Balance at		Charge to		Charge to					Balance at
	Beginning of		Costs and		Other					End of
Description	Period		Expenses		Accounts		Deductions			Period
Deferred tax asset valuation allowance	$	—	$		$		$	—		$	—
Inventory reserve		4,646		648		—		—			5,294
Reserve for bad debts		372		277		—		(110	)		539

S-1

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 to be signed on its behalf by the undersigned, thereunto duly authorized.

IMPAX LABORATORIES, INC.
By:	/s/ Larry Hsu, Ph.D.
	Name:	Larry Hsu, Ph.D.
	Title:	President and Chief Executive Officer

Date: February 25, 2011

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

Signature	Title	Date
/s/ Larry Hsu, Ph.D Larry Hsu, Ph.D	President, Chief Executive Officer (Principal Executive Officer) and Director	February 25, 2011
/s/ Arthur A. Koch, Jr. Arthur A. Koch, Jr.	Senior Vice President, Finance, and Chief Financial Officer (Principal Financial and Accounting Officer)	February 25, 2011
/s/ Leslie Z. Benet, Ph.D. Leslie Z. Benet, Ph.D.	Director	February 25, 2011
/s/ Robert L. Burr Robert L. Burr	Chairman of the Board	February 25, 2011
/s/ Nigel Ten Fleming, Ph.D. Nigel Ten Fleming, Ph.D.	Director	February 25, 2011
/s/ Michael Markbreiter Michael Markbreiter	Director	February 25, 2011
/s/ Allen Chao, Ph.D. Allen Chao, Ph.D.	Director	February 25, 2011
/s/ Peter R. Terreri Peter R. Terreri	Director	February 25, 2011

II-1

EXHIBIT INDEX

Exhibit No.	Description of Document
3.1.1	Restated Certificate of Incorporation, dated August 30, 2004.(1)
3.1.2	Certificate of Designation of Series A Junior Participating Preferred Stock, as filed with the Secretary of State of Delaware on January 21, 2009.(2)
3.2	Amended and Restated Bylaws, effective June 29, 2009.(3)
4.1	Specimen of Common Stock Certificate.(4)
4.2	Form of Debenture (incorporated by reference to Exhibit A to the Indenture, dated as of June 27, 2005, between the Company and HSBC Bank USA, National Association, as Trustee, listed on Exhibit 4.3)
4.3	Indenture, dated as of June 27, 2005, between the Company and HSBC Bank USA, National Association, as Trustee.(4)
4.4	Supplemental Indenture, dated as of July 6, 2005, between the Company and HSBC Bank USA, National Association, as Trustee.(4)
4.5	Registration Rights Agreement, dated as of June 27, 2005, between the Company and the Initial Purchasers named therein.(4)
4.6	Promissory Note dated June 7, 2006, issued by the Company to Solvay Pharmaceuticals, Inc.(4)
4.7	Preferred Stock Rights Agreement, dated as of January 20, 2009, by and between the Company and StockTrans, Inc., as Rights Agent.(2)
10.1.1	Amended and Restated Loan and Security Agreement, dated as of December 15, 2005, between the Company and Wachovia Bank, National Association.(4)
10.1.2	First Amendment, dated October 14, 2008, to Amended and Restated Loan and Security Agreement, dated December 15, 2005, between the Company and Wachovia Bank, National Association.(5)
10.1.3	Second Amendment to Amended and Restated Loan and Security Agreement, effective as of December 31, 2008, by and among the Company and Wachovia Bank, National Association.(6)
10.1.4	Third Amendment to Amended and Restated Loan and Security Agreement, effective as of March 31, 2009, by and among the Company and Wachovia Bank, National Association.(7)
10.1.5	Fourth Amendment to Amended and Restated Loan and Security Agreement, effective as of March 12, 2010, by and among the Company and Wachovia Bank, National Association, a Wells Fargo Company.(8)
10.1.6	Fifth Amendment to Amended and Restated Loan and Security Agreement, effective as of June 30, 2010, by and among the Company and Wells Fargo Bank, National Association, successor by merger to Wachovia Bank, National Association.(9)
10.1.7	Sixth Amendment to Amended and Restated Loan and Security Agreement, effective as of September 30, 2010, by and among the Company and Wells Fargo Bank, National Association, successor by merger to Wachovia Bank, National Association.(10)
10.1.8	Seventh Amendment to Amended and Restated Loan and Security Agreement, effective as of January 31, 2011, by and among the Company and Wells Fargo Bank, National Association, successor by merger to Wachovia Bank, National Association.
10.2	Purchase Agreement, dated June 26, 2005, between the Company and the Purchasers named therein.(4)
10.3.1	Impax Laboratories Inc. 1999 Equity Incentive Plan.*(6)
10.3.2	Form of Stock Option Grant under the Impax Laboratories, Inc. 1999 Equity Incentive Plan.*(6)
10.4	Impax Laboratories Inc. 2001 Non-Qualified Employee Stock Purchase Plan.*(4)
10.5.1	Impax Laboratories Inc. Amended and Restated 2002 Equity Incentive Plan.*(11)
10.5.2	Form of Stock Option Grant under the Impax Laboratories, Inc. Amended and Restated 2002 Equity Incentive Plan.*(6)

II-2

Exhibit No.	Description of Document
10.5.3	Form of Stock Bonus Agreement under the Impax Laboratories, Inc. Amended and Restated 2002 Equity Incentive Plan.*(6)
10.6.1	Impax Laboratories Inc. Executive Non-Qualified Deferred Compensation Plan, amended and restated effective January 1, 2008.*(8)
10.6.2	Amendment to Impax Laboratories Inc. Executive Non-Qualified Deferred Compensation Plan, effective as of January 1, 2009.* (8)
10.7.1	Employment Agreement, dated December 14, 1999, by and between the Company and Larry Hsu, Ph.D.*(5)
10.7.2	Amendment No. 1, dated May 19, 2009, to Employment Agreement, dated December 14, 1999, by and between the Company and Larry Hsu, Ph.D.*(12)
10.7.3	Employment Agreement, dated as of January 1, 2010, between the Company and Larry Hsu, Ph.D.*(13)
10.8	Employment Agreement, dated as of January 1, 2010, between the Company and Charles V. Hildenbrand.*(13)
10.9	Employment Agreement, dated as of January 1, 2010, between the Company and Arthur A. Koch, Jr.*(13)
10.10	Employment Agreement, dated as of January 1, 2010, between the Company and Michael J. Nestor.*(13)
10.11.1	Offer of Employment Letter, effective as of January 5, 2009, between the Company and Christopher Mengler.*(6)
10.11.2	Employment Agreement, dated as of January 1, 2010, between the Company and Christopher Mengler, R.Ph.*(13)
10.11.3	Separation Agreement and General Release, dated October 19, 2010, by and between the Company and Christopher Mengler, R.Ph.*(14)
10.12	License and Distribution Agreement, dated as of January 19, 2006, between the Company and Shire LLC.**(15)
10.13	Joint Development Agreement, dated as of November 26, 2008, between the Company and Medicis Pharmaceutical Corporation.**(15)
10.14	License, Development and Commercialization Agreement, dated as of December 15, 2010, by and between the Company and Glaxo Group Limited.***
10.15	Supply Agreement, dated as of December 15, 2010, by and between the Company and Glaxo Group Limited.***
11.1	Statement re computation of per share earnings (incorporated by reference to Note 17 to the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K).
21.1	Subsidiaries of the registrant.

II-3

Exhibit No.	Description of Document
23.1	Consent of Grant Thornton LLP.
31.1	Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certifications of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*	Management contract, compensatory plan or arrangement.
**	Confidential treatment granted for certain portions of this exhibit pursuant to Rule 24b-2 under the Exchange Act, which portions are omitted and filed separately with the SEC.
***	Confidential treatment requested for certain portions of this exhibit pursuant to Rule 24b-2 under the Exchange Act, which portions are omitted and filed separately with the SEC.
(1)	Incorporated by reference to Amendment No. 5 to the Company’s Registration Statement on Form 10 filed on December 23, 2008.
(2)	Incorporated by reference to the Company’s Current Report on Form 8-K filed on January 22, 2009.
(3)	Incorporated by reference to the Company’s Current Report on Form 8-K filed on July 2, 2009.
(4)	Incorporated by reference to the Company’s Registration Statement on Form 10 filed on October 10, 2008.
(5)	Incorporated by reference to Amendment No. 2 to the Company’s Registration Statement on Form 10 filed on December 2, 2008.
(6)	Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.
(7)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.
(8)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010.
(9)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010.
(10)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010.
(11)	Incorporated by reference to the Company’s Definitive Proxy Statement on Schedule 14A filed on April 14, 2010.
(12)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009.
(13)	Incorporated by reference to the Company’s Current Report on Form 8-K filed on January 14, 2010.
(14)	Incorporated by reference to the Company’s Current Report on Form 8-K filed on October 22, 2010.
(15)	Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

II-4

EX-10.1.8

Exhibit 10.1.8

SEVENTH AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT

THIS SEVENTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (the “Amendment”) is made effective as of the 31st day of January, 2011, by and between IMPAX LABORATORIES, INC., a Delaware corporation (“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION successor by merger to WACHOVIA BANK, NATIONAL ASSOCIATION (together with its successors and assigns, “Bank”).

BACKGROUND

A. Pursuant to that certain Amended and Restated Loan and Security Agreement dated December 15, 2005 by and between Borrower and Bank (as amended by that certain First Amendment to Amended and Restated Loan and Security Agreement dated October 14, 2008, that certain Second Amendment to Amended and Restated Loan and Security Agreement dated December 31, 2008, that certain Third Amendment to Amended and Restated Loan and Security Agreement dated March 31, 2009, that certain Fourth Amendment to Amended and Restated Loan and Security Agreement dated March 12, 2010, that certain Fifth Amendment to Amended and Restated Loan and Security Agreement dated June 30, 2010, that certain Sixth Amendment to Amended and Restated Loan and Security Agreement dated September 30, 2010 and as the same may hereafter be further amended, modified, supplemented or restated from time to time, being referred to herein as the “Loan Agreement”), Bank agreed, inter alia, to amend and restate an existing revolving line of credit in the maximum principal amount of Thirty-Five Million Dollars ($35,000,000.00).

B. Borrower has requested and Bank has agreed to amend the Loan Agreement in accordance with the terms and conditions contained herein.

C. All capitalized terms contained herein and not otherwise defined herein shall have the meanings set forth in the Loan Agreement.

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

1. Termination Date. The reference to “January 31, 2011” contained in the definition of “Termination Date” in Section 1.1 of the Loan Agreement is hereby deleted and replaced with “April 1, 2011”.

2. Extension Fee. Borrower shall pay to Bank an extension fee in an amount equal to $15,000 (the “Extension Fee”) on February 28, 2011, which Extension Fee has been fully earned as of the date hereof. Notwithstanding the foregoing, if on or prior to February 25, 2011 (i) the Loan Agreement shall have been terminated and the Obligations shall have been paid in full as a result of refinancing provided by the Growth Technology and Life Sciences Group of the Bank or (ii) Borrower shall have satisfied all conditions to the occurrence of the foregoing refinancing and no representation, warranty or covenant in any document evidencing the same would be violated upon closing of such refinancing, but the Bank shall have been unwilling or unable to close such refinancing with no fault on the part of Borrower, then and in either such event, no Extension Fee shall be due and owing. The Extension Fee, if and when due, may be deducted from any account of Borrower maintained with Bank or charged as a Revolver Loan.

3. Amendment/References. The Loan Agreement and the Loan Documents are hereby amended to be consistent with the terms of this Amendment. All references in the Loan Agreement and the Loan Documents to (a) the “Loan Agreement” shall mean the Loan Agreement as amended hereby; and (b) the “Loan Documents” shall include this Amendment and all other instruments or agreements executed pursuant to or in connection with the terms hereof.

4. Release. Borrower acknowledges and agrees that it has no claims, suits or causes of action against Bank and hereby remises, releases and forever discharges Bank, its officers, directors, shareholders, employees, agents, successors and assigns, and any of them, from any claims, suits or causes of action whatsoever, in law or at equity, which Borrower has or may have arising from any act, omission or otherwise, at any time up to and including the date of this Amendment.

5. Additional Documents; Further Assurances. Borrower covenants and agrees to execute and deliver to Bank, or to cause to be executed and delivered to Bank contemporaneously herewith, at the sole cost and expense of Borrower, the Amendment and any and all documents, agreements, statements, resolutions, searches, insurance policies, consents, certificates, legal opinions and information as Bank may require in connection with the execution and delivery of this Amendment or any documents in connection herewith, or to further evidence, effect, enforce or protect any of the terms hereof or the rights or remedies granted or intended to be granted to Bank herein or in any of the Loan Documents, or to enforce or to protect Bank’s interest in the Collateral. All such documents, agreements, statements, etc., shall be in form and content acceptable to Bank in its sole discretion. Borrower hereby authorizes Bank to file, at Borrower’s cost and expense, financing statements, amendments thereto and other items as Bank may require to evidence or perfect Bank’s continuing security interest and liens in and against the Collateral. Borrower agrees to join with Bank in notifying any third party with possession of any Collateral of Bank’s security interest therein and in obtaining an acknowledgment from the third party that it is holding the Collateral for the benefit of Bank. Borrower will cooperate with Bank in obtaining control with respect to Collateral consisting of deposit accounts, investment property, letter-of-credit rights and electronic chattel paper.

6. Further Agreements and Representations. Borrower does hereby:

(a) ratify, confirm and acknowledge that the statements contained in the foregoing Background are true and complete and that, as amended hereby, the Loan Agreement and the other Loan Documents are in full force and effect and are valid, binding and enforceable against Borrower and its assets and properties, all in accordance with the terms thereof, as amended;

(b) covenant and agree to perform all of Borrower’s obligations under the Loan Agreement and the other Loan Documents, as amended;

- 2 -

(c) acknowledge and agree that as of the date hereof, Borrower has no defense, set-off, counterclaim or challenge against the payment of any of the Obligations or the enforcement of any of the terms of the Loan Agreement or of the other Loan Documents, as amended;

(d) acknowledge and agree that all representations and warranties of Borrower contained in the Loan Agreement and/or the other Loan Documents, as amended (including, without limitation as modified by the amendments set forth on Schedule A hereto), are true, accurate and correct on and as of the date hereof as if made on and as of the date hereof,

(e) represent and warrant that no Default or Event of Default exists;

(f) covenant and agree that Borrower’s failure to comply with any of the terms of this Amendment or any other instrument or agreement executed or delivered in connection herewith, shall constitute an Event of Default under the Loan Agreement and each of the other Loan Documents; and

(g) acknowledge and agree that nothing contained herein, and no actions taken pursuant to the terms hereof, are intended to constitute a novation of the Note, the Loan Agreement or of any of the other Loan Documents and does not constitute a release, termination or waiver of any existing Event of Default or of any of the liens, security interests, rights or remedies granted to the Bank in any of the Loan Documents, which liens, security interests, rights and remedies are hereby expressly ratified, confirmed, extended and continued as security for all of the Obligations.

Borrower acknowledges and agrees that Bank is relying on the foregoing agreements, confirmations, representations and warranties of Borrower and the other agreements, representations and warranties of Borrower contained herein in agreeing to the amendments contained in this Amendment.

7. Fees, Cost, Expenses and Expenditures. Borrower will pay all of Bank’s reasonable, out-of-pocket expenses in connection with the review, preparation, negotiation, documentation and closing of this Amendment and the consummation of the transactions contemplated hereunder, including without limitation, fees, disbursements, expenses and disbursements of counsel retained by Bank and all fees related to filings, recording of documents, searches, environmental assessments and appraisal reports, whether or not the transactions contemplated hereunder are consummated.

8. No Waiver. Nothing contained herein constitutes an agreement or obligation by Bank to grant any further amendments to the Loan Agreement or any of the other Loan Documents. Nothing contained herein constitutes a waiver or release by Bank of any Event of Default or of any rights or remedies available to Bank under the Loan Documents or at law or in equity.

9. Inconsistencies. To the extent of any inconsistencies between the terms and conditions of this Amendment and the terms and conditions of the Loan Agreement or the other Loan Documents, the terms and conditions of this Amendment shall prevail. All terms and conditions of the Loan Agreement and other Loan Documents not inconsistent herewith shall remain in full force and effect and are hereby ratified and confirmed by Borrower.

- 3 -

10. Binding Effect. This Amendment, upon due execution hereof, shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

11. Governing Law. This Amendment shall be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to conflict of law principles.

12. Severability. The provisions of this Amendment and all other Loan Documents are deemed to be severable, and the invalidity or unenforceability of any provision shall not affect or impair the remaining provisions which shall continue in full force and effect.

13. Modifications. No modification of this Amendment or any of the Loan Documents shall be binding or enforceable unless in writing and signed by or on behalf of the party against whom enforcement is sought.

14. Headings. The headings of the Articles, Sections, paragraphs and clauses of this Amendment are inserted for convenience only and shall not be deemed to constitute a part of this Amendment.

15. Counterparts. This Amendment may be executed in multiple counterparts, each of which shall constitute an original and all of which together shall constitute the same agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

- 4 -

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have caused this Amendment to be executed the day and year first above written.

IMPAX LABORATORIES, INC.
By:	Arthur A. Koch, Jr.
	Name/Title: Arthur A. Koch, Jr./
	Chief Financial Officer
WELLS FARGO BANK, NATIONAL ASSOCIATION, Successor By Merger To WACHOVIA BANK, NATIONAL ASSOCIATION
By:	Margaret A. Byrne
	Margaret A. Byrne/Vice President

- 5 -

EX-10.14

EXHIBIT 10.14

XXXXXX INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

EXECUTION COPY

LICENSE, DEVELOPMENT AND COMMERCIALIZATION
AGREEMENT

This LICENSE, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (the “Agreement”) is entered into as of December 15, 2010 (the “Effective Date”) by and between IMPAX LABORATORIES, INC., a Delaware corporation with its principal place of business at 30831 Huntwood Avenue, Hayward, CA 94544 (“Impax”), and GLAXO GROUP LIMITED, a company organized and existing under the laws of England and having an office and place of business at Glaxo Wellcome House, Berkeley Avenue, Greenford, Middlesex, UB6 ONN, United Kingdom (“GSK”). Impax and GSK are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

RECITALS

Whereas, Impax is developing a controlled release carbidopa-levodopa capsule product for the treatment of Parkinson’s disease;

Whereas, GSK possesses substantial resources and expertise in the development, marketing, and commercialization of pharmaceutical products;

Whereas, GSK desires to collaborate with Impax on the further development of such product, and to obtain commercialization rights to such product in Europe and certain other countries, and Impax is willing to so collaborate and to grant such rights on the terms and conditions hereof; and

Whereas, GSK and Impax are also entering into a separate supply agreement of even date hereof (the “Supply Agreement”) pursuant to which GSK will be purchasing its requirements of such product (in finished bulk form) from Impax and Impax will be supplying such product to GSK on the terms and conditions set forth therein.

Now, Therefore, in consideration of the foregoing premises and the mutual promises, covenants and conditions contained in this Agreement, the Parties agree as follows:

ARTICLE 1

DEFINITIONS

1.1 “Acquiror” has the meaning set forth in Section 14.5.

1.2 “Additional GSK Modifications” has the meaning set forth in Section 4.2(a)(ii).

1.3 “Affiliate” means, with respect to a particular person, any corporation or other person which is directly or indirectly controlling, controlled by or under common control of such particular person for so long as such control exists. For purposes of this definition, the word “control” (including, with correlative meaning, the terms “controlled by” or “under common control of”) mean the direct or indirect ownership of at least fifty percent (50%) of the outstanding shares or other voting rights of the subject entity and/or having the power to direct the affairs of the entity.

1.4 “Alliance Manager” has the meaning set forth in Section 3.1.

1.5 “Bankruptcy” has the meaning set forth in Section 12.6(a).

1.6 “Bankruptcy Code” has the meaning set forth in Section 12.6(b).

1.7 “Bioequivalence Study” means a study to be carried out by Impax, that is designed to show that the Original Product Manufactured in Impax’s Manufacturing facility in Taiwan is bioequivalent to the Original Product Manufactured in Impax’s Manufacturing facility in Hayward, California. Without limiting the foregoing, the term “Bioequivalence Study” will include any number of such studies to be carried out by Impax which are necessary to establish bioequivalence.

1.8 “Business Day” means a day on which banking institutions in New York, New York, are open for business, but in any event excluding the nine (9) consecutive calendar days beginning on December 24th and continuing through January 1st of each calendar year during the Term.

1.9 “Change of Control” of Impax means: (a) a sale of all or substantially all of the assets of Impax in one or a series of integrated transactions not in the ordinary course of business to a Third Party Competitor; (b) the acquisition of control (as defined in Section 1.3) of Impax by a Third Party Competitor by means of any transaction or series of related transactions to which Impax is a party (including, any stock acquisition, merger or consolidation); or (c) the occurrence of an event defined under Section 2.6(a)(ii). For the purpose of this definition, Third Party Competitor means a Third Party that, as of the date of Change of Control, is XXXXXX.

1.10 “Claims” has the meaning set forth in Section 10.1.

1.11 “CMC Information” means Information related to the chemistry, manufacturing and controls of a Licensed Product, as specified by the FDA, EMA and other applicable Regulatory Authorities.

1.12 “Commercialization,” with a correlative meaning for “Commercialize” and “Commercializing,” means all activities undertaken before and after obtaining Regulatory Approvals relating specifically to the pre-launch, launch, promotion, detailing, medical education and medical liaison activities, marketing, pricing, reimbursement, sale, and distribution of a Licensed Product, including strategic marketing, sales force detailing, advertising, medical education and liaison, and market and Licensed Product support, and all customer support, Licensed Product distribution, invoicing and sales activities. For clarity, Commercialization shall exclude any activities relating to the Manufacture of a Licensed Product; provided, however, Commercialization shall include packaging and labeling of finished Licensed Product for sale to distributors and end customers (including any necessary release testing of product or any component or ingredient thereof, and other quality assurance activities) using bulk finished Licensed Product Manufactured and supplied by Impax or Third Parties licensed or contracted by Impax.

2.

1.13 “Commercialization Plan” has the meaning set forth in Section 6.2(a).

1.14 “Commercially Reasonable Efforts” means, with respect to a Party’s obligations under this Agreement, the carrying out of such obligations with a level of efforts and resources consistent with the commercially reasonable practices of Impax or GSK, as applicable and not taking into account any assignment of this Agreement pursuant to Section 14.5, for the research, development or commercialization of a similarly situated pharmaceutical product as a Licensed Product at a similar stage of development or commercialization, taking into account efficacy, safety, patent and regulatory exclusivity, anticipated or approved labeling, present and future market potential, competitive market conditions, the profitability of the product in light of pricing and reimbursement issues (but not considering any payments due to Impax pursuant to this Agreement or the Supply Agreement), and all other relevant factors. Commercially Reasonable Efforts shall be determined on a market-by-market and indication-by-indication basis, and it is anticipated that the level of efforts required may be different for different markets and indications and may change over time, reflecting changes in the status of a Licensed Product and markets involved. Commercially Reasonable Efforts require that the Party: (a) promptly assign responsibility for such obligations or tasks to specific employee(s) who are held accountable for progress and monitor such progress on an on-going basis, (b) set and consistently seek to achieve specific and meaningful objectives for carrying out such obligations, and (c) consistently make and implement decisions and allocate resources designed to advance progress with respect to such objectives.

1.15 “Competing Product” has the meaning set forth in Section 2.6(a).

1.16 “Confidential Information” of a Party means any and all Information of such Party that is disclosed to the other Party under this Agreement or the Supply Agreement, whether in oral, written, graphic, or electronic form. All Information disclosed by either Party pursuant to the Mutual Confidential Disclosure Agreement between the Parties dated September 21, 2009 (the “Confidentiality Agreement”) shall be deemed to be such Party’s Confidential Information disclosed hereunder.

1.17 “Control” means, with respect to any material, Information, or intellectual property right, that a Party (a) owns or (b) has a license (other than a license granted to such Party under this Agreement) to such material, Information, or intellectual property right and, in each case, has the ability to grant to the other Party access, a license, or a sublicense (as applicable) to the foregoing on the terms and conditions set forth in this Agreement without violating the terms of any then-existing agreement with any Third Party.

1.18 “Courts” has the meaning set forth in Section 13.2.

3.

1.19 “CPI-U” means the Consumer Price Index for all Urban Consumers, San Francisco-Oakland-San Jose, CA, (All Items 1982-84=100) issued by the United States Department of Labor, Bureau of Labor Statistics, or any successor agency of the United States that issues such indexes or any successor index.

1.20 “Develop” or “Development” means (a) all activities relating to research, non-clinical, preclinical and clinical trials, toxicology testing, statistical analysis, publication and presentation of research and study results and reporting, preparation and submission of applications (including any CMC Information) for obtaining and maintaining Regulatory Approval of the Original Product, and (b) if GSK exercises an Option, all activities (both prior to and after GSK’s exercise of an Option) relating to research, non-clinical, preclinical and clinical trials, toxicology testing, statistical analysis, publication and presentation of research and study results and reporting, preparation and submission of applications (including any CMC-related information) for obtaining and maintaining Regulatory Approval of the particular Improved Product in question; provided, however, Develop and Development shall not include any activities that involve the Commercialization of a Licensed Product.

1.21 “Development Costs” means the costs incurred by Impax or GSK, as calculated in accordance with such Party’s accounting principles consistently applied, that are specifically identifiable (or reasonably and consistently allocable) to the Development of an Improved Product or the Original Product. The Development Costs shall include amounts, without mark-up, that Impax or GSK pays to Third Parties involved in such Development and all internal costs incurred by Impax or GSK in connection with such Development, which internal costs shall be calculated at the FTE Rate for such Party. For clarity, Development Costs shall include the cost of Manufacturing the Original Product or Improved Product, as applicable, for use in Development.

1.22 “Development Plan” has the meaning set forth in Section 4.3(a).

1.23 “Dispute” has the meaning set forth in Section 13.1.

1.24 “Dollar” means a U.S. dollar, and “$” shall be interpreted accordingly.

1.25 “EMA” means the European Medicines Agency or any successor entity.

1.26 “EU” or “European Union” means the European Union member states as then constituted. As of the Effective Date, the European Union member states are Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and United Kingdom.

1.27 “Executive Officers” has the meaning set forth in Section 13.1.

1.28 “Expert” has the meaning set forth in Section 3.2(e)(ii).

1.29 “FD&C Act” means the U.S. Federal Food, Drug and Cosmetic Act, as amended.

1.30 “FDA” means the U.S. Food and Drug Administration or any successor entity.

4.

1.31 “Field” means any and all human diagnostic, therapeutic and prophylactic uses of the Licensed Products in any and all indications, including Parkinson’s disease.

1.32 “First Commercial Sale” means, with respect to a particular Licensed Product, the first sale to a Third Party of such Licensed Product in a given regulatory jurisdiction after Regulatory Approval has been obtained in such jurisdiction.

1.33 “FTE” means the equivalent of a full-time individual’s work, at two thousand and eighty (2080) hours per year, for a twelve (12)-month period, performing activities pursuant to this Agreement or the Supply Agreement. For clarity, the Parties intend the FTE to be a unit of measurement used to calculate the amount of time dedicated to the performance of this Agreement on behalf of Impax or GSK. One FTE may constitute work performed by an individual whose time is dedicated solely to this Agreement or may be comprised of the efforts of several individuals, each of whom dedicates only part of his or her time to work under this Agreement.

1.34 “FTE Rate” means the cost of an FTE of Impax or GSK performing Development upon the Original Product or an Improved Product, which rates, for Impax and GSK, are initially set forth on Schedule 1.34. Each such rate shall be adjusted on January 1st of each calendar year, commencing on January 1, 2012, by agreement of the Parties and if no such agreement can be reached, by a percentage equal to the percentage by which the latest version of the CPI-U published as of such date differs from the latest version of the CPI-U published as of the Effective Date.

1.35 “GAAP” has the meaning set forth in Section 7.8.

1.36 “Generic Product” means, with respect to a Licensed Product in a particular regulatory jurisdiction, any pharmaceutical product that (i) contains the same qualitative and quantitative composition of active pharmaceutical ingredients, or salts or esters thereof, as such Licensed Product in the same pharmaceutical form as such Licensed Product; (ii) has obtained regulatory approval in such jurisdiction (for an indication for which such Licensed Product obtained Regulatory Approval from the applicable Regulatory Authority in such jurisdiction) on an expedited or abbreviated basis in a manner that relied on or incorporated data submitted by GSK, its Affiliates or sublicensees and, in the case of a product containing a salt or ester of an active pharmaceutical ingredient contained in the Licensed Product, such approval was obtained without reliance on or submission of additional safety or efficacy data; (iii) is bioequivalent to the Licensed Product as determined by the applicable Regulatory Authority in such jurisdiction; and (iv) is sold in such jurisdiction by a Third Party that is not a sublicensee of GSK or its Affiliates and did not purchase such product in a chain of distribution that included any of GSK or its Affiliates or sublicensees, excluding all pharmaceutical products marketed as of the Effective Date containing levodopa and carbidopa. Without limiting the foregoing, or being limited thereby, with respect to a Licensed Product in the EU Generic Product shall include any pharmaceutical product that has been authorized with respect to such Licensed Product under the provisions of Articles 10.1, 10.2, 10.3 or 10a of EU Pharma Directive 2001/83.

5.

1.37 “GCP” or “Good Clinical Practices” means the then-current standards, practices and procedures promulgated or endorsed by the FDA as set forth in the guidelines entitled “Guidance for Industry E6 Good Clinical Practice: Consolidated Guidance,” including related regulatory requirements imposed by the FDA and comparable regulatory standards, practices and procedures promulgated by the EMA or other Regulatory Authority applicable to the Licensed Territory, as they may be updated from time to time, including applicable quality guidelines promulgated under the ICH.

1.38 “GLP” or “Good Laboratory Practices” means the then-current good laboratory practice standards promulgated or endorsed by the FDA as defined in 21 C.F.R. Part 58, and comparable regulatory standards promulgated by the EMA or other Regulatory Authority applicable to the Licensed Territory, as they may be updated from time to time, including applicable quality guidelines promulgated under the ICH.

1.39 “Governmental Authority” means any multi-national, federal, state, local, municipal, provincial or other governmental authority of any nature (including any governmental division, prefecture, subdivision, department, agency, bureau, branch, office, commission, council, court or other tribunal).

1.40 “GSK Indemnitees” has the meaning set forth in Section 10.1.

1.41 “GSK Know-How” means all Information that is discovered, developed, invented or created by or on behalf of GSK or its Affiliates through activities undertaken as contemplated by this Agreement, or that has been used in the Development, use, sale, offer for sale, having sold, import or any other Commercialization of any Licensed Product in the Licensed Territory. For clarity, GSK Know-How excludes Information contained within the GSK Patents, and the use of “Affiliate” in this definition shall exclude any Third Party that becomes an Affiliate after the Effective Date due to an acquisition of, by or merger with GSK, subject to the terms of Section 14.5, unless such Affiliate performs any activities under this Agreement or Information controlled by such Affiliate is used in the Development, use, sale, offer for sale, having sold, import or any other Commercialization of any Licensed Product in the Licensed Territory.

1.42 “GSK Modifications” has the meaning set forth in Section 4.2(a)(i).

1.43 “GSK Patent” means any Patent (other than a Joint Patent) that (a) claims an invention that is discovered, developed, invented or created by or on behalf of GSK or its Affiliates through activities undertaken as contemplated by this Agreement, and (b) covers the Development, use, sale, offer for sale, having sold, import or any other Commercialization of any Licensed Product. For clarity, the use of “Affiliate” in this definition shall exclude any Third Party that becomes an Affiliate after the Effective Date due to an acquisition of, by or merger with GSK, subject to the terms of Section 14.5, unless such Affiliate performs any activities under this Agreement.

1.44 “GSK Prosecuted Patents” has the meaning set forth in Section 8.3(b)(i).

1.45 “GSK Technology” means the GSK Know-How, GSK Patents and GSK’s interest in Joint Patents.

6.

1.46 “GSK Withholding Tax Action” has the meaning set forth in Section 7.9(d).

1.47 “ICH” means International Conference on Harmonization.

1.48 “IFRS” has the meaning set forth in Section 7.8.

1.49 “Impax Indemnitees” has the meaning set forth in Section 10.2.

1.50 “Impax Know-How” means all Information that is Controlled by Impax or its Affiliates as of the Effective Date or during the Term having application in the Development, use, sale, offer for sale, having sold, import or any other Commercialization of a Licensed Product, including packaging and labeling of finished Licensed Product for sale to distributors and end customers (including any necessary release testing of product or any component or ingredient thereof, and other quality assurance activities) using bulk finished Licensed Product Manufactured and supplied by Impax or Third Parties licensed or contracted by Impax. For clarity, Impax Know-How excludes Information contained within the Impax Patents, and the use of “Affiliate” in this definition shall exclude any Third Party that becomes an Affiliate after the Effective Date due to an acquisition of, by or merger with Impax, subject to the terms of Section 14.5.

1.51 “Impax Patents” means any Patent (other than a Joint Patent) that (a) is Controlled by Impax or its Affiliates as of the Effective Date or at any time during the Term, and (b) covers or claims the composition of matter, Development, process or method for making Licensed Product, use, sale, offer for sale, having sold, import, or any other Commercialization of a Licensed Product, including, packaging and labeling of finished Licensed Product for sale to distributors and end customers (including any necessary release testing of product or any component or ingredient thereof, and other quality assurance activities) using bulk finished Licensed Product Manufactured and supplied by Impax or Third Parties licensed or contracted by Impax, but is not directed solely to the Manufacture of a Licensed Product. Impax Patents include, as of the Effective Date, such Patents listed in the attached Schedule 1.51, which schedule may be updated by the consensus of JPC from time to time during the Term. For clarity, the use of “Affiliate” in this definition shall exclude any Third Party that becomes an Affiliate after the Effective Date due to an acquisition of, by or merger with Impax, subject to the terms of Section 14.5.

1.52 “Impax Prosecuted Patents” has the meaning set forth in Section 8.3(a).

1.53 “Impax Technology” means the Impax Know-How, Impax Patents and Impax’s interest in Joint Patents.

1.54 “Improved Product” means a XXXXXX. In the event that there is more than one Improved Product, XXXXXX.

1.55 “Indemnified Party” has the meaning set forth in Section 10.3.

1.56 “Indemnifying Party” has the meaning set forth in Section 10.3.

1.57 “Indication” means any human disease or condition which can be treated, prevented or cured or the progression of which can be delayed.

7.

1.58 “Information” means any data, results, technology, business or financial information or information of any type whatsoever, in any tangible or intangible form, including know-how, trade secrets, practices, techniques, methods, processes, inventions, developments, specifications, formulations, formulae, materials or compositions of matter of any type or kind (patentable or otherwise), software, algorithms, marketing reports, expertise, technology, test data (including pharmacological, biological, chemical, biochemical, clinical test data and data resulting from non-clinical studies), CMC Information, stability data and other study data and procedures.

1.59 “Infringement” has the meaning set forth in Section 8.4(a).

1.60 “INN” has the meaning set forth in Section 8.10.

1.61 “Joint Inventions” has the meaning set forth in Section 8.1.

1.62 “Joint Patents” has the meaning set forth in Section 8.1.

1.63 “Joint Patent Committee” or “JPC” means the committee formed by the Parties as described in Section 3.3.

1.64 “Joint Steering Committee” or “JSC” means the committee formed by the Parties as described in Section 3.2(a).

1.65 “Laws” means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of any federal, national, multinational, state, provincial, county, city or other political subdivision, domestic or foreign.

1.66 “XXXXXX” has the meaning set forth in XXXXXX.

1.67 “Licensed Product” means (i) the Original Product, or (ii) from and after GSK’s exercise of an Option and timely payment of the Option Exercise Fee, as provided in this Agreement, the particular Improved Product for which such Option was exercised.

1.68 “Licensed Territory” means all countries of the world other than U.S. and Taiwan.

1.69 “Major Market Country” means the following: XXXXXX.

1.70 “Manufacture” with a correlative meaning for “Manufacturing,” means all activities related to the manufacturing of the Original Product, and if GSK exercises an Option, all activities (both prior to and after GSK’s exercise of such Option) related to the manufacturing of the particular Improved Product in question, in each case in unlabeled bulk form for use in Development or Commercialization, including in-process and finished product testing, release of product or any component or ingredient thereof, quality assurance activities related to manufacturing and release of product, ongoing stability and conformance testing, and regulatory activities related to any of the foregoing, but excluding the limited use of CMC Information as provided for under Article 5, which use is included in Development, and excluding packaging and labeling of finished Licensed Product for sale to distributors and end customers (including any necessary release testing of product or any component or ingredient thereof, and other quality assurance activities) using bulk finished Licensed Product Manufactured and supplied by Impax, which use is included in Commercialization.

8.

1.71 “Marketing Authorization Application” or “MAA” means an application to the appropriate Regulatory Authority for approval to market a Licensed Product (but excluding Pricing Approval) in any particular jurisdiction and all amendments and supplements thereto.

1.72 “NDA” means a New Drug Application (as more fully defined in 21 C.F.R. 314.5 et seq. or its successor regulation) and all amendments and supplements thereto filed with the FDA.

1.73 “Net Sales” means the gross amounts invoiced by GSK, its Affiliates and their respective sublicensees for sales of Licensed Product to unaffiliated Third Parties, less the following deductions to the extent reasonable and customary provided to unaffiliated entities and actually allowed and taken with respect to such sales:

(a) reasonable cash, trade or quantity discounts and charge-back payments, and rebates actually granted to trade customers, managed health care organizations, pharmaceutical benefit managers, group purchasing organizations and national, state, or local government; provided, however, that in each case such amounts shall be applied in a normal and customary manner with respect to other similarly situated products of GSK and not applied disproportionately to a Licensed Product;

(b) credits, rebates or allowances actually allowed upon prompt payment or on account of claims, damaged goods, rejections or returns of such Licensed Product, including in connection with recalls;

(c) freight, postage, shipping, transportation and insurance charges, in each case actually allowed or paid for delivery of Licensed Product, to the extent included in such invoice;

(d) taxes (other than income taxes), duties, tariffs or other governmental charges levied on the sale of such Licensed Product, including VAT, excise taxes and sales taxes, to the extent included in such invoice; and

(e) the lesser of: (i) two percent (2.0%) of the aggregate gross amount invoiced on sales of a Licensed Product in the relevant country or (ii) the actual amount of any write-offs for bad debts relating to such sales during the period in which there is an obligation to pay a royalty under this Agreement.

Notwithstanding the foregoing, amounts received or invoiced by GSK, its Affiliates, or their sublicensees for the sale of Licensed Product among GSK, its Affiliates or their respective sublicensees for resale shall not be included in the computation of Net Sales hereunder. For purposes of determining Net Sales, a Licensed Product shall be deemed to be sold when invoiced. Net Sales shall be accounted for in accordance with standard GSK practices for operation by GSK, its Affiliates or sublicensees, as practiced in the relevant country in the Licensed Territory, but in any event in accordance with International Financial Reporting Standards (“IFRS”), consistently applied in such country in the Licensed Territory. For clarity, a particular item may only be deducted once in the calculation of Net Sales.

9.

With respect to any transfer of any Licensed Product in a given country for any substantive consideration other than monetary consideration on arm’s length terms, for the purposes of calculating the Net Sales under this Agreement, such Licensed Product shall be deemed to be sold exclusively for money at the average Net Sales price charged to Third Parties for cash sales in such country during the applicable reporting period (or if there were only de minimis cash sales in such country, at the fair market value as determined by comparable markets).

GSK, its Affiliates, and their respective sublicensees shall sell a Licensed Product as a stand alone product and will not sell a Licensed Product as a part of a bundle with other products or offer packaged arrangements to customers that include a Licensed Product, except with Impax’s prior written consent.

1.74 “Neuroscience Business” means GSK’s then existing assets or business relating to products for the treatment of neurological diseases.

1.75 “Option” has the meaning set forth in Section 2.4(a).

1.76 “Option Exercise Fee” has the meaning set forth in Section 2.4(c).

1.77 “Original Product” means Impax’s oral, controlled release formulated pharmaceutical product containing levodopa and carbidopa (LD-CD) at a ratio of 4:1 and additional excipients including an organic acid, which product is referred to as IPX 066 and is generally described in IND # 102,887, as such IND may be amended or updated from time to time.

1.78 “Other Shared Development Activities” has the meaning set forth in Section 4.2(a)(iii).

1.79 “Party Sublicense Agreement” has the meaning set forth in Section 2.3(b).

1.80 “Patents” means (a) provisional patent applications, pending patent applications, issued patents, utility models and designs; (b) reissues, substitutions, confirmations, registrations, validations, re-examinations, additions, continuations, continued prosecution applications, continuations-in-part, divisions of or applications claiming priority to any of the foregoing; and (c) extension, renew or restoration of any of the foregoing by existing or future extension, renew or restoration mechanisms, including supplementary protection certificate, pediatric extensions or the equivalent thereof.

1.81 “Pharmacovigilance Agreement” has the meaning set forth in Section 5.7(a).

1.82 “XXXXXX” means a XXXXXX.

1.83 “Phase III Clinical Trial” means a clinical trial of a Licensed Product on human patients, which trial is designed to (a) establish that a drug is safe and efficacious for its intended use; and (b) support approval of an application to a Regulatory Authority for the commercial marketing of such drug.

10.

1.84 “Pivotal Phase III Trials” means the B08-05, B09-02 and B09-06 Phase III Clinical Trials for the Original Product, as set forth in Exhibit A.

1.85 “Pricing Approval” means such governmental approval, agreement, determination or decision establishing prices for a Licensed Product that can be charged and/or reimbursed in regulatory jurisdictions where the applicable Governmental Authorities approve or determine the price and/or reimbursement of pharmaceutical products and where such approval, agreement, determination or decision establishes prices for a Licensed Product that are acceptable to GSK in its sole discretion, provided that GSK shall promptly notify Impax of any governmental approval, agreement, determination or decision establishing prices for a Licensed Product (including any final decision by a Governmental Authority which is the result of an appeal (whether formal or informal) by GSK of a previous governmental approval, agreement, determination or decision establishing prices for a Licensed Product) (each, a “Pricing Decision”) and shall notify Impax within thirty (30) Business Days of the receipt of such Pricing Decision whether GSK intends to appeal such Pricing Decision (where appeal is permitted in a particular market), accept such Pricing Decision, or reject (but not appeal or further appeal (where appeal is permitted in a particular market)) a Pricing Decision. A Pricing Decision which GSK has notified Impax that it does not intend to appeal (i.e. whether GSK has accepted the Pricing Decision or rejected (without appealing) such Pricing Decision) shall thereafter be considered a Pricing Approval. For the avoidance of doubt, if GSK begins to commercially sell a Licensed Product under a Pricing Decision, then for purposes of this Agreement, such Pricing Decision shall thereafter be considered a Pricing Approval. The concept of “appeal” as used in relation to a Pricing Decision shall include both formal appeal processes as well as entering into discussions with applicable Governmental Authorities regarding the Pricing Decision and desired changes or adjustments to such Pricing Decision, in each case where such appeal is permitted in a particular market, and “appeal” is considered concluded upon the cessation of discussions between GSK and the applicable Governmental Authority, at which point the applicable Governmental Authority shall be deemed to have made its final Pricing Decision with no possibility for further appeal. Following GSK providing notice to Impax that GSK intends to appeal a Pricing Decision, GSK shall use Commercially Reasonable Efforts to diligently prosecute such appeal and shall keep the JSC regularly updated regarding the progress of such appeal.

1.86 “Product Marks” has the meaning set forth in Section 8.9.

1.87 “Prosecution and Maintenance” with a correlative meaning for “Prosecute and Maintain” means, with respect to a Patent, the preparing, filing, maintenance and prosecution of such Patent, as well as the conduct of interferences, Third Party oppositions, re-examination, re-issues and other similar proceedings.

1.88 “Regulatory Approval” means all approvals, including Pricing Approvals, necessary for the commercial sale of a Licensed Product in the Field in a given country or regulatory jurisdiction.

11.

1.89 “Regulatory Approval Application” means an application for all approvals necessary for the commercial sale of a pharmaceutical product (excluding applications for pricing approval) in a given country or regulatory jurisdiction following the completion of the applicable phase III clinical studies.

1.90 “Regulatory Authority” means, in a particular country or jurisdiction, any applicable Governmental Authority involved in granting Regulatory Approval in such country or jurisdiction.

1.91 “Regulatory Exclusivity” means any exclusive marketing rights or data exclusivity rights conferred by any Governmental Authority with respect to a Licensed Product in a country or jurisdiction in the Licensed Territory, other than a Patent right, including orphan drug exclusivity, pediatric exclusivity, rights conferred in the EU under Directive 2001/83/EC, or rights similar thereto in other countries or regulatory jurisdictions in the Licensed Territory.

1.92 “Regulatory Submissions” means regulatory applications, submissions, notifications, communications, correspondence, registrations, Regulatory Approvals and/or other filings made to, received from or otherwise conducted with a Regulatory Authority in order to Develop, Manufacture, market, sell or otherwise Commercialize a Licensed Product in a particular country or jurisdiction.

1.93 “Reimbursement Study” means a clinical trial of the Original Product for reimbursement purposes in the Licensed Territory, as described in the initial Development Plan.

1.94 “Remedial Action” has the meaning set forth in Section 5.8.

1.95 “Royalty Term” has the meaning set forth in Section 7.4(b).

1.96 “Sale of the Neuroscience Business” means any sale, divestment or other transfer of all or substantially all of the Neuroscience Business, whether by asset sale, de-merger, spin-out, public offering, reorganization or otherwise, and whether such sale, divestment or other transfer is to (1) a Third Party or (2) an Affiliate.

1.97 “SEC” has the meaning set forth in Section 11.4(d).

1.98 “Selected Claim” has the meaning set forth in Section 3.2(a)(vi).

1.99 “Selected Major Market” means the following: XXXXXX.

1.100 “Senior Patent Counsel” has the meaning set forth in Section 3.3.

1.101 “Sensitive Information” has the meaning set forth in Section 14.6(a).

1.102 “Serious Adverse Event” has the meaning set forth in Section 5.7(b).

1.103 “Sole Inventions” has the meaning set forth in Section 8.1.

1.104 “Subcommittee” has the meaning set forth in Section 3.2(b).

12.

1.105 “Successful Completion” or “Successfully Completing” means for a Bioequivalence Study, the occurrence of a positive outcome of a Bioequivalence Study demonstrating that the Original Product Manufactured in Impax’s Manufacturing facility in Taiwan is bioequivalent to the Original Product Manufactured in Impax’s Manufacturing facility in Hayward, California.

1.106 “Supply Agreement” has the meaning set forth in the Recitals.

1.107 “Term” has the meaning set forth in Section 12.1.

1.108 “Third Party” means any entity other than Impax or GSK or an Affiliate of either of them.

1.109 “U.S.” means the United States of America, including all possession and territories thereof.

1.110 “Valid Claim” means a claim of (a) an issued and unexpired patent (as may be extended through supplementary protection certificate or patent term extension or the like) included within the Impax Patents or Joint Patents, or (b) a pending patent application included within the GSK Prosecuted Patents, to the extent such claim in the foregoing (a) or (b) has not been revoked, finally rejected with no possibility of appeal or continued prosecution, held invalid or unenforceable by a patent office, court or other governmental agency of competent jurisdiction in a final and non-appealable judgment (or judgment from which no appeal was taken within the allowable time period) and which claim has not been disclaimed, denied or admitted to be invalid or unenforceable through reissue, re-examination or disclaimer or otherwise.

1.111 “Wind-down Period” has the meaning set forth in Section 12.7(d)(iii).

ARTICLE 2

LICENSES AND OPTION

2.1 Licenses to GSK under Impax Technology.

(a) Development License to GSK. Subject to the terms and conditions of this Agreement, Impax hereby grants GSK an exclusive (even as to Impax except as provided in Section 2.1(d) below), milestone-bearing license, with the right to sublicense solely as provided in Section 2.1(e) in a manner consistent with Section 2.3(b), under the Impax Technology, to Develop Licensed Products in the Field, solely for the purpose of obtaining and maintaining Regulatory Approval in the Licensed Territory. For clarity, the foregoing license does not include a right for GSK to Manufacture or have Manufactured Licensed Products for use in Development (except to label and package, for Development purposes, Licensed Products supplied to GSK by Impax pursuant to the Supply Agreement); GSK’s only rights under the Impax Technology to Manufacture or have Manufactured Licensed Products are as expressly set forth in Section 2.10 and Section 12.3 of the Supply Agreement or in Section 12.1.

13.

(b) Commercial License To GSK. Subject to the terms and conditions of this Agreement, Impax hereby grants GSK an exclusive (even as to Impax except as provided in Section 2.1(d) below), royalty-bearing license, with the right to sublicense solely as provided in Section 2.1(e) in a manner consistent with Section 2.3(b), under the Impax Technology, to use, sell, offer for sale, have sold, import and otherwise Commercialize Licensed Products in the Field in the Licensed Territory. For clarity, the foregoing license does not include a right for GSK to Manufacture or have Manufactured Licensed Products for use in Commercialization (except to label and package, for Commercialization purposes, Licensed Products supplied to GSK by Impax pursuant to the Supply Agreement); GSK’s only rights under the Impax Technology to Manufacture or have Manufactured Licensed Products are as expressly set forth in Section 12.3 of the Supply Agreement or in Section 12.1.

(c) Clarification Regarding Manufacturing Data. For further clarity, the foregoing licenses in Section 2.1(a) and 2.1(b) shall include the right for GSK to incorporate in its Regulatory Submission in the Licensed Territory any Manufacturing data supplied by Impax pursuant to Section 5.1(c) for the purpose of seeking and maintaining Regulatory Approval in the Licensed Territory.

(d) Impax Retained Rights. Notwithstanding the rights granted to GSK in Sections 2.1(a) and 2.1(b) and without limiting the generality of Section 2.6, Impax retains the following: (i) the right to practice the Impax Technology in the Licensed Territory to fulfill its obligations under this Agreement; (ii) the right to Develop a Licensed Product in the Field for the purpose of obtaining or maintaining Regulatory Approval outside the Licensed Territory; (iii) the right to Manufacture or have Manufactured a Licensed Product anywhere in the world and to sell such Licensed Product for use outside the Licensed Territory or to GSK pursuant to the Supply Agreement; and (iv) the right to practice and license the Impax Technology outside the scope of the licenses granted to GSK in Sections 2.1(a) and 2.1(b); in each case of the foregoing (i) — (iv) (inclusive), subject to and without prejudice to Section 2.6.

(e) Sublicense Rights of GSK. GSK shall have the right to grant a sublicense of the licenses granted in Sections 2.1(a) and 2.1(b) only to (A) its Affiliate; provided, however, that such sublicense shall automatically terminate if such person, corporation, partnership or entity ceases to be an Affiliate of GSK, and (B) a Third Party subcontractor that performs part of GSK’s obligations under this Agreement; provided, however, that GSK shall at all times sell, offer for sale, distribute, import, export and otherwise Commercialize a Licensed Product in GSK’s or its Affiliate’s name. GSK shall be solely responsible for all of its sublicensees’ activities and any and all failures by its sublicensees to comply with the terms of this Agreement.

(f) Covenant Not to Sue. Impax or its Affiliates will not assert any Patent covering Manufacturing Inventions (as defined in the Supply Agreement), or any other Patent directed to the Manufacture of the Licensed Product and Controlled by Impax or its Affiliates, against GSK, its Affiliates or permitted sublicensees with respect to such parties’ use, sale, offer to sell, import or other Commercialization of Licensed Product in the Licensed Territory during the Term as permitted by this Agreement, provided that such Licensed Product has been (i) Manufactured by Impax, its Affiliates, a Backup Manufacturer (as such term is defined in the Supply Agreement) or a Third Party on behalf of Impax and (ii) supplied to GSK, its Affiliates or permitted sublicensees under the Supply Agreement.

14.

2.2 License to Impax under GSK Technology. Subject to the terms and conditions of this Agreement, GSK hereby grants to Impax a non-exclusive, perpetual, fully paid, royalty-free license, with the right to sublicense in multiple tiers in a manner consistent with Section 2.3(b), under the GSK Technology, to (a) Develop the Licensed Products solely for the purpose of obtaining or maintaining Regulatory Approval outside the Licensed Territory and (b) use, sell, offer for sale, import and otherwise Commercialize Licensed Products outside the Licensed Territory.

2.3 Negative Covenant; General Sublicense Terms.

(a) GSK covenants that it will not, and will not permit any of its Affiliates or sublicensees to, use or practice any Impax Technology outside the scope of the licenses granted to it under Sections 2.1(a) and 2.1(b). Impax covenants that it will not, and will not permit any of its Affiliates or sublicensees to, use or practice any GSK Technology outside the scope of the license granted to it under Section 2.2.

(b) A Party shall, within thirty (30) days after granting any sublicense hereunder, notify the other Party of the grant of such sublicense and provide the other Party with a true and complete copy of the sublicense agreement (each, a “Party Sublicense Agreement”). Each Party Sublicense Agreement shall be consistent with the terms and conditions of this Agreement and shall include the following additional terms and conditions:

(i) the sublicensee shall be bound by non-use and non-disclosure obligations no less stringent than those set forth in this Agreement;

(ii) the sublicensee shall not have any right to grant sublicenses to the Impax Technology (if a sublicensee GSK) or the GSK Technology (if a sublicensee of Impax) nor to engage subcontractors to perform its obligations to the sublicensing Party;

(iii) if GSK is the sublicensing Party, GSK’s sublicensee shall not have any right to Prosecute or Maintain any Impax Patents;

(iv) the sublicensee shall be required to provide all Licensed Product-related Information to the sublicensing Party so that the sublicensing Party can comply with its obligations under this Agreement;

(v) if GSK is the sublicensing Party, GSK shall own and Control all Regulatory Submissions (including Regulatory Approvals) prepared or filed by GSK’s sublicensee;

(vi) the sublicensee shall provide copies of all Regulatory Submissions that it prepares or files to the sublicensing Party so that the sublicensing Party can comply with its obligations under this Agreement;

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(vii) the sublicensing Party shall own and Control all Information and Patents made by the sublicensee in the course of conducting its activities under the Party Sublicense Agreement; and

(viii) if GSK is the sublicensing Party and this Agreement terminates, Impax shall have the option, at its sole discretion, to (1) assume GSK’s rights and obligations under the Party Sublicense Agreement, or (2) terminate the Party Sublicense Agreement in its entirety without any penalty or other obligation to the sublicensee; and

(ix) if Impax is the sublicensing Party and GSK terminates this Agreement pursuant to Section 12.5 on account of Impax’s uncured material breach, GSK shall have the option, at its sole discretion, to (1) assume Impax’s rights and obligations under the Party Sublicense Agreement, or (2) terminate the Party Sublicense Agreement in its entirety without any penalty or other obligation to the sublicensee.

2.4 Option.

(a) Grant. Impax hereby grants GSK an option to obtain an exclusive, royalty-bearing license from Impax to develop and commercialize a particular Improved Product in the Field in the Licensed Territory, which option may be exercised as set forth in Section 2.4(b) and is subject to expiration as set forth in Section 2.4(b) (the “Option”).

(b) Exercise; Expiration. Impax shall keep GSK reasonably informed as to the timeline of its Development efforts relating to each Improved Product, including the expected date of completion of the XXXXXX for such Improved Product. Impax shall notify GSK promptly upon the completion of the XXXXXX for each Improved Product and shall provide GSK with a report setting forth the XXXXXX. GSK may exercise each Option by providing written notice to Impax within sixty (60) days after the receipt of such report. If the exercise notice is not received by Impax within such sixty (60)-day period, then the Option with respect to such Improved Product shall expire upon the end of such sixty (60)-day period and, notwithstanding Section 2.6, Impax shall have the right to continue the development and commercialization of such Improved Product, either on its own or in collaboration with a Third Party, with no further obligations to GSK.

(c) Option Exercise Fee. Within ten (10) days after GSK’s timely exercise of each Option, GSK shall pay to Impax a one-time payment of XXXXXX Dollars ($XXXXXX) (“Option Exercise Fee”). Such payment shall be non-refundable but shall be creditable, as set forth in Section 7.2(c), against GSK’s share of the Development Costs for the Improved Product for which such Option was exercised.

(d) After Payment of Option Exercise Fee. After GSK’s timely exercise of each Option and timely payment of the Option Exercise Fee, the Improved Product for which such Option was exercised shall automatically be deemed to be a “Licensed Product” and all terms of this Agreement that apply to Original Product shall apply to such Improved Product, including without limitation the licenses set forth in Sections 2.1(a) and 2.1(b), the diligence obligations set forth in Sections 4.5 and 6.4, and the payment obligations set forth in Sections 7.3 and 7.4. In addition, GSK shall reimburse Impax pursuant to Section 7.2(c) an amount equal to XXXXXX percent (XXXXXX%) of the Development Costs for such Improved Product that are incurred by Impax before and after the exercise of the applicable Option; provided, however, GSK shall credit the amount of the Option Exercise Fee paid to Impax with respect to such Improved Product against such expense reimbursement, as described in Section 7.2(c).

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2.5 No Implied Licenses. Except as explicitly set forth in this Agreement, neither Party shall be deemed by estoppel or implication to have granted the other Party any license or other right to any intellectual property of such Party.

2.6 Exclusivity.

(a) Subject to the remainder of this Section 2.6, during the Term, other than with respect to the Licensed Product, neither Party nor their respective Affiliates shall, either on its or their own, or in collaboration with a Third Party, file a Regulatory Approval Application for or sell in a Selected Major Market: (1) XXXXXX, or (2) XXXXXX (each pharmaceutical product described in (1) or (2), a “Competing Product”); provided, however:

(i) Impax shall have the right to Develop any Improved Product through the completion of a XXXXXX; provided, however, that Impax offers GSK an Option with respect thereto in accordance with Section 2.4, and if such Option expires unexercised, notwithstanding the foregoing in this Section 2.6, Impax shall have the right to continue the development and commercialization of such Improved Product anywhere in the world, either on its own or in collaboration with a Third Party, with no further obligations to GSK;

(ii) If Impax is acquired by a Third Party that has filed a Regulatory Approval Application in one or more Selected Major Markets for a Competing Product or is then selling a Competing Product in one or more Selected Major Markets, whether alone or in collaboration with another Third Party, then (A) such event shall be deemed to be a Change of Control of Impax and the provisions of Section 14.6 shall apply, and in addition (B) such Third Party acquiror may continue to seek regulatory approval and to commercialize such Competing Product in the Selected Major Markets, without any obligations to GSK, including any obligation pursuant to Section 2.4; and

(iii) XXXXXX.

(b) If during the Term a Party or its Affiliates obtains ownership of or license to a Competing Product in a Selected Major Market due to an acquisition of or by or a merger with a Third Party that wishes to sell or is selling in a Selected Major Market, then such Party shall promptly notify the other Party and, except for the situation described in Section 2.6(a)(ii) above, the following shall apply:

(i) At the request of the Party having the Competing Product, the Parties shall discuss the compatibility of the commercialization plans for the Competing Product with those for the Licensed Product. Following such discussions, the Parties shall use good faith efforts to agree upon a mutual written agreement (no later than ninety (90) days after the notice given in the foregoing in this Section 2.6(b)) regarding the sale of the Competing Product in relation to the Commercialization of the Licensed Products.

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(ii) If the Parties reach such mutual written agreement pursuant to Section 2.6(b)(i) above, then notwithstanding Section 2.6(a), the Party having the Competing Product may undertake sales of or continue to sell such Competing Product, as the case may be, in the manner that has been agreed to by the Parties.

(iii) If the Parties are not able to reach a mutual written agreement pursuant to Section 2.6(b)(i) above, then unless otherwise agreed in writing by the Parties, XXXXXX.

(iv) During the XXXXXX (XXXXXX) month period after a Party has obtained ownership of or license to a Competing Product in one or more Selected Major Markets due to an acquisition of or by or a merger with a Third Party, the detailing, promotion, marketing, and/or sale of such Competing Product in such Selected Major Markets shall not be in violation of this Section 2.6, provided, however, XXXXXX.

(c) If GSK or its Affiliates obtains ownership of, or license or other rights to commercialize, a Competing Product in any country in the Licensed Territory, GSK shall promptly notify Impax in writing. Such notice shall specify the identity of the Competing Product and the countries in which GSK or its Affiliates has obtained such ownership, license or other rights.

ARTICLE 3

GOVERNANCE

3.1 Alliance Managers. Within forty-five (45) days after the Effective Date, each Party shall appoint and notify the other Party of the identity of a representative having the appropriate qualifications, including a general understanding of pharmaceutical development and commercialization issues, to act as its alliance manager under this Agreement (the “Alliance Manager”). The Alliance Managers shall serve as the primary contact points between the Parties for the purpose of providing each Party with information on the progress of each Party’s Development and Commercialization of a Licensed Product. The Alliance Managers shall also be primarily responsible for facilitating the flow of information and otherwise promoting communication, coordination and collaboration between the Parties. Each Party may replace its Alliance Manager at any time upon written notice to the other Party. The Alliance Managers shall attend each meeting of the Joint Steering Committee as non-voting members.

3.2 Joint Steering Committee.

(a) Formation and Role. Within forty-five (45) days after the Effective Date, the Parties shall establish a joint steering committee (the “Joint Steering Committee” or “JSC”) for the overall coordination and oversight of the Parties’ activities under this Agreement. The role of the JSC shall be:

(i) to review, coordinate, discuss and approve the overall strategy for the Development and Commercialization of a Licensed Product in the Licensed Territory;

(ii) to review and discuss any amendments to the Development Plan before such amended plan is adopted;

(iii) to review and discuss the Commercialization Plan and any amendments thereto;

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(iv) to discuss and attempt to resolve any deadlock issues submitted to it by any Subcommittee;

(v) to review and discuss material issues relating to the Manufacture of the Licensed Product;

(vi) to discuss and attempt to resolve any claim by either Party that it believes in good faith that an activity undertaken or to be undertaken by or on behalf of the other Party with respect to a Licensed Product in the Licensed Territory (if such other Party is GSK) or outside the Licensed Territory (if such other Party is Impax) is likely to have a material adverse effect upon the procurement or maintenance of Regulatory Approval or Commercialization of a Licensed Product in the other territory (such claim, an “Selected Claim”), and

(vii) to perform such other functions as appropriate to further the purposes of this Agreement, as expressly set forth in this Agreement or as determined by the Parties in writing.

The JSC shall have only the powers expressly assigned to it in this Section 3.2 and elsewhere in this Agreement. JSC shall have no power to amend, modify, or waive compliance with this Agreement.

(b) Subcommittee(s). From time to time, the JSC may establish subcommittees to oversee particular projects or activities, as it deems necessary or advisable (each, a “Subcommittee”). Each Subcommittee shall consist of such number of members as the JSC determines is appropriate from time to time.

(c) Members. Each Party shall initially appoint three (3) representatives to the JSC, each of whom will be an officer or employee of such Party having sufficient seniority within the applicable Party to make decisions arising within the scope of the JSC’s responsibilities. The JSC may change its size from time to time by mutual consent of its members and each Party may replace its representatives at any time upon written notice to the other Party. The Alliance Managers shall each have the ability to convene a meeting of the JSC in coordination with the other Alliance Manager regarding the agenda and timing of the meeting. The Alliance Managers shall jointly preside at the meeting of the JSC to ensure the preparation of meeting minutes but shall not vote on any decisions of the JSC.

(d) Meetings. The JSC shall meet at least one (1) time per calendar quarter during the Term unless the Parties mutually agree in writing to a different frequency for such meetings. Either Party may also call a special meeting of the JSC (by videoconference or teleconference) by at least ten (10) Business Days prior written notice to the other Party in the event such Party reasonably believes that a significant matter must be addressed prior to the next regularly scheduled meeting, and such Party shall provide the JSC no later than ten (10) Business Days prior to the special meeting with materials reasonably adequate to enable an informed decision. The JSC may meet in person, by videoconference or by teleconference; provided, however, at least one (1) meeting per calendar year shall be in person unless the Parties mutually agree in writing to waive such requirement in lieu of a videoconference or teleconference. The Alliance Managers shall be jointly responsible for jointly preparing and circulating to the JSC, within ten (10) Business Days after such meeting, reasonably detailed written minutes of all JSC meetings that reflect, without limitation, all material decisions made at such meetings.

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(e) Decision Making. All decisions of the JSC shall be made by consensus, with each Party having collectively one (1) vote in all decisions. If after reasonable discussion and good faith consideration of both Party’s views on a particular matter before the JSC, the JSC is still unable after a period of ten (10) Business Days to reach a unanimous decision on such matter, then either Party may, by written notice to the other, have such matter referred to the Executive Officers of the Parties for resolution in accordance with Section 13.1. If the Executive Officers are able to resolve such matter within the thirty (30) day period set forth in Section 13.1, then such resolution shall be deemed the decision of the JSC. If the Executive Officers are not able to resolve such matter within such thirty (30) day period, then:

(i) Subject to the diligence obligations set forth in Sections 4.5 and 6.4, GSK’s JSC representative shall have final decision-making authority with respect to such unresolved matter if it is within the JSC’s authority, it is not a Selected Claim, and it pertains to: (A) XXXXXX; or (B) XXXXXX;

(ii) If such unresolved matter is a Selected Claim, then such matter shall be resolved by an independent Third Party expert experienced in the development and commercialization of pharmaceutical products (the “Expert”). Within ten (10) Business Days after such thirty (30)-day period, the JSC shall agree upon the Expert and, as promptly as possible thereafter, the Parties shall jointly retain the Expert. The Parties shall bear all costs of the Expert equally. XXXXXX. The determination of the Expert shall be binding on the Parties and the Parties shall act in accordance with the Expert’s decision;

(iii) If such unresolved matter is referred to the JSC pursuant to Section 3.3 concerning the patent prosecution or enforcement action by GSK in the Licensed Territory, then such matter shall be resolved by an independent Third Party patent counsel experienced in the prosecution and enforcement of patents for pharmaceutical products (the “Patent Expert”). Within ten (10) Business Days after the thirty (30)-day period referenced in Section 3.3, the JSC shall agree upon the Patent Expert and, as promptly as possible thereafter, the Parties shall jointly retain the Patent Expert. The Parties shall bear all costs of the Patent Expert equally. XXXXXX. The determination of the Patent Expert shall be binding on the Parties and the Parties shall act in accordance with the Patent Expert’s decision; or

(iv) For any unresolved matter not addressed in subsection (i), (ii) or (iii) above, then the status quo shall persist with respect to the unresolved matter unless either Party brings a litigation in accordance with Section 13.2.

For clarity, once a Party has brought a Selected Claim or a patent prosecution or enforcement action to the JSC, the other Party shall cease and shall not initiate any activity that is the basis for such Selected Claim or the patent prosecution or enforcement action in question until such time as the JSC or Executive Officers have resolved the matter, or the Expert or the Patent Expert (as applicable) has made a decision, in each case that allows such other Party to proceed.

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3.3 Joint Patent Committee. Within forty-five (45) days after the Effective Date, the Parties shall establish a committee (the “Joint Patent Committee” or “JPC”) to be responsible for the coordination of the Parties’ efforts in accordance with Article 8 of this Agreement, including, but not limited to, the review and filing of patent applications and assessments of inventorship. The JPC shall be comprised of an equal number of representatives from each of GSK and Impax and shall meet on such dates and at such places and times agreed to by the Parties. All decisions of the JPC on matters for which it has responsibility shall be made by consensus, with each Party having collectively one (1) vote in all decisions. In the event that the JPC is unable to reach a consensus decision within ten (10) Business Days after it has met and attempted to reach such decision, then either Party may, by written notice to the other, have such issue submitted to the chief patent counsel of GSK and of Impax (together, the “Senior Patent Counsel”), or such other person holding a similar position designated by GSK or Impax (who may be a Third Party) from time to time, for resolution. The Senior Patent Counsel shall meet promptly to discuss the matter submitted and to determine a resolution. XXXXXX. Each Party will bear all expenses it incurs in regard to participating in all meetings of the JPC, including all travel and living expenses.

ARTICLE 4

PRODUCT DEVELOPMENT

4.1 Overview. The Parties desire and intend to collaborate with respect to the Development of a Licensed Product, as and to the extent set forth in this Agreement. As described in more detail in this Article 4, Impax shall be responsible for conducting those Development activities anticipated to be necessary to generate sufficient Information for GSK to file MAA in the EU via the centralized procedure for Regulatory Approval for the Original Product (excluding Pricing Approval), including the three (3) Pivotal Phase III Trials, the Successful Completion of the Bioequivalence Study, and the appropriate process validation and stability study activities at the designated manufacturing sites (including bulk shipping studies), but excluding (except as otherwise expressly agreed in writing between the Parties) any Development activities that are not necessary for obtaining Regulatory Approval for the Original Product in the U.S., and GSK shall be responsible for conducting the Reimbursement Study and all other Development activities (except for those Development activities expressly agreed to be performed or managed by Impax as set forth in a Development Plan) that are necessary for obtaining Regulatory Approval for the Original Product (including Pricing Approval) in the Licensed Territory but are not necessary for obtaining Regulatory Approval for the Original Product in the U.S. If GSK exercises an Option, then, except as otherwise expressly agreed in writing between the Parties, Impax shall thereafter be responsible for conducting those Development activities that are necessary for obtaining Regulatory Approval for the particular Improved Product in question in the U.S., which Development activities may also be necessary for obtaining Regulatory Approval for such Improved Product in the Licensed Territory, and GSK shall be responsible for conducting those Development activities that are necessary for obtaining Regulatory Approval for such Improved Product (including Pricing Approval) in the Licensed Territory but are not necessary for obtaining Regulatory Approval for such Improved Product in the U.S.

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4.2 Development Responsibilities. Unless the Parties agree in writing upon an alternative allocation of responsibilities, the Parties shall have the following rights and obligations with respect to the Development of a Licensed Product:

(a) Impax Development Responsibilities.

(i) With respect to the Original Product, Impax shall be responsible for conducting the three (3) Pivotal Phase III Trials, Successfully Completing the Bioequivalence Study, and the appropriate process validation and stability study activities at the designated manufacturing sites (including bulk shipping studies). Without limiting the foregoing, Impax shall, at its sole cost and expense, undertake Development activities directed to Successfully Completing the Bioequivalence Study. Impax has already incorporated into the descriptions of the Pivotal Phase III Trials set forth in Exhibit A certain modifications requested by GSK prior to the Effective Date (such incorporated modifications, the “GSK Modifications”). As of the Effective Date, the three (3) Pivotal Phase III Trials, the Successful Completion of the Bioequivalence Study, and the appropriate process validation and stability study activities at the designated manufacturing sites (including bulk shipping studies) are the only Development activities that are expected to be necessary to generate sufficient Information to obtain Regulatory Approval under Article 8.3 of Directive 2001/83/EC (excluding Pricing Approval) for the Original Product in both the EU and in the U.S.

(ii) If it is subsequently determined that additional Development activities are needed to generate Information that is necessary to obtain Regulatory Approval under Article 8.3 of Directive 2001/83/EC (excluding Pricing Approval) for the Original Product in the EU and if such additional Development activities are also necessary to obtain Regulatory Approval for the Original Product in the U.S., then Impax may elect, in its sole discretion, to carry out such additional Development activities at its sole cost and expense. For clarity, Impax has no obligation to carry out any such additional Development activities. If Impax so elects to carry out such additional Development activities, Impax, through JSC, shall consider in good faith any modifications to such additional Development activities, such as an increase in the size or scope of the trials, that are suggested by GSK. If Impax agrees to incorporate any such modifications into the additional Development activities (such incorporated modifications, “Additional GSK Modifications”), GSK agrees to be responsible for the expense of implementing such Additional GSK Modifications as set forth in Section 4.4(a).

(iii) With respect to additional Development activities that are not required to obtain Regulatory Approval under Article 8.3 of Directive 2001/83/EC (excluding Pricing Approval) for the Original Product in the EU and are not required to obtain Regulatory Approval in the U.S., (such additional Development activities, the “Other Shared Development Activities”), if the Parties reach mutual agreement in writing on undertaking such additional Development activities and sharing the costs and expenses thereof, then the Parties shall allocate the responsibilities between the Parties as mutually agreed and shall equally share in the costs and expenses of undertaking such Other Shared Development Activities as specified in Section 4.4(b).

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(iv) If GSK exercises an Option, Impax shall thereafter be responsible for conducting those Development activities that are necessary for obtaining Regulatory Approval for the particular Improved Product in question in the U.S. and that are set forth in the Development Plan, which Development activities may also be necessary for obtaining Regulatory Approval for such Improved Product in the Licensed Territory. The Parties shall share the Development Costs with respect thereto as specified in Section 4.4(c).

(v) Notwithstanding anything else to the contrary, as between GSK and Impax, Impax shall at all times remain solely responsible for all costs and expenses incurred by Impax for all Development activities that are necessary for obtaining Regulatory Approval for the Original Product outside the Licensed Territory which Development activities are not necessary for obtaining Regulatory Approval for the Original Product in the Licensed Territory.

(b) GSK Development Responsibilities.

(i) With respect to the Original Product, GSK shall be responsible for conducting all Development activities, including the Reimbursement Study, that are necessary for obtaining Regulatory Approval (including Pricing Approval) for the Original Product in the Licensed Territory other than those described in Sections 4.2(a)(i), 4.2(a)(ii) and 4.2(a)(iii), as set forth in the applicable Development Plan. GSK shall also be responsible for conducting any Other Shared Development Activities allocated to GSK as mutually agreed by the Parties.

(ii) If GSK exercises an Option, GSK shall be responsible for conducting those Development activities that are necessary for obtaining Regulatory Approval (including Pricing Approval) for the particular Improved Product in question in the Licensed Territory other than those described in Section 4.2(a)(iv), as set forth in the applicable Development Plan.

(iii) GSK shall also be responsible for seeking Regulatory Approval of all Licensed Products in the Licensed Territory. All such Development and Regulatory Approval activities shall be described in detail in the Development Plan and GSK shall perform such Development and Regulatory Approval activities in accordance with the Development Plan.

4.3 Development Plan.

(a) General. Development of each Licensed Product with respect to the Licensed Territory shall be conducted pursuant to a comprehensive written development plan (a “Development Plan”), which shall specify all major Development activities, including all clinical trials of the Licensed Product, to be conducted by or on behalf of GSK for such Licensed Product and the timeline regarding such activities, as well as XXXXXX in which GSK is undertaking material Development activities before GSK begins to conduct Development activities in such country. The Parties have agreed upon an outline for the initial Development Plan for the Original Product, which is attached to this Agreement as Exhibit B. Such outline for the initial Development Plan for the Original Product only addresses at a high level the Development and Regulatory Approval activities for the European Union, and shall be amended in calendar year 2011 to be a complete Development Plan and to add Development and Regulatory Approval activities for all XXXXXX not addressed in the outline for the initial Development Plan. Promptly following GSK’s exercise of an Option, the Parties shall seek to mutually agree, consistent with Sections 4.2 and 5.5, upon Phase III protocols and a Development Plan for the Improved Product in question.

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(b) Amendments. From time to time during the Term (at least on an annual basis), GSK shall prepare updates and amendments, as appropriate, to the then-current Development Plan for the Original Product, including adding any planned Development activities for XXXXXX for which GSK had not previously proposed Development activities. GSK shall submit such updates and amendments to the JSC for review and discussion before such updates and amendments are adopted. If GSK exercises an Option, GSK and Impax shall jointly prepare updates and amendments, as appropriate, to the then-current Development Plan for the Improved Product in question. In addition, if a Regulatory Authority in the Licensed Territory communicates to GSK that additional studies or material changes to then-contemplated studies may be required for Regulatory Approval (including Pricing Approval) of a Licensed Product, GSK shall promptly notify Impax, and the JSC shall promptly meet to discuss such Regulatory Authority requirement.

(c) Performance. Each Party shall use Commercially Reasonable Efforts to conduct the Development activities allocated to it under the Development Plan for the Original Product in a timely and effective manner. If GSK exercises an Option: (i) GSK shall use Commercially Reasonably Efforts to conduct the Development activities allocated to it under the Development Plan for the particular Improved Product in question in a timely and effective manner; and (ii) Impax shall use Commercially Reasonably Efforts to conduct the Development activities allocated to it (if any) under the Development Plan for the particular Improved Product in question in a timely and effective manner. No Development Plan may allocate responsibility for Development activities to Impax without Impax’s agreement.

4.4 Development Costs. Each Party shall be solely responsible for the costs and expenses it incurs to conduct the Development responsibilities assigned to it under Section 4.2, except that (a) GSK shall be responsible for the additional Development Costs resulting from the Additional GSK Modifications, (b) the Parties shall each be responsible for XXXXXX percent (XXXXXX%) of the Development Costs for the Other Shared Development Activities, and (c) if GSK exercises an Option, GSK shall be responsible for XXXXXX percent (XXXXXX%) of the Development Costs for the particular Improved Product in question incurred by Impax both before and after the exercise of that Option. GSK and Impax shall pay such Development Costs as set forth in Section 7.2.

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4.5 Diligence. With respect to the Original Product, following the completion of the Pivotal Phase III Trials, and with respect to an Improved Product, following GSK’s exercise of the Option, GSK shall use Commercially Reasonable Efforts to Develop each Licensed Product in each XXXXXX, to prepare and file appropriate Regulatory Submissions for each Licensed Product in each XXXXXX, and to obtain and maintain Regulatory Approval (including Pricing Approval) for each Licensed Product in each XXXXXX; provided, however, that following GSK’s exercise of an Option, GSK may from time to time elect in its sole discretion to discontinue or otherwise de-prioritize efforts on any Licensed Product if it is otherwise in compliance with its diligence obligations hereunder with respect to at least one other Licensed Product and such discontinuation or de-prioritization shall not, per se, be a breach of this Agreement; provided further, XXXXXX. Without limiting the foregoing, GSK shall use Commercially Reasonable Efforts to actively Develop and seek Regulatory Approval in each XXXXXX and to:

(a) XXXXXX;

(b) XXXXXX; and

(c) XXXXXX;

(d) XXXXXX; and

(e) XXXXXX.

For the purpose of this Section 4.5, “XXXXXX” means the XXXXXX.

4.6 Mutual Data Exchange and Use. In addition to its adverse event and safety data reporting obligations pursuant to Section 5.7, each Party shall promptly provide the other Party with copies of all data and results and all supporting documentation (e.g. protocols, CRFs, analysis plans) generated from its Development activities under this Agreement. Each Party shall have the right to use, without additional consideration, any and all data and results generated by or on behalf of the other Party under this Agreement solely for obtaining and maintaining Regulatory Approval and reimbursement for the Licensed Products and otherwise Commercializing the Licensed Products in accordance with the terms of this Agreement, in the Licensed Territory for GSK and outside the Licensed Territory for Impax. For clarity, such right shall include the use of such data and results in connection with activities intended to produce sufficient Information for GSK to file for Regulatory Approval in the EU via the centralized procedure for Regulatory Approval (EU Regulation 726/2004).

4.7 Development Reports. Each Party shall provide the JSC with written reports detailing its Development activities under this Agreement and the results of such activities at each regularly scheduled JSC meeting. Without limiting the foregoing, GSK will provide Impax with the expected timelines of each upcoming expected launch of the Licensed Products in each XXXXXX. The Parties shall discuss the status, progress and results of each Party’s Development activities under this Agreement at such JSC meetings.

4.8 Development Records. Each Party shall maintain complete, current and accurate records of all Development activities conducted by it hereunder, and all data and other Information resulting from such activities. Such records shall fully and properly reflect all work done and results achieved in the performance of the Development activities in good scientific manner appropriate for regulatory and patent purposes. Each Party shall document all non-clinical studies and clinical trials in formal written study records according to applicable Laws, including applicable national and international guidelines such as ICH, GCP and GLP. Each Party shall have the right to review and copy such records maintained by the other Party at reasonable times and to obtain access to the original to the extent necessary or useful for regulatory and patent purposes.

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4.9 Compliance with Laws. Each Party shall conduct its activities under this Agreement in good scientific manner and in compliance in all material respects with all applicable Laws, including applicable national and international guidelines such as ICH, GCP and GLP.

4.10 Transfer of Know-How. Impax shall work with GSK to facilitate the transfer to GSK of Impax Know-How that is necessary for GSK to file MAA in the EU via the centralized procedure for Regulatory Approval. Such transfer shall occur in a manner and following a reasonable schedule to be established by the JSC. For clarity, Impax shall not have any obligation hereunder to transfer or otherwise provide GSK with any Information Controlled by Impax that is necessary or useful for the Manufacture of a Licensed Product but not necessary or useful for non-Manufacturing Development or Commercialization activities

4.11 Impax’s Other Licensees. For clarity, if Impax grants a Third Party an exclusive license to Develop and/or Commercialize a Licensed Product in any country outside the Licensed Territory, then such licensee may directly exercise Impax’s rights pursuant to this Agreement with respect to such Licensed Product in such country if such licensee agrees in writing to be bound by those terms, conditions, rights and obligations of this Agreement that apply to Impax and that are relevant to such licensee, given the scope of such licensee’s license from Impax with respect the Licensed Product.

ARTICLE 5

REGULATORY MATTERS

5.1 Regulatory Responsibilities in the Licensed Territory.

(a) Except as set forth in Section 5.1(c) below, GSK shall own all Regulatory Submissions (including Regulatory Approvals) for a Licensed Product in the Licensed Territory, and shall be responsible for preparing and filing of any and all Regulatory Submissions for a Licensed Product in the Licensed Territory at its sole expense, including in the Major Market Countries in accordance with the Development Plan and in other countries in the Licensed Territory as and when reasonably decided by GSK but otherwise in a manner consistent with this Agreement; provided, however, XXXXXX. Impax shall assist and cooperate with GSK in connection with the preparation of such Regulatory Submissions, as reasonably requested by GSK, including necessary information from Impax suppliers. Impax shall be responsible for providing all regulatory submission-necessary deliverables as generated from the development responsibilities in Section 4.2(a), including but not limited to: planning documents, reports, QC documentation, case report tabulations (SAS transport files, data definition tables, annotated CRFs), SAS programs, logs, macros and libraries (required to re-run programs) according to a timeline agreed to by the Parties. All deliverables shall comply with ICH M2 EWG eCTD Specifications, and be complete and quality-assured. All clinical reports should be compliant with ICH E3 — Structure and Content of Clinical Reports guidance. All statistical package deliverables must meet the standards and specifications set forth by the FDA in their “Guidance for Industry: Providing Regulatory Submissions in Electronic Format — NDAs,” ICH E9, and other pertinent regulatory guidances.

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(b) GSK shall keep Impax informed of regulatory developments relating to a Licensed Product in the Licensed Territory and shall promptly notify Impax in writing of any decision by any Regulatory Authority in the Licensed Territory regarding Regulatory Approval. GSK shall provide Impax for review and comment all draft Regulatory Submissions (other than routine correspondence) at least twenty (20) Business Days in advance of their intended date of submission to a Regulatory Authority in the Licensed Territory and shall consider in good faith any comments thereto provided by Impax. GSK shall promptly notify Impax of any Regulatory Submissions (other than routine correspondence) submitted to or received from any Regulatory Authority in the Licensed Territory and shall provide Impax with copies thereof within ten (10) Business Days after submission or receipt. GSK shall provide Impax with reasonable advance notice of all meetings, conferences, and discussions scheduled with any Regulatory Authority in the Licensed Territory concerning a Licensed Product, and shall consider in good faith any input from Impax in preparing for such meetings, conferences or discussion. To the extent permitted by applicable Laws, Impax shall have the right to participate only as an observer in any such meetings, conferences or discussions and GSK shall facilitate such participation. If Impax is not present for participation in such meetings, conferences or discussions, GSK shall provide Impax with written summaries of such meetings, conferences or discussions in English as soon as practicable after the conclusion thereof.

(c) Impax shall be responsible for compiling and providing to GSK the CMC Information that is required for GSK to obtain and maintain Regulatory Approval of a Licensed Product in the Licensed Territory, including (i) obtaining, from supplier(s) within the supply chain for a Licensed Product, CMC Information that is necessary to obtain Regulatory Approval in the Licensed Territory or, (ii) to the extent that Impax is not successful in obtaining such Information, facilitating GSK’s direct contact with such supplier(s) for such purpose. GSK shall use the CMC Information provided to it by Impax or such supplier(s) for the sole purpose of obtaining and maintaining Regulatory Approval of a Licensed Product in the Licensed Territory and for no other purpose. Upon GSK’s reasonable request, Impax shall provide reasonable assistance to GSK with respect to communications with Regulatory Authorities in the Licensed Territory regarding the Manufacture of a Licensed Product or the CMC Information.

(d) Unless the Parties otherwise agree in writing: (i) except as expressly contemplated by Section 5.1(a), 5.1(b) or 5.1(c), Impax shall not communicate with respect to a Licensed Product with any Regulatory Authority having jurisdiction in the Licensed Territory, unless so ordered by such Regulatory Authority, in which case Impax shall immediately provide notice to GSK of such order; and (ii) Impax shall not submit any Regulatory Submissions or seek Regulatory Approvals for a Licensed Product in the Licensed Territory.

5.2 Regulatory Responsibilities outside the Licensed Territory.

(a) Impax shall own all Regulatory Submissions (including Regulatory Approvals) for a Licensed Product outside the Licensed Territory, and shall be responsible for preparing and filing of any and all Regulatory Submissions for a Licensed Product outside the Licensed Territory at its sole expense. GSK shall assist and cooperate with Impax in connection with the preparation and filing of such Regulatory Submissions, as reasonably requested by Impax.

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(b) Impax shall keep GSK informed of regulatory developments relating to a Licensed Product outside the Licensed Territory through regular reports at the JSC meetings. Impax shall provide GSK for review and comment all draft Regulatory Submissions (other than routine correspondence), at least twenty (20) Business Days in advance of the intended date of submission to a Regulatory Authority outside the Licensed Territory and shall consider in good faith any comments thereto provided by GSK. Impax shall promptly notify GSK of any Regulatory Submissions (other than routine correspondence) submitted to or received from any Regulatory Authorities and shall provide GSK with copies thereof within ten (10) Business Days after submission or receipt. Impax shall provide GSK with reasonable advance notice of all meetings, conferences, discussions, and inspections scheduled with any Regulatory Authority outside the Licensed Territory concerning a Licensed Product, and shall consider in good faith any input from GSK in preparing for such meetings, conferences discussion, or inspections. To the extent permitted by applicable Laws, GSK shall have the right to participate only as an observer in any such meetings, conferences discussions, or inspections and Impax shall facilitate such participation. If GSK is not present for participation in such meetings, conferences, discussions or inspections, Impax shall provide GSK with written summaries of such meetings, conferences, discussions or inspections in English as soon as practicable after the conclusion thereof.

(c) Unless the Parties otherwise agree in writing: (i) except as expressly contemplated by Section 5.2(a) or 5.2(b), GSK shall not communicate with respect to a Licensed Product with any Regulatory Authority having jurisdiction outside the Licensed Territory, unless so ordered by such Regulatory Authority, in which case GSK shall immediately provide notice to Impax of such order; and (ii) GSK shall not submit any Regulatory Submissions or seek Regulatory Approvals for a Licensed Product outside the Licensed Territory.

5.3 Regulatory Costs. GSK shall be solely responsible for all costs and expenses related to the preparation, filing and maintenance of all Regulatory Submissions and Regulatory Approvals for a Licensed Product in the Licensed Territory.

5.4 Rights of Reference to Regulatory Submissions. Impax hereby grants to GSK a right of reference to all Regulatory Submissions filed by or on behalf of Impax, which right of reference GSK may use for the sole purpose of seeking, obtaining and maintaining Regulatory Approvals in the Licensed Territory. GSK hereby grants to Impax and Impax’s licensees outside the Licensed Territory a right of reference to all Regulatory Submissions filed by or on behalf of GSK, which right of reference Impax may use for the sole purpose of seeking, obtaining and maintaining Regulatory Approvals outside the Licensed Territory. Each Party shall support the other Party, as reasonably requested by such other Party and at such other Party’s expense, in obtaining Regulatory Approvals in such other Party’s territory, including providing necessary documents or other materials required by applicable Laws to obtain Regulatory Approval in such territory, all in accordance with the terms and conditions of this Agreement.

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5.5 Cooperation and Consistency. Without prejudice to the other provisions set forth in this Agreement, and without giving rise to any fiduciary duty between the Parties, the Parties agree to the following as set forth in this Section 5.5:

(a) Wherever practicable and commercially reasonable each Party shall seek to exercise its rights and fulfill its obligations with respect to the Licensed Products within their territories in manner that is consistent with and not harmful to the other Party’s exercise of its rights and fulfillment of its obligations with respect to the Licensed Products in its territory.

(b) To the extent practicable and commercially reasonable, the Parties shall seek to establish and maintain a Commercialization positioning strategy and activities for the Licensed Products that is consistent worldwide, actively taking into account impact on the other Party’s territory through one’s actions or omissions in one’s own territory. Similarly, to the extent practicable and commercially reasonable, the Parties shall seek to establish and maintain a Development strategy and activities for the Licensed Products that is consistent worldwide, actively taking into account impact on the other Party’s territory through one’s actions or omissions in one’s own territory. The Parties, acting through the Alliance Managers, shall communicate with one another and exchange Information necessary and useful to facilitate the foregoing cooperation between the Parties.

5.6 Notification of Threatened Action. Each Party shall immediately notify the other Party of any information it receives regarding any threatened or pending action, inspection or communication by or from any Third Party, including without limitation a Regulatory Authority, which may affect the Development, Commercialization or regulatory status of a Licensed Product. Without prejudice to the other provisions set forth in this Agreement, upon receipt of such information, the Parties shall consult with each other in an effort to arrive at a mutually acceptable procedure for taking appropriate action.

5.7 Adverse Event Reporting and Safety Data Exchange.

(a) Within ninety (90) days after the Effective Date, the Parties shall define and finalize the actions that the Parties shall employ with respect to a Licensed Product to protect patients and promote their well-being in a written pharmacovigilance agreement (the “Pharmacovigilance Agreement”). These responsibilities shall include mutually acceptable guidelines and procedures for the receipt, investigation, recordation, communication, and exchange (as between the Parties) of adverse event reports, pregnancy reports, and any other information concerning the safety of any Licensed Product. Such guidelines and procedures shall be in accordance with, and enable the Parties to fulfill, local and national regulatory reporting obligations under applicable Laws. Furthermore, such agreed procedure shall be consistent with relevant ICH guidelines, except where said guidelines may conflict with existing local regulatory reporting safety reporting requirement, in which case local reporting requirement shall prevail. GSK shall be responsible for reporting quality complaints, adverse events and safety data related to a Licensed Product to applicable Regulatory Authorities in the Licensed Territory, as well as responding to safety issues and to all requests of Regulatory Authorities relating to a Licensed Product in the Licensed Territory. The Pharmacovigilance Agreement shall also provide for a worldwide safety database to be maintained by GSK at its cost. GSK shall provide Impax with information from the safety database in a manner that is sufficient for Impax to comply with applicable Laws, including Impax’s obligation to report to Regulatory Authorities or to respond to regulatory requests. Each Party hereby agrees to comply with its respective obligations under such Pharmacovigilance Agreement and to cause its Affiliates and permitted sublicensees to comply with such obligations.

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(b) Prior to the execution of such Pharmacovigilance Agreement, the Parties agree to coordinate the pharmacovigilance procedures in connection with the Development of the Products, and each Party shall submit to the other Party all safety information and reporting in a manner that meets the reporting requirements under applicable Laws in the other Party’s territory. Each Party shall notify the other Party within three (3) calendar days of any Serious Adverse Event. Each Party shall also provide the other Party, on an annual basis and more frequently as reasonably requested by the other Party, a summary report of Adverse Events. As used herein, unless defined differently by the FDA, “Adverse Event” means any Licensed Product related, or potentially Licensed Product related, side effect, injury, toxicity or sensitivity reaction, or any unexpected incident, and the severity thereof. “Serious Adverse Event” means an Adverse Event which results in death, is immediately life-threatening, results in persistent and significant disability/incapacity or requires in-patient hospitalization or prolongation of existing hospitalization, is a congenital anomaly or birth defect in the foetus/child or is an Important Medical Event (i.e., an Adverse Event that may not be immediately life-threatening or result in death or hospitalisation but may jeopardise the subject or require medical or surgical intervention).

5.8 Remedial Actions. Each Party will notify the other Party immediately, and promptly confirm such notice in writing, if it obtains information indicating that a Licensed Product may be subject to any recall, corrective action or other regulatory action with respect to a Licensed Product taken by virtue of applicable Laws (a “Remedial Action”). The Parties will assist each other in gathering and evaluating such information as is necessary to determine the necessity of conducting a Remedial Action. Each Party shall, and shall ensure that its Affiliates and sublicensees will, maintain adequate records to permit the Parties to trace the Manufacture, distribution and use of a Licensed Product. In the event GSK determines that any Remedial Action with respect to a Licensed Product in the Licensed Territory should be commenced or is required by applicable Regulatory Authority, GSK shall have the right, at its expense, to control and coordinate all efforts necessary to conduct such Remedial Action. In the event Impax determines that any Remedial Action with respect to a Licensed Product outside the Licensed Territory should be commenced or is required by applicable Regulatory Authority, Impax shall have the right, at its expense, to control and coordinate all efforts necessary to conduct such Remedial Action. Notwithstanding the foregoing, any Remedial Action that relates to the Manufacture and supply of a Licensed Product by Impax to GSK shall be governed by the terms and conditions of the Supply Agreement.

ARTICLE 6

COMMERCIALIZATION

6.1 Overview of Commercialization in the Licensed Territory. Subject to the terms and conditions of this Article 6, as between the Parties, with respect to the Original Product, following the payment from GSK to Impax pursuant to Section 7.3(a), and with respect to an Improved Product, following GSK’s exercise of the Option, GSK will be responsible for all aspects of the Commercialization of a Licensed Product in the Licensed Territory, including: (a) developing and executing a commercial launch and pre-launch plan, (b) negotiating with applicable Governmental Authorities regarding the price and reimbursement status of a Licensed Product; (c) marketing and promotion; (d) booking sales and distribution and performance of related services; (e) handling all aspects of order processing, invoicing and collection, inventory and receivables; (f) providing customer support, including handling medical queries, and performing other related functions; and (g) conforming its practices and procedures to applicable Laws relating to the marketing, detailing and promotion of a Licensed Product in the Licensed Territory. GSK shall bear all of the costs and expenses incurred in connection with such Commercialization activities.

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6.2 Commercialization Plan for Licensed Territory.

(a) General. Following the payment from GSK to Impax pursuant to Section 7.3(a), GSK shall Commercialize the Original Product and, if GSK exercises an Option, GSK shall Commercialize the particular Improved Product in question, in the Licensed Territory pursuant to a plan prepared by GSK (the “Commercialization Plan”). The Commercialization Plan shall include (i) a reasonably detailed description of and anticipated timeline for GSK’s significant Commercialization activities in each of the XXXXXX for the following XXXXXX (XXXXXX) years consistent with its obligations under Section 6.4 and (ii) a list of all other countries in the Licensed Territory in which GSK is Commercializing Licensed Products.

(b) Initial Plan and Amendments. The initial Commercialization Plan for a particular Licensed Product shall be delivered to the JSC no later than nine (9) months prior to the anticipated date of first Regulatory Approval of such Licensed Product in the Licensed Territory. GSK shall periodically (at least on an annual basis) prepare updates and amendments to the Commercialization Plan to reflect changes in its plans, including in response to changes in the marketplaces, relative success of the Licensed Products and other relevant factors influencing such plans and activities. GSK shall submit all updates and amendments to the Commercialization Plan to the JSC for review and discussion. Neither the JSC nor Impax shall have approval authority over the Commercialization Plan or any amendment thereto.

6.3 Pricing. GSK shall have the sole right to determine all pricing of Licensed Products in the Licensed Territory; provided, however, XXXXXX. Impax shall not have any right to direct, control, or approve GSK’s pricing of Licensed Products for the Licensed Territory.

6.4 Commercial Diligence.

(a) GSK shall use Commercially Reasonable Efforts to Commercialize each Licensed Product in each XXXXXX in which it receives Regulatory Approval; provided, however, that following GSK’s exercise of an Option, GSK may from time to time elect in its sole discretion to discontinue or otherwise de-prioritize efforts on any Licensed Product if it is otherwise in compliance with its diligence obligations hereunder with respect to at least one other Licensed Product and such discontinuation or de-prioritization shall not, per se, be a breach of this Agreement. Without limiting the foregoing, GSK shall achieve First Commercial Sale of each Licensed Product in a XXXXXX within XXXXXX (XXXXXX) months after the Regulatory Approval (including Pricing Approval, if required by applicable Laws) has been obtained in such country for such Licensed Product; provided, however, such XXXXXX (XXXXXX) month period shall be extended to the extent that the achievement of First Commercial Sale is delayed on account of Impax’s failure to supply Licensed Product ordered by GSK pursuant to the Supply Agreement and GSK provides prompt notification of such failure.

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(b) Failure to Launch.

(i) In the event that a Licensed Product has not obtained Regulatory Approval in a particular XXXXXX because GSK decides to reject a Pricing Decision, GSK shall notify Impax of its decision within thirty (30) Business Days of the receipt of such Pricing Decision and shall provide Impax with an explanation of such decision, including a financial analysis thereof. Where GSK’s decision to reject such Pricing Decision in such country is founded on GSK’s good faith belief that the Licensed Product is not commercially viable in such country, for example because of pricing and reimbursement concerns or that the launch of the Licensed Product in such country would adversely affect the amount of Net Sales that would be achieved in the Licensed Territory, Impax shall not have the right to terminate this Agreement in such country, except as described in Sections 6.4(b)(ii) and 6.4(b)(iii). However, for the avoidance of doubt: (A) XXXXXX; (B) XXXXXX; and (C) XXXXXX. The Parties hereby accept that the failure to launch a particular Licensed Product in any country in which it has received Regulatory Approval shall not, per se, be deemed a breach of GSK’s obligations pursuant to Section 6.4(a). For purposes of this Section 6.4(b)(i), if GSK decides to appeal a Pricing Decision (in any country where appeal of a Pricing Decision is possible), GSK shall not be deemed to have rejected the Pricing Decision until the appeal process is concluded and GSK has elected not to accept the Pricing Decision resulting from such appeal process.

(ii) Notwithstanding anything else herein, where (A) GSK has decided under Section 6.4(b)(i) that it will reject a Pricing Decision for any Licensed Product in XXXXXX, or (B) GSK has failed to achieve First Commercial Sale of any Licensed Product in XXXXXX following a Pricing Approval within the timeframe contemplated by Section 6.4(a), Impax has the right to terminate this Agreement in all XXXXXX by giving GSK sixty (60) days written notice to that effect at any time thereafter; provided, however, that GSK has not in the interim, prior to receipt of notice of termination from Impax, notified Impax that it XXXXXX. For purposes of this Section 6.4(b)(ii), if GSK decides to appeal a Pricing Decision (in any country where appeal of a Pricing Decision is possible), GSK shall not be deemed to have rejected the Pricing Decision until the appeal process is concluded and GSK elects not to accept the Pricing Decision resulting from such appeal process.

(iii) Notwithstanding anything else herein, where (A) GSK has decided under Section 6.4(b)(i) that it will reject a Pricing Decision for any Licensed Product in XXXXXX, or (B) GSK has failed to achieve First Commercial Sale any Licensed Product in XXXXXX following a Pricing Approval within XXXXXX (XXXXXX) months after the Regulatory Approval (including Pricing Approval, if required by applicable Laws) has been obtained in the relevant XXXXXX, Impax has the right to terminate this Agreement in all XXXXXX by giving GSK sixty (60) days written notice to that effect at any time thereafter; provided, however, that GSK has not in the interim, prior to receipt of notice of termination from Impax, notified Impax that it XXXXXX; provided, further, such XXXXXX (XXXXXX) month period shall be extended to the extent that the achievement of First Commercial Sale of a Licensed Product is delayed on account of Impax’s failure to supply Licensed Product ordered by GSK pursuant to the Supply Agreement and GSK provides prompt notification of such failure. For purposes of this Section 6.4(b)(iii), if GSK decides to appeal a Pricing Decision (in any country where appeal of a Pricing Decision is possible), GSK shall not be deemed to have rejected the Pricing Decision until the appeal process is concluded and GSK elects not to accept the Pricing Decision resulting from such appeal process.

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6.5 Cross-Territorial Restrictions. Each Party shall, and shall ensure that its Affiliates and sublicensees will, use Commercially Reasonable Efforts to avoid directly or indirectly distributing, selling or have sold any Licensed Product, including via internet or mail order, to end customers into countries outside its territory. As to such countries outside its territory, such Party shall not, and shall ensure that its Affiliates and sublicensees will not: (a) engage in any advertising or promotional activities relating to any Licensed Product that are directed primarily to customers or other purchasers of such Licensed Product located in such countries, (b) solicit orders from any prospective purchaser located in such countries, or (c) sell or distribute any Licensed Product to any person in its territory who intends to sell or has in the past sold such Licensed Product in such countries. If a Party receives any order for a Licensed Product from a prospective purchaser located in a country outside their territory, such Party shall refer that order to the other Party and shall not accept any such orders. Each Party shall not deliver or tender (or cause to be delivered or tendered) any Licensed Product into a country outside of its territory.

6.6 Reports. GSK shall update the JSC periodically at each regularly scheduled JSC meeting regarding GSK’s Commercialization activities with respect to the Licensed Products in the Licensed Territory. Each such update shall be in a form to be reasonably agreed by the Parties and shall summarize significant Commercialization activities with respect to the Licensed Products in the Licensed Territory.

ARTICLE 7

COMPENSATION

7.1 Upfront Payment. Within five (5) Business Days after the Effective Date, GSK shall pay to Impax a one-time, non-refundable and non-creditable initial payment of eleven million five hundred thousand Dollars ($11,500,000).

7.2 Reimbursement of Development Costs.

(a) Within thirty (30) days after the end of each calendar quarter during which Impax has incurred Development Costs resulting from an Additional GSK Modification, Impax shall submit to GSK a reasonably detailed invoice setting forth all such Development Costs incurred in such calendar quarter. Subject to Section 7.2(e), GSK shall pay to Impax the amount invoiced within sixty (60) days after the receipt of such invoice.

(b) Within thirty (30) days after the end of each calendar quarter during which either Party is conducting any Other Shared Development Activities, such Party shall submit to the other Party a reasonably detailed invoice setting forth XXXXXX percent (XXXXXX%) of the Development Costs incurred by such Party while conducting Other Shared Development Activities in such calendar quarter. Subject to Section 7.2(e), the other Party shall pay to such Party the amount invoiced within sixty (60) days after the receipt of such invoice.

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(c) GSK shall be responsible for XXXXXX percent (XXXXXX%) of the Development Costs for the particular Improved Product incurred by Impax before and after the exercise of an Option. Within thirty (30) days after the exercise of an Option and the end of each calendar quarter thereafter, Impax shall submit to GSK a reasonably detailed invoice of the Development Costs incurred by Impax before the exercise of an Option or in such calendar quarter, as applicable. Subject to Section 7.2(e), GSK shall pay to Impax the amount invoiced within sixty (60) days after the receipt of such invoice; provided, however, GSK may credit the amount of Option Exercise Fee paid to Impax against the payments due to Impax pursuant to this Section 7.2(c).

(d) All payments made pursuant to this Section 7.2 shall be non-refundable and non-creditable.

(e) If a Party disputes in good faith any portion of an invoice provided by the other Party pursuant to this Section 7.2, such Party shall promptly notify the other Party and shall pay to the other Party the undisputed portion of such invoice within sixty (60) days after the receipt of such invoice, the Parties shall use good faith efforts to resolve such dispute expediently and, upon resolution of such dispute, such Party shall pay to the other Party the amount of such formally disputed portion that is resolved in the other Party’s favor within sixty (60) days after such resolution.

7.3 Milestone Payments.

(a) XXXXXX. Impax shall notify GSK promptly upon the XXXXXX, and shall provide GSK (i) a report setting forth the XXXXXX and (ii) an invoice for payment under this Section 7.3(a). Unless GSK provides written notice of termination pursuant to Section 12.2(a) within forty-five (45) days after receipt of such report and invoice, GSK shall pay to Impax a one-time, non-refundable and non-creditable payment of XXXXXX Dollars ($XXXXXX) within sixty (60) days after such receipt.

(b) XXXXXX. GSK shall notify Impax promptly upon the XXXXXX and shall provide Impax with a report setting forth the XXXXXX within ten (10) Business Days after the XXXXXX. If the XXXXXX, Impax shall submit to GSK an invoice of XXXXXX Dollars ($XXXXXX) and GSK shall pay to Impax the amount invoiced within sixty (60) days after the receipt of such invoice.

(c) XXXXXX. GSK shall notify Impax within five (5) Business Days after the XXXXXX. After the receipt of such notice, Impax shall submit to GSK an invoice of XXXXXX Dollars ($XXXXXX) and GSK shall pay to Impax the amount invoiced within sixty (60) days after the receipt of such invoice.

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(d) XXXXXX. GSK shall notify Impax within five (5) Business Days after the XXXXXX. After the receipt of such notice, Impax shall submit to GSK an invoice of either:

(i) XXXXXX Dollars ($XXXXXX) if (A) XXXXXX, and (B) XXXXXX; or

(ii) XXXXXX Dollars ($XXXXXX) if either of the criteria set forth in subsection (i) above were not met by the time of the XXXXXX.

GSK shall pay to Impax the amount invoiced within sixty (60) days after the receipt of such invoice. For clarity, GSK shall only be obligated to make one payment, either under (i) or (ii), pursuant to this Section 7.3(d).

(e) Additional Indications. GSK shall notify Impax within five (5) Business Days after the receipt of Regulatory Approval in any country in the Licensed Territory for a new Indication for which GSK had not previously obtained Regulatory Approval in any country in the Licensed Territory for the applicable Licensed Product. After the receipt of such notice only with respect to any such new Indication that is not Parkinson’s disease or for the treatment of any symptom thereof, Impax shall submit to GSK an invoice of XXXXXX Dollars ($XXXXXX) and GSK shall pay to Impax the amount invoiced within sixty (60) days after the receipt of such invoice. For clarity, the payment described in this Section 7.3(e) shall be owed once per new Indication per Licensed Product and XXXXXX. For further clarity, no payments are due under this Section 7.3(e) with respect to any new Indications for Parkinson’s disease or for the treatment of any symptom thereof.

(f) Clarification. All payments made by GSK pursuant to this Section 7.3 shall be non-refundable and non-creditable. The milestone payments set forth above in Sections 7.3(a) and 7.3(b) are specific to the Original Product and shall not be paid with respect to any Improved Product. Each of the milestone payments set forth above in Sections 7.3(c), 7.3(d) and 7.3(e) apply to both the Original Product and each Improved Product subject to an exercised Option; provided, however, that the milestone payments set forth above in Sections 7.3(c) and 7.3(d) shall only be paid with respect to the particular Improved Product in question if GSK exercises an Option and such milestone payment has not been paid with respect to the Original Product.

7.4 Royalties and XXXXXX Payments.

(a) Royalty Rates. Subject to Sections 7.4(c) and 7.4(d) below, GSK shall pay to Impax non-refundable, non-creditable royalties on the Net Sales of all Licensed Products (including the Improved Products with respect to which GSK has exercised Options) in the Licensed Territory during the Royalty Term, as calculated by multiplying the applicable royalty rate by the corresponding amount of incremental, aggregated Net Sales of all Licensed Products in the Licensed Territory in each calendar year.

Annual Net Sales of all Licensed Products in the Licensed Territory	Royalty Rate
For that portion of annual Net Sales less than or equal to XXXXXX Dollars ($XXXXXX)	XXXXXX	%
For that portion of annual Net Sales greater than XXXXXX Dollars ($XXXXXX) but less than or equal to XXXXXX Dollars ($XXXXXX)	XXXXXX	%
For that portion of annual Net Sales greater than XXXXXX Dollars ($XXXXXX)	XXXXXX	%

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(b) Royalty Term. Royalties shall be paid under this Section 7.4, on a country-by-country and Licensed Product-by-Licensed Product basis, for Net Sales of Licensed Product made from the First Commercial Sale of such Licensed Product in each country in the Licensed Territory until the latest of: (i) the expiration of the last-to-expire Valid Claim in such country claiming the composition of matter (including formulation) or method of use (including dosing regimens and the pharmacokinetic or pharmacodynamic profile of one or more active pharmaceutical ingredients) of such Licensed Product; or (ii) the expiration of Regulatory Exclusivity for such Licensed Product in such country; or (iii) the tenth (10th) anniversary of the First Commercial Sale of such Licensed Product in such country (the “Royalty Term”). For purposes of this Section 7.4, a Valid Claim claims the composition of matter (including formulation) or method of use (including dosing regimens and the pharmacokinetic or pharmacodynamic profile of one or more active pharmaceutical ingredients) of such Licensed Product if such Valid Claim would be infringed (evaluating pending patent claims as if already issued), but for a license, by the Commercialization of such Licensed Product for its approved indication in such country.

(c) Royalty Reductions.

(i) If a Licensed Product is generating Net Sales in a country during the Royalty Term in such country at a time when a Generic Product with respect to such Licensed Product is being sold in such country, then the royalty rate applicable to Net Sales of such Licensed Product in such country shall be reduced to XXXXXX percent (XXXXXX%) of the average royalty rate otherwise applicable to all Net Sales for such Licensed Product in the Licensed Territory under Section 7.4(a), commencing with Net Sales made after the first calendar quarter during which the unit volume of all such Generic Products sold by Third Parties in such country exceeds, in each month during such calendar quarter, XXXXXX percent (XXXXXX%) of the combined unit volume of such Licensed Product and such Generic Product sold in such month in such country and ending when such unit volume no longer exceeds XXXXXX percent (XXXXXX%). All such determinations of unit volume shall be based upon a mutually acceptable calculation method and using market share data provided by a reputable and mutually agreed upon provider, such as IMS Health. By way of illustration of the foregoing, if during the first calendar quarter of a particular calendar year, the Net Sales in such calendar quarter with respect to which the royalty rate is not subject to deduction under this Section 7.4(c)(i) are XXXXXX Dollars ($XXXXXX), and Net Sales in such calendar quarter with respect to which the royalty rate is subject to deduction under this Section 7.4(c)(i) are XXXXXX Dollars ($XXXXXX), the following shall apply with respect to the royalty payment owed to Impax for such calendar quarter: The royalty payment without regard to the reduced rate would be $XXXXXX x XXXXXX% + $XXXXXX x XXXXXX% + $XXXXXX x XXXXXX% = $XXXXXX. The average royalty rate would be $XXXXXX / $XXXXXX = XXXXXX%. The royalty rate then applicable to the Net Sales subject to royalty reduction would be XXXXXX% x XXXXXX% = XXXXXX%. Thus total royalty due would be $XXXXXX x XXXXXX% + $XXXXXX x XXXXXX% = $XXXXXX.

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(ii) If it is necessary for GSK to obtain a license from a Third Party under any Patent in a particular country in the Licensed Territory in order to use, import or sell a Licensed Product and GSK obtains such a license, GSK may deduct, from the royalty payment that would otherwise have been due pursuant to Section 7.4(a) with respect to Net Sales of such Licensed Product in such country in a particular calendar quarter, an amount equal to XXXXXX percent (XXXXXX%) of the royalties paid by GSK to such Third Party pursuant to such license on account of the sale of such Licensed Product in such country during such calendar quarter.

(iii) If it is necessary for Impax to obtain a license from a Third Party under any Patent to permit Impax, its Affiliates or a Backup Manufacturer to Manufacture a Licensed Product in the country in which Impax is Manufacturing or having Manufactured such Licensed Product for the purposes of supplying such Licensed Product to GSK, its Affiliates or permitted sublicensees pursuant to the Supply Agreement, XXXXXX. For clarity, Impax shall be solely responsible for seeking and maintaining any such license needed from a Third Party. Impax shall promptly notify GSK of any Third Party Patent under which it intends to seek any such license, to enable GSK to determine whether it is necessary under Section 7.4(c)(ii) above for GSK to obtain a license under such Patent or any equivalent Patent in the Licensed Territory. Notwithstanding the foregoing, if Impax obtains a license from a Third Party under any Patent to permit Impax, its Affiliates or a Backup Manufacturer to Manufacture a Licensed Product in the country in which Impax is Manufacturing or having Manufactured such Licensed Product for the purposes of supplying such Licensed Product to GSK, its Affiliates or permitted sublicensees pursuant to the Supply Agreement as a settlement of a dispute or litigation with a Third Party in which such Third Party alleged that Impax’s Manufacture of the Licensed Product infringes such Third Party’s Patent(s), XXXXXX for the Licensed Product under the Supply Agreement. In addition, in the event of a breach of a representation or warranty made by Impax under Section 9.2(c), Impax shall be responsible for obtaining and paying for any license that is necessary to cure or otherwise remedy such breach, other than any license necessary to permit Impax, its Affiliates or a Backup Manufacturer to Manufacture a Licensed Product in the country in which Impax is Manufacturing or having Manufactured such Licensed Product for the purposes of supplying such Licensed Product to GSK, its Affiliates or permitted sublicensees pursuant to the Supply Agreement.

(iv) Notwithstanding the foregoing, during any calendar quarter in the Royalty Term for a Licensed Product in a particular country in the Licensed Territory, the operation of Sections 7.4(c)(i) or 7.4(c)(ii) individually or in combination shall not reduce by more than XXXXXX percent (XXXXXX%) the royalties that would otherwise have been due under Section 7.4(a) with respect to Net Sales of such Licensed Product in such country during such calendar quarter.

(d) Royalty Adjustment due to the Transfer Price of a Licensed Product. Notwithstanding Sections 7.4(a) and 7.4(c), if the royalty payment that would otherwise be due to Impax pursuant to Section 7.4(a), after application of all applicable royalty reductions in accordance with Sections 7.4(c)(i), (ii) and (iv), with respect to Net Sales of a Licensed Product made in a particular country in the Licensed Territory during a particular calendar quarter in the Royalty Term for such country, would, when added to the Transfer Price paid by GSK to Impax pursuant to the Supply Agreement for the units of such Licensed Product sold in such country during such calendar quarter, exceed XXXXXX percent (XXXXXX%) of such Net Sales, then GSK shall make a royalty payment to Impax with respect to such Net Sales, equal to the greater of: (i) XXXXXX percent (XXXXXX%) of such Net Sales minus XXXXXX paid by GSK to Impax pursuant to XXXXXX for the units of such Licensed Product sold in such country during such calendar quarter; or (ii) XXXXXX percent (XXXXXX%) of XXXXXX paid by GSK to Impax pursuant to XXXXXX for the units of such Licensed Product sold in such country during such calendar quarter.

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(e) XXXXXX Payments. GSK shall make each of the following one-time, non-refundable, non-creditable XXXXXX payments to Impax when the XXXXXX. GSK shall notify Impax within thirty (30) days after the end of the calendar quarter in which XXXXXX. Following such notification from GSK, Impax shall invoice GSK for the applicable amount due under this Section 7.4(e), and GSK shall pay such amount due within thirty (30) days of the receipt of such invoice. For clarity, (i) XXXXXX, (ii) XXXXXX, and (iii) XXXXXX.

XXXXXX	XXXXXX Payment
XXXXXX	XXXXXX Dollars ($XXXXXX	)
XXXXXX	XXXXXX Dollars ($XXXXXX	)
XXXXXX	XXXXXX Dollars ($XXXXXX	)
XXXXXX	XXXXXX Dollars ($XXXXXX	)

(f) Royalty Reports and Payments. Prior to the end of each calendar quarter, commencing with the calendar quarter in which the First Commercial Sale of a Licensed Product is made in a Major Market Country, GSK shall provide Impax with a report containing the actual Net Sales of the Licensed Product in the Major Market Countries in the first two months in such calendar quarter. Within sixty (60) days following the end of each calendar quarter, commencing with the calendar quarter in which the First Commercial Sale of a Licensed Product is made anywhere in the Licensed Territory, GSK shall provide Impax with a report containing the following information for the applicable calendar quarter, on a country-by-country and, if GSK has exercised an Option, Licensed Product-by-Licensed Product basis: (i) Net Sales and a calculation of the royalty payment due on such sales, (ii) an accounting of the number of units and prices for a Licensed Product sold and the Transfer Price paid by GSK to Impax pursuant to the Supply Agreement with respect to each such unit, (iii) the exchange rate for such country, (iv) aggregate annual Net Sales of all Licensed Products in the Licensed Territory in such calendar year and the amount of XXXXXX payment due and (v) the application of the reduction and adjustment, if any, made in accordance with the terms of Sections 7.4(c) and 7.4(d). Concurrent with the delivery of the applicable quarterly report, GSK shall pay in Dollars all amounts due to Impax pursuant to Section 7.4 with respect to Net Sales by GSK, its Affiliates and their respective sublicensees for such calendar quarter.

7.5 Blocked Currency. In each country in the Licensed Territory where the local currency is blocked and cannot be removed from the country, royalties accrued on Net Sales in such country shall be paid to Impax in the equivalent amount in Dollars.

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7.6 Foreign Exchange. The rate of exchange to be used in computing the amount of currency equivalent in Dollars of Net Sales invoiced in other currencies shall be made using the average exchange rates as calculated and utilized by GSK’s group reporting system and published accounts. The current method is sourced from Reuters/Bloomberg, with U.S. spot rates supplied on a daily basis. The cumulative year-to-date average rates are calculated as the average of the preceding 31st December spot rate plus the closing spot rates of the relevant months to date, using the following as input: (a) Dollar and Euro input to 4 decimal places and (b) all other currencies to 3 significant places (or to the nearest round number if over 999). As an example, the cumulative average rate for the five (5) months to May will be computed by taking the sum of the spot rates of the preceding 31st December, plus the month-end spot rates for the five (5) months to May, divided by 6. The resulting average rates are published to three (3) significant figures (e.g. $1.44 for the Dollar, or Naira 168 for Nigeria ), or to the nearest round number if the currency is more than 999 (e.g. Bolivar 1,302 for Venezuela). The rounding process for a currency is that 0.5 is rounded up (e.g. $1.4350 is rounded up to $1.44). If changed, GSK will notify Impax of revised method in advance of it being applied.

7.7 Payment Method; Late Payments. All payments due to Impax hereunder shall be made in Dollars by wire transfer of immediately available funds into an account designated by Impax in advance. If Impax does not receive payment of any sum due to it on or before the due date, simple interest shall thereafter accrue on the sum due to Impax until the date of payment at the per annum rate of two percent (2%) over the then-current prime rate reported in The Wall Street Journal or the maximum rate allowable by applicable Laws, whichever is lower with the following exceptions: no interest shall be due for any portion of payments that is subject to good faith dispute, provided that GSK has paid any undisputed amounts.

7.8 Accounting; Records; Audits. All payments and other amounts under this Agreement shall be accounted for in accordance with the International Financial Reporting Standards (“IFRS”) accounting principles for GSK or U.S. Generally Accepted Accounting Principles (“GAAP”) accounting principles for Impax, in each case applied on a consistent basis. GSK and its Affiliates and sublicensees will maintain complete and accurate records in sufficient detail to permit Impax to confirm the accuracy of the calculation of royalty payments and the achievement of milestone events. Upon reasonable prior notice of at least sixty (60) days, such records shall be available during regular business hours for a period of three (3) years from the end of the calendar year to which they pertain for examination, and not more often than once each calendar year, by an independent certified public accountant selected by Impax and reasonably acceptable to GSK, for the sole purpose of verifying the accuracy of the financial reports furnished by GSK pursuant to this Agreement. Any such auditor shall not disclose GSK’s Confidential Information, except to the extent such disclosure is necessary to verify the accuracy of the financial reports furnished by GSK or the amount of payments due by GSK to Impax under this Agreement. Any amounts shown to be owed but unpaid shall be paid within sixty (60) days from the accountant’s report, plus interest (as set forth in Section 7.7) from the original due date. Impax shall bear the full cost of such audit unless such audit discloses an underpayment by the GSK of more than five percent (5%) of the amount due, in which case GSK shall bear the full cost of such audit.

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7.9 Taxes.

(a) Taxes on Income; Withholding. The Parties agree that, as of the Effective Date, GSK is not required by applicable Law to deduct and withhold any taxes on account of any royalties or other payments payable to Impax under this Agreement. To the extent GSK becomes, on account of a change in applicable Law or a change in Impax’s residency for tax purposes, required by applicable Laws to deduct and withhold any taxes on account of any royalties or other payments payable to Impax under this Agreement, GSK shall notify Impax in writing, shall deduct such taxes from the amount of royalties or other payments otherwise due to Impax and shall pay such taxes to the proper tax authority in a timely manner. GSK shall secure and send to Impax proof of any such taxes withheld and paid by GSK for the benefit of Impax, and shall, at Impax’s request, provide reasonable assistance to Impax in recovering such taxes. Impax shall provide GSK with U.S. residency certification from U.S. Internal Revenue Service to show that it is resident for tax purposes in the United States of America. Impax shall notify GSK immediately in writing in the event that the Company ceases to be resident for tax purposes in the United States of America. Pending receipt of formal certification from the UK Inland Revenue GSK may pay royalty income and any other payments under this Agreement to Impax by deducting tax at a rate specified in the double tax treaty between the UK and USA, which rate, as of the Effective Date, is zero percent.

(b) Tax on Income. Each Party shall be solely responsible for the payment of all taxes imposed on its share of income arising directly or indirectly from the efforts of the Parties under this Agreement.

(c) Tax Cooperation. The Parties agree to cooperate with one another and use reasonable efforts to reduce or eliminate tax withholding or similar obligations in respect of royalties, milestone payments, and other payments made by GSK to Impax under this Agreement. Impax shall provide GSK any tax forms that may be reasonably necessary in order for GSK not to withhold tax or to withhold tax at a reduced rate under an applicable bilateral income tax treaty. Each Party shall provide the other with reasonable assistance to enable the recovery, as permitted by applicable Laws, of withholding taxes, value added taxes, or similar obligations resulting from payments made under this Agreement, such recovery to be for the benefit of the Party bearing such withholding tax or value added tax. GSK shall require its sublicensees in the Licensed Territory to cooperate with Impax in a manner consistent with this Section 7.9(c).

(d) Taxes Resulting From GSK Action. If GSK is required to make a payment to Impax that is subject to a deduction or withholding of tax, then (i) if such withholding or deduction obligation arises as a result of any action by GSK, including any assignment or sublicense, any change in GSK’s residency for tax purposes, any change in the entity making such payment, or any failure on the part of GSK to comply with applicable Laws or filing or record retention requirements, that has the effect of modifying the tax treatment of the Parties hereto (a “GSK Withholding Tax Action”), then the sum payable by GSK (in respect of which such deduction or withholding is required to be made) shall be increased to the extent necessary to ensure that Impax receives a sum equal to the sum which it would have received had no such GSK Withholding Tax Action occurred, and (ii) otherwise, the sum payable by GSK (in respect of which such deduction or withholding is required to be made) shall be made to Impax after deduction of the amount required to be so deducted or withheld, which deducted or withheld amount shall be remitted to the proper Governmental Authority in accordance with applicable Laws.

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ARTICLE 8

INTELLECTUAL PROPERTY MATTERS

8.1 Ownership of Inventions. Inventorship shall be determined in accordance with U.S. patent laws. The ownership of any and all inventions arising pursuant to this Agreement, which is discovered, developed, invented or created solely by or on behalf of a Party or jointly by or on behalf of GSK and Impax, shall be determined in accordance with inventorship, subject to the rights and licenses expressly granted by one Party to the other Party under this Agreement. Each Party shall own any inventions, whether or not patentable, made solely by its own employees, agents, or independent contractors in the course of conducting its activities under this Agreement, together with all intellectual property rights therein (“Sole Inventions”). The Parties shall jointly own any inventions that are made jointly by employees, agents, or independent contractors of each Party in the course of performing activities under this Agreement, together with all intellectual property rights therein (“Joint Inventions”). All Manufacturing activities conducted with respect to a Licensed Product shall be deemed conducted pursuant to the Supply Agreement rather than pursuant to this Agreement; ownership of inventions made pursuant to the Supply Agreement is addressed in the Supply Agreement. All Patents claiming jointly owned Joint Inventions shall be referred to herein as “Joint Patents.” Except to the extent either Party is restricted by the licenses granted to the other Party under this Agreement, each Party shall be entitled to practice and exploit the Joint Inventions and Joint Patents without the duty of accounting or seeking consent from the other Party.

8.2 Disclosure of Inventions. Each Party shall promptly disclose to the JPC all Sole Inventions and Joint Inventions, including any invention disclosures, or other similar documents, submitted to it by its employees, agents or independent contractors describing inventions that are either Sole Inventions or Joint Inventions, and such Information relating to such inventions to the extent necessary or useful for the preparation, filing and maintenance of any Patent with respect to such invention.

8.3 Prosecution of Patents.

(a) Impax Prosecuted Patents. As between the Parties, Impax shall have the sole right to Prosecute and Maintain Impax Patents and Joint Patent outside the Licensed Territory and any Patents for which the responsibility for Prosecution and Maintenance has been assumed by Impax pursuant to Section 8.3(b)(ii) or 8.3(b)(iii) below (the “Impax Prosecuted Patents”), at Impax’s cost and expense. Impax shall provide GSK reasonable opportunity to review and comment on such prosecution efforts regarding such Impax Prosecuted Patents, as follows. Impax shall promptly provide GSK with copies of all material communications from any patent authority regarding such Impax Prosecuted Patents, and shall provide GSK, for its review and comment, with drafts of any material filings or responses to be made to such patent authorities at least five (5) Business Days in advance of submitting such filings or responses. Impax shall consider in good faith any reasonable comments thereto provided by GSK in connection with the prosecution of Impax Prosecuted Patents.

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(b) GSK Prosecuted Patents.

(i) Subject to Sections 8.3(b)(ii) and 8.3(b)(iii) below, as between the Parties, GSK shall have the first right to Prosecute and Maintain Impax Patents and any Joint Patents in the Licensed Territory (the “GSK Prosecuted Patents”), at GSK’s cost and expense. GSK shall provide Impax reasonable opportunity to review and comment on such prosecution efforts regarding such GSK Prosecuted Patents, as follows. GSK shall promptly provide Impax with copies of all material communications from any patent authority regarding such GSK Prosecuted Patents, and shall provide Impax, for its review and comment, with drafts of any material filings or responses to be made to such patent authorities at least five (5) Business Days in advance of submitting such filings or responses. GSK shall consider in good faith any reasonable comments thereto provided by Impax in connection with the prosecution of GSK Prosecuted Patents. If Impax reasonably determines that any patent prosecution or enforcement action in the Licensed Territory is detrimental to the practice, prosecution or enforcement of Impax Patents outside the Licensed Territory, Impax may submit such action to the JPC for review and GSK shall not undertake such action until the JPC has rendered a decision pursuant to Section 3.3.

(ii) If GSK decides to cease the Prosecution or Maintenance of any GSK Prosecuted Patents, it shall notify Impax in writing sufficiently in advance so that Impax may, at its discretion, assume the responsibility for the Prosecution or Maintenance of such Patents, at Impax’s cost and expense. If Impax assumes such responsibility, then such Patents shall be included in the Impax Prosecuted Patents and the terms of Section 8.3(a) shall apply to such Patents.

(iii) If GSK or its Affiliates obtains ownership of, or a license or other right to commercialize in any country in the Licensed Territory: (1) XXXXXX, or (2) XXXXXX, then GSK shall no longer have the first right to Prosecute and Maintain Impax Patents and any Joint Patents in such country, and Impax may, at its discretion, assume the responsibility for the Prosecution or Maintenance of such Patents, at Impax’s cost and expense. If Impax assumes such responsibility, then such Patents shall be included in the Impax Prosecuted Patents and the terms of Section 8.3(a) shall apply to such Patents.

(c) Cooperation. Each Party shall provide the other Party all reasonable assistance and cooperation in the patent prosecution efforts provide above in this Section 8.3, including providing any necessary powers of attorney and executing any other required documents or instruments for such prosecution.

(d) Patent Term Extension. The Parties will cooperate with each other in gaining patent term extension where applicable to Licensed Products. All filings for such extension will be made by the holder of the Marketing Authorization Approval in the particular country. The Parties will timely provide any documentation or other assistance required in order to obtain such patent term extensions.

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8.4 Enforcement of Impax Patents and Joint Patents.

(a) Notification. If either Party becomes aware of any existing or threatened infringement of the Impax Patents or Joint Patents in the Licensed Territory (“Infringement”), it shall promptly notify the other Party in writing to that effect and the Parties will consult with each other regarding any actions to be taken with respect to such Infringement.

(b) Enforcement Rights. For any Infringement, each Party shall share with the other Party all Information available to it regarding such alleged infringement. GSK shall have the first right, but not the obligation, to bring an appropriate suit or other action against any person or entity engaged in such Infringement, at GSK’s cost and expense. GSK shall have a period of ninety (90) days after its receipt or delivery of notice under Section 8.4(a) to elect to so enforce the Impax Patents or Joint Patents in the Licensed Territory (or to settle or otherwise secure the abatement of such Infringement). In this case, Impax shall take appropriate actions, at GSK’s cost, in order to enable GSK to commence a suit or take the actions set forth in the preceding sentence. If GSK fails to commence a suit to enforce the applicable Impax Patents or Joint Patents or to settle or otherwise secure the abatement of such Infringement within such period, then Impax shall have the right, but not the obligation, to commence a suit or take action to enforce such Impax Patents or Joint Patents against such Infringement in the Licensed Territory at its own cost and expense. In this case, GSK shall take appropriate actions, at Impax’s cost, in order to enable Impax to commence a suit or take the actions set forth in the preceding sentence.

(c) Collaboration. Each Party shall provide to the enforcing Party reasonable assistance in such enforcement, at such enforcing Party’s request and expense, including to be named in such action if required by applicable Laws to pursue such action. The enforcing Party shall keep the other Party regularly informed of the status and progress of such enforcement efforts, shall reasonably consider the other Party’s comments on any such efforts, including, without limitation, determination of litigation strategy, filing of material papers to the competent court, which shall not be unreasonably withheld or delayed. The non-enforcing Party shall be entitled to separate representation in such matter by counsel of its own choice and at its own expense, but such Party shall at all times cooperate fully with the enforcing Party.

(d) Settlement. GSK shall not settle any claim, suit or action that it brought under Section 8.4(b) in any manner that would negatively impact the applicable Impax Patents or that would limit or restrict the ability of Impax to Develop, make, use, import, offer for sale, sell or otherwise Commercialize Licensed Products anywhere outside the Licensed Territory or to make or have made the Licensed Product anywhere in the world, without the prior written consent of Impax, which consent shall not be unreasonably withheld or delayed. Impax shall not settle any claim, suit or action that it brought under Section 8.4(b) in any manner that would limit or restrict the ability of GSK to sell Licensed Products for use in the Field, or impair the exclusivity of GSK’s license rights under this Agreement, in each case without the prior written consent of GSK, which consent shall not be unreasonably withheld or delayed.

(e) Expenses and Recoveries. The enforcing Party bringing a claim, suit or action under Section 8.4(b) shall be solely responsible for any expenses incurred by such Party as a result of such claim, suit or action. If such Party recovers monetary damages in such claim, suit or action, such recovery shall be allocated first to the reimbursement of any expenses incurred by the Party bringing suit, second to the reimbursement of any expenses incurred by the other Party in such litigation, and XXXXXX; provided, however, that, in the event GSK is the Party bringing suit, XXXXXX.

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8.5 Enforcement of GSK Patents. GSK shall have the sole right, but not the obligation, to bring an appropriate suit or other action against any person or entity allegedly infringing any Patents Controlled by GSK.

8.6 Patents Licensed From Third Parties. Each Party’s rights under this Article 8 with respect to the Prosecution and Maintenance and enforcement of any Impax Patent that is licensed by Impax from a Third Party shall be subject to the rights of such Third Party to Prosecute and Maintain and enforce such Patent.

8.7 Infringement of Third Party Rights in the Licensed Territory. If any Licensed Product used or sold by GSK, its Affiliates or sublicensees becomes the subject of a Third Party’s claim or assertion of infringement of a Patent granted by a jurisdiction within the Licensed Territory, GSK shall promptly notify Impax and the Parties shall promptly meet to consider the claim or assertion and the appropriate course of action and may, if appropriate, agree on and enter into a “common interest agreement” wherein the Parties agree to their shared, mutual interest in the outcome of such potential dispute. Except to the extent that GSK is entitled to indemnification pursuant to Section 10.1 of this Agreement or Section 11.1 of the Supply Agreement, GSK shall be solely responsible for the defense of any such infringement claims brought against GSK, at GSK’s cost and expense; provided, however, that the provisions of Section 8.4 shall govern the right of GSK to assert a counterclaim of infringement of any Impax Patents or Joint Patents.

8.8 Patent Marking. If permissible under the applicable Laws of a country in the Licensed Territory, and GSK decides to make it a standard practice to include patent numbers or indicia on its other prescription products in such country in the Licensed Territory, then GSK will discuss with Impax whether it is appropriate to include patent numbers or indicia on the Licensed Products, and the Parties shall proceed on such matters as they may then mutually agree.

8.9 Trademarks. GSK shall have the right to brand the Licensed Products in the Licensed Territory using GSK related trademarks and any other trademarks and trade names it determines appropriate for the Licensed Products in consultation with Impax, which may vary by country or within a country (“Product Marks”); provided, however, that GSK shall not, and shall ensure that its Affiliates and sublicensees will not, make any use of the trademarks or house marks of Impax (including Impax’s corporate name) or any trademark confusingly similar thereto without Impax’s prior written consent. GSK or its Affiliates shall own all rights in the Product Marks, and all goodwill in the Product Marks shall accrue to GSK or its Affiliates. GSK or its Affiliates shall register and maintain, at their own cost and expense, the Product Marks in the countries and regions in the Licensed Territory that GSK and its Affiliates determines reasonably necessary. GSK and its Affiliates shall have the sole right to register domain names incorporating the Product Marks at their own cost and expense. GSK and its Affiliates shall have the sole right to take action to prosecute and defend its rights in the Product Marks (including in respect of oppositions and infringement actions) as GSK and its Affiliates deem reasonably necessary.

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8.10 International Nonproprietary Name. If changes to the International Nonproprietary Name (“INN”) for the Licensed Products are required by the Regulatory Authorities in future, Impax will be responsible for the clearance and costs of obtaining a new generic name.

ARTICLE 9

REPRESENTATIONS AND WARRANTIES; COVENANTS

9.1 Mutual Representations and Warranties. Each Party hereby represents and warrants to the other Party as follows:

(a) Corporate Existence. As of the Effective Date, it is a company or corporation duly organized, validly existing, and in good standing under the Laws of the jurisdiction in which it is incorporated.

(b) Corporate Power, Authority and Binding Agreement. As of the Effective Date: (i) it has the corporate power and authority and the legal right to enter into this Agreement and perform its obligations hereunder; (ii) it has taken all necessary corporate action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder; and (iii) this Agreement has been duly executed and delivered on behalf of such Party, and constitutes a legal, valid, and binding obligation of such Party that is enforceable against it in accordance with its terms.

9.2 Additional Representations and Warranties of Impax. Impax represents and warrants to GSK as follows, as of the Effective Date:

(a) Title; Encumbrances. It has sufficient legal and/or beneficial title, ownership or license, free and clear from any mortgages, pledges, liens, security interests, conditional and installment sale agreement, encumbrances, charges or claim of any kind, of the Impax Technology to grant the licenses to GSK as purported to be granted pursuant to this Agreement;

(b) Notice of Infringement or Misappropriation. It has not received any written notice from any Third Party asserting or alleging that any research or development of a Licensed Product by Impax prior to the Effective Date infringed or misappropriated the intellectual property rights of such Third Party;

(c) Non-Infringement of Third Party Rights. To Impax’s knowledge, the Development and Commercialization of a Licensed Product and the Manufacture of Licensed Product under the Supply Agreement can be carried out in the manner reasonably contemplated as of the Effective Date without infringing any issued patents owned or controlled by a Third Party;

(d) No Proceeding. There are no pending, and to Impax’s knowledge, no threatened, adverse actions, suits or proceedings against Impax involving Impax Technology or a Licensed Product;

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(e) Other Agreements. Impax has no existing agreements, options, commitments, or rights with, of, or to any person (other than GSK) to acquire, license or otherwise obtain any rights to the Original Product in the Licensed Territory. As of the Effective Date, no Impax Patents or Impax Know-How have been licensed to Impax from any Third Party;

(f) Certain Other Arrangements. Prior to the Effective Date, neither Impax nor its Affiliates have directly or indirectly (i) been a party to a license, sublicense or other contractual arrangement relating to, or (ii) entered into or otherwise benefitted from a license, sublicense or other contractual arrangement relating to any intellectual property rights or other interests or rights, including rights in non-clinical or clinical data, in any product (other than a Licensed Product) containing carbidopa or levodopa (whether formulated individually or in combination) for which an MAA had previously been approved;

(g) Prosecution of Impax Patents. To Impax’s knowledge, prior to the Effective Date, Impax has not taken action or failed to undertake an action in connection with filing, prosecuting and maintaining the Impax Patents in violation of any applicable law, statute or regulation.

9.3 Additional Representations and Warranties of GSK. GSK represents and warrants to Impax that, to GSK’s knowledge as of the Effective Date, GSK does not Control any Patent that is necessary to make, use, import, offer for sale or sell the Original Product in the Field.

9.4 Mutual Covenants.

(a) No Debarment. In the course of the Development of a Licensed Product, each Party shall not use any employee or consultant who has been debarred by any Regulatory Authority, or, to such Party’s knowledge, is the subject of debarment proceedings by a Regulatory Authority. Each Party shall notify the other Party promptly upon becoming aware that any of its employees or consultants has been debarred or is the subject of debarment proceedings by any Regulatory Authority.

(b) Conduct of Activities. Each Party’s Development of a Licensed Product shall be conducted in a manner consistent with the following: (i) in the case of GSK, not adversely impacting Impax’s or its Affiliates’ or Third Party partner’s Development or Commercialization efforts for a Licensed Product outside the Licensed Territory; and (ii) in the case of Impax, not adversely impacting GSK’s or its Affiliates’ or sublicensees’ Development or Commercialization efforts for a Licensed Product in the Licensed Territory.

(c) Compliance. Each Party and its Affiliates shall comply in all material respects with all applicable Laws in the Development and Commercialization of a Licensed Product and performance of its obligations under this Agreement, including the statutes, regulations and written directives of the FDA, the EMA and any Regulatory Authority having jurisdiction in the Licensed Territory, the FD&C Act, the Prescription Drug Marketing Act, the Federal Health Care Programs Anti-Kickback Law, 42 U.S.C. 1320a-7b(b), the statutes, regulations and written directives of Medicare, Medicaid and all other health care programs, as defined in 42 U.S.C. § 1320a-7b(f), and the Foreign Corrupt Practices Act of 1977, each as may be amended from time to time.

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9.5 Additional Covenants of Impax. The Parties acknowledge and agree that GSK desires to obtain a ten-year period of data exclusivity in connection with the MAA approval for a Licensed Product in the EU and that GSK could become ineligible to obtain such ten-year data exclusivity on account of Impax’s activities. XXXXXX:

(a) XXXXXX,

(b) XXXXXX,

(c) XXXXXX,

(d) XXXXXX, or

(e) XXXXXX.

For clarity, the restrictions set forth in this Section 9.5 shall terminate upon the first MAA approval of the Original Product by the European Commission or, if sooner, the first MAA approval by the European Commission of an Improved Product for which GSK has exercised its Option. For further clarity, this Section 9.5 shall not apply to XXXXXX.

9.6 Disclaimer. GSK understands that a Licensed Product is the subject of ongoing clinical research and development and that Impax cannot assure the safety or usefulness of a Licensed Product. In addition, Impax makes no warranties except as set forth in this Article 9 concerning the Impax Technology.

9.7 No Other Representations or Warranties. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, OR NON-MISAPPROPRIATION OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS, ARE MADE OR GIVEN BY OR ON BEHALF OF A PARTY, AND ALL REPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, ARE HEREBY EXPRESSLY EXCLUDED.

ARTICLE 10

INDEMNIFICATION

10.1 Indemnification by Impax. Impax shall defend, indemnify, and hold GSK and its Affiliates and their respective officers, directors, employees, and agents (the “GSK Indemnitees”) harmless from and against any and all Third Party claims, suits, proceedings, damages, expenses (including court costs and reasonable attorneys’ fees and expenses) and recoveries (collectively, “Claims”) to the extent that such Claims arise out of, are based on, or result from: (a) the Development or Commercialization of a Licensed Product by or on behalf of Impax, (b) the failure by Impax to timely obtain and maintain the license(s) required to be secured by Impax pursuant to Section 7.4(c)(iii), (c) the breach of any of Impax’s obligations under this Agreement, including Impax’s representations and warranties set forth herein, or (d) the willful misconduct or gross negligence of Impax, its Affiliates, or the officers, directors, employees, or agents of Impax or its Affiliates. The foregoing indemnity obligation shall not apply to the extent that (i) the GSK Indemnitees fail to comply with the indemnification procedures set forth in Section 10.3 and Impax’s defense of the relevant Claims is prejudiced by such failure, or (ii) any Claim arises from, is based on, or results from any activity set forth in Section 10.2(a), 10.2(b) or 10.2(c) for which GSK is obligated to indemnify the Impax Indemnitees under Section 10.2.

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10.2 Indemnification by GSK. GSK shall defend, indemnify, and hold Impax and its Affiliates and their respective officers, directors, employees, and agents (the “Impax Indemnitees”) harmless from and against any and all Claims to the extent that such Claims arise out of, are based on, or result from (a) the Development or Commercialization of a Licensed Product by or on behalf of GSK or its Affiliates or its or their sublicensees, or (b) the breach of any of GSK’s obligations under this Agreement, including GSK’s representations and warranties set forth herein, or (c) the willful misconduct or gross negligence of GSK, its Affiliates, or the officers, directors, employees, or agents of GSK or its Affiliates. The foregoing indemnity obligation shall not apply to the extent that (i) the Impax Indemnitees fail to comply with the indemnification procedures set forth in Section 10.3 and GSK’s defense of the relevant Claims is prejudiced by such failure, or (ii) any Claim arises from, is based on, or results from any activity set forth in Section 10.1(a), 10.1(b) or 10.1(c) for which Impax is obligated to indemnify the GSK Indemnitees under Section 10.1.

10.3 Indemnification Procedures. The Party claiming indemnity under this Article 10 (the “Indemnified Party”) shall give written notice to the Party from whom indemnity is being sought (the “Indemnifying Party”) promptly after learning of such Claim. The Indemnified Party shall provide the Indemnifying Party with reasonable assistance, at the Indemnifying Party’s expense, in connection with the defense of the Claim for which indemnity is being sought. The Indemnified Party may participate in and monitor such defense with counsel of its own choosing at its sole expense; provided, however, the Indemnifying Party shall have the right to assume and conduct the defense of the Claim with counsel of its choice. The Indemnifying Party shall not settle any Claim without the prior written consent of the Indemnified Party, not to be unreasonably withheld or delayed, unless the settlement involves only the payment of money. So long as the Indemnifying Party is actively defending the Claim in good faith, the Indemnified Party shall not settle or compromise any such Claim without the prior written consent of the Indemnifying Party. If the Indemnifying Party does not assume and conduct the defense of the Claim as provided above, (a) the Indemnified Party may defend against, consent to the entry of any judgment, or enter into any settlement with respect to such Claim in any manner the Indemnified Party may deem reasonably appropriate (and the Indemnified Party need not consult with, or obtain any consent from, the Indemnifying Party in connection therewith), and (b) the Indemnifying Party shall remain responsible to indemnify the Indemnified Party as provided in this Article 10.

10.4 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 10.4 IS INTENDED TO OR SHALL LIMIT OR RESTRICT THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY UNDER SECTION 10.1 OR 10.2, OR DAMAGES AVAILABLE FOR A PARTY’S BREACH OF CONFIDENTIALITY OBLIGATIONS IN ARTICLE 11.

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10.5 Supply Agreement. The rights and obligations set forth in this Article 10 shall be in addition to, and without prejudice to, indemnification, limitations of liability, insurance, representations and warranties and other rights and obligations of the Parties provided for under the Supply Agreement.

10.6 Insurance. Each Party shall procure and maintain insurance, including product liability insurance, adequate to cover its obligations hereunder and consistent with normal business practices of prudent companies similarly situated at all times during which any Licensed Product is being clinically tested in human subjects or commercially distributed or sold by such Party. It is understood that such insurance shall not be construed to create a limit of either Party’s liability with respect to its indemnification obligations under this Article 10. Each Party shall provide the other Party with written evidence of such insurance upon request. Each Party shall provide the other Party with written notice at least thirty (30) days prior to the cancellation, non renewal or material change in such insurance. GSK hereby represents and warrants to Impax that it is self-insured against liability and other risks associated with its activities and obligations under this Agreement.

ARTICLE 11

CONFIDENTIALITY

11.1 Confidentiality. Each Party agrees that, during the Term and for a period of five (5) years thereafter, it shall keep confidential and shall not publish or otherwise disclose and shall not use for any purpose other than as provided for in this Agreement or the Supply Agreement (which includes the exercise of any rights or the performance of any obligations hereunder or thereunder) any Confidential Information furnished to it by the other Party pursuant to this Agreement or the Supply Agreement, except to the extent expressly authorized by this Agreement or the Supply Agreement or otherwise agreed in writing by the Parties. The foregoing confidentiality and non-use obligations shall not apply to any portion of the other Party’s Confidential Information that the receiving Party can demonstrate by competent written proof:

(a) was already known to the receiving Party or its Affiliate, other than under an obligation of confidentiality, at the time of disclosure by the other Party;

(b) was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party;

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(c) became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement;

(d) was disclosed to the receiving Party or its Affiliate by a Third Party who has a legal right to make such disclosure and who did not obtain such information directly or indirectly from the other Party; or

(e) was independently discovered or developed by the receiving Party or its Affiliate without access to or aid, application, use of the other Party’s Confidential Information, as evidenced by a contemporaneous writing.

11.2 Authorized Disclosure. Notwithstanding the obligations set forth in Section 11.1, a Party may disclose the other Party’s Confidential Information and the terms of this Agreement to the extent:

(a) such disclosure is required to be made (i) for the filing or prosecuting Patent rights as contemplated by this Agreement or the Supply Agreement; (ii) to comply with the requirements of Regulatory Authorities with respect to obtaining and maintaining Regulatory Approval of a Licensed Product; or (iii) for the prosecuting or defending litigation as contemplated by this Agreement or the Supply Agreement;

(b) such disclosure is required to be made to its employees, agents, consultants, contractors, licensees or sublicensees on a need-to-know basis for the sole purpose of performing its obligations or exercising its rights under this Agreement or the Supply Agreement; provided, however, that in each case, the disclosees are bound by written obligations of confidentiality and non-use consistent with those contained in this Agreement;

(c) such disclosure is required to be made to any bona fide potential or actual investor, acquiror, merger partner, or other financial or commercial partner for the sole purpose of evaluating an actual or potential investment, acquisition or other business relationship; provided, however, that in connection with such disclosure, such Party shall use all reasonable efforts to inform each disclosee of the confidential nature of such Confidential Information and cause each disclosee to treat such Confidential Information as confidential; or

(d) such disclosure is required in order to comply with applicable Laws, including regulations promulgated by applicable security exchanges, court order, administrative subpoena or order.

Notwithstanding the foregoing, in the event a Party is required to make a disclosure of the other Party’s Confidential Information pursuant to Section 11.2(a) or 11.2(d), such Party shall promptly notify the other Party such required disclosure and shall use reasonable efforts to obtain, or to assist the other Party in obtaining, a protective order preventing or limiting the required disclosure.

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11.3 Technical Publication.

(a) Subject to Section 11.3(b) below, GSK shall have the right to publish, in GSK’s Clinical Trial Register, summaries of the results of all clinical trials of a Licensed Product conducted by either Party under this Agreement.

(b) Neither Party may publish peer reviewed manuscripts, or give other forms of public disclosure such as abstracts and presentations, of results of studies carried out under this Agreement, without the opportunity for prior review by the other Party, except to the extent required by applicable Laws. A Party seeking publication shall provide the other Party the opportunity to review and comment on any proposed publication which relates to a Licensed Product at least thirty (30) days prior to its intended submission for publication. The other Party shall provide the Party seeking publication with its comments in writing, if any, within twenty (20) days after receipt of such proposed publication. The Party seeking publication shall consider in good faith any comments thereto provided by the other Party and shall comply with the other Party’s request to remove any and all of such other Party’s Confidential Information from the proposed publication. In addition, the Party seeking publication shall delay the submission for a period up to sixty (60) days in the event that the other Party can demonstrate reasonable need for such delay, including the preparation and filing of a patent application. If the other Party fails to provide its comments to the Party seeking publication within such twenty (20)-day period, such other Party shall be deemed not to have any comments, and the Party seeking publication shall be free to publish in accordance with this Section 11.3(b) after the thirty (30)-day period has elapsed. The Party seeking publication shall provide the other Party a copy of the manuscript at the time of the submission. Each Party agrees to acknowledge the contributions of the other Party and its employees in all publications as scientifically appropriate.

11.4 Publicity.

(a) The Parties agree that the material terms of this Agreement are the Confidential Information of both Parties, subject to the special authorized disclosure provisions set forth in this Section 11.4.

(b) The Parties shall make a joint public announcement of the execution of this Agreement in the form attached as Exhibit C, which shall be issued on or promptly after the Effective Date.

(c) After release of such press release, if either Party desires to make a public announcement concerning the material terms of this Agreement, such Party shall give reasonable prior advance notice of the proposed text of such announcement to the other Party for its prior review and approval (except as otherwise provided herein), such approval not to be unreasonably withheld or delayed. A Party commenting on such a proposed press release shall provide its comments, if any, within five (5) Business Days after receiving the press release for review. In addition, where required by applicable Laws, including regulations promulgated by applicable security exchanges, such Party shall have the right to make a press release announcing the achievement of each milestone under this Agreement as it is achieved, and the achievements of Regulatory Approvals in the Licensed Territory as they occur, subject only to the review procedure set forth in the preceding sentence. In relation to the other Party’s review of such an announcement, such other Party may make specific, reasonable comments on such proposed press release within the prescribed time for commentary, but shall not withhold its consent to disclosure of the information that the relevant milestone has been achieved and triggered a payment hereunder. Neither Party shall be required to seek the permission of the other Party to repeat any information regarding the terms of this Agreement that has already been publicly disclosed by such Party, or by the other Party, in accordance with this Section 11.4; provided, however, such information remains accurate as of such time.

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(d) The Parties acknowledge that either or both Parties may be obligated to file under applicable Laws a copy of this Agreement with the U.S. Securities and Exchange Commission (“SEC”) or other Governmental Authorities. Each Party shall be entitled to make such a required filing; provided, however, that it requests confidential treatment of the commercial terms and sensitive technical terms hereof and thereof to the extent such confidential treatment is reasonably available to such Party. In the event of any such filing, each Party will provide the other Party with a copy of this Agreement marked to show provisions for which such Party intends to seek confidential treatment and shall reasonably consider and incorporate the other Party’s comments thereon to the extent consistent with the legal requirements, with respect to the filing Party, governing disclosure of material agreements and material information that must be publicly filed.

11.5 Equitable Relief. Each Party acknowledges that its breach of this Article 11 will cause irreparable harm to the other Party, which cannot be reasonably or adequately compensated in damages in an action at law. By reasons thereof, each Party agrees that the other Party shall be entitled, in addition to any other remedies it may have under this Agreement or otherwise, to preliminary and permanent injunctive and other equitable relief to prevent or curtail any actual or threatened breach of the obligations relating to Confidential Information set forth in this Article 11 by the other Party.

ARTICLE 12

TERM AND TERMINATION

12.1 Term. This Agreement shall become effective on the Effective Date and, unless earlier terminated pursuant to this Article 12, shall remain in effect on a country-by-country and, if GSK exercises an Option, Licensed Product-by-Licensed Product basis, until the expiration of the Royalty Term of a Licensed Product in such country (the “Term”). Upon the expiration of the Royalty Term for a Licensed Product in a particular country in the Licensed Territory: (a) the licenses granted by Impax to GSK under Sections 2.1(a) and 2.1(b) with respect to such Licensed Product in such country shall become perpetual, irrevocable, fully-paid, royalty free and exclusive and sublicenseable in multiple tiers; provided, however, that XXXXXX, and (b) Impax shall be deemed to have granted to GSK, a non-exclusive, perpetual, irrevocable, fully-paid, royalty-free license (with the right to grant sublicenses), under the Impax Manufacturing Technology, to make and have made such Licensed Product solely for use and sale in the Field in such country. For the purposes of this Section 12.1, the “Impax Manufacturing Technology” means (i) all Information Controlled by Impax or its Affiliates as of the expiration of such Royalty Term that is necessary to Manufacture such Licensed Product or was used by Impax pursuant to the Supply Agreement to Manufacture such Licensed Product or (ii) all Patents Controlled by Impax or its Affiliates as of the expiration of such Royalty Term that claim the composition of matter of, or a method of making, such Licensed Product.

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12.2 Unilateral Termination by GSK.

(a) GSK may terminate this Agreement in its entirety or with respect to a particular country upon ninety (90) days prior written notice to Impax at any time.

(b) GSK may terminate this Agreement in its entirety immediately upon written notice to Impax within thirty (30) days after the date on which (i) there is an issuance of a negative EMA CHMP opinion on the Original Product; (ii) the Original Product is approved by the European Commission outside the provisions of Article 8.3 of Directive 2001/83/EC and therefore is not granted ten years of data exclusivity; or (iii) the Reimbursement Study fails to meet its primary end point as set forth in the Development Plan, as amended from time to time.

12.3 Unilateral Termination by Impax. In the event that GSK or its Affiliates or sublicensees (directly or indirectly, individually or in association with any other person or entity) XXXXXX except for a country in the Licensed Territory in which this Agreement has been terminated and GSK did not, prior to such termination, exercise its first right to Prosecute and Maintain Impax Patents and Joint Patents in such country (a “XXXXXX”), Impax shall have the right to terminate this Agreement in its entirety upon providing written notice to GSK. However, Impax’s right to terminate this Agreement under this Section 12.3 shall not apply to any Affiliate of GSK that first becomes an Affiliate of GSK after the Effective Date of this Agreement in connection with a merger or acquisition event, where such Affiliate of GSK was undertaking activities in connection with a XXXXXX prior to such merger or acquisition event; provided, however, that GSK causes such XXXXXX to terminate within forty-five (45) days after such merger or acquisition event. For the avoidance of doubt, XXXXXX.

12.4 Termination Due to Termination of the Supply Agreement. This Agreement shall automatically terminate upon termination of the Supply Agreement for any reason.

12.5 Termination for Breach.

(a) Each Party shall have the right to terminate this Agreement in its entirety immediately upon written notice to the other Party if the other Party materially breaches its material obligations under this Agreement or the Supply Agreement and, after receiving written notice identifying such material breach in reasonable detail, fails to cure such material breach within ninety (90) days from the date of such notice (or within thirty (30) days from the date of such notice in the event such material breach is solely based on the breaching Party’s failure to pay any amounts due hereunder or pursuant to the Supply Agreement). The right of either Party to terminate this Agreement as provided in this Section 12.5(a) shall not be affected in any way by such Party’s waiver or failure to take action with respect to any previous default.

(b) Notwithstanding Section 12.5(a), if GSK is the breaching Party and GSK’s material breach only pertains to GSK’s diligence obligations with respect to a particular country in the Licensed Territory that is not a XXXXXX, Impax shall not have the right to terminate this Agreement in its entirety, but instead shall be limited in its remedies to terminating this Agreement only with respect to such country.

(c) If GSK has the right to terminate this Agreement pursuant to Section 12.5(a) on account of Impax’s uncured material breach, then, in lieu of its rights to terminate this Agreement in its entirety but in addition to any other remedies that GSK may have, GSK may, in its sole discretion, elect to put in effect the following changes to the Agreement and in such event: (i) XXXXXX; and (ii) XXXXXX; provided, however, that GSK shall have the right to set off against any payment obligations under Article 7 any amounts recovered by GSK in any litigation resulting from Impax’s material breach of this Agreement.

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12.6 Termination for Insolvency.

(a) Either Party may terminate this Agreement in its entirety, if, at any time, the other Party shall file in any court or agency pursuant to any statute or regulation of any state or country, a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment of a receiver or trustee of the Party or of substantially all of its assets, or if the other Party proposes a written agreement of composition or extension of substantially all of its debts, or if the other Party shall be served with an involuntary petition against it, filed in any insolvency proceeding, and such petition shall not be dismissed within ninety (90) calendar days after the filing thereof, or if the other Party shall propose or be a party to any dissolution or liquidation, or if the other Party shall make an assignment of substantially all of its assets for the benefit of creditors, (“Bankruptcy”).

(b) All licenses granted under or pursuant to any section of this Agreement are and shall otherwise be deemed to be for purposes of Section 365(n) of Title 11, United States Code (the “Bankruptcy Code”) licenses of rights to “intellectual property” as defined in Section 101(56) of the Bankruptcy Code. The Parties shall retain and may fully exercise all of their respective rights and elections under the Bankruptcy Code. Upon the bankruptcy of any Party, the non-bankrupt Party shall further be entitled to a complete duplicate of, or complete access to, any such intellectual property, and such, if not already in its possession, shall be promptly delivered to the non-bankrupt Party, unless the bankrupt Party elects to continue, and continues, to perform all of its obligations under this Agreement. Nothing in this Section 12.6(b) shall be interpreted as giving any Party greater rights to the other Party’s intellectual property after the bankruptcy of the other Party than such Party had prior to such bankruptcy.

12.7 Effect of Termination. Upon the termination of this Agreement with respect to a particular country or countries in the Licensed Territory or the termination of this Agreement in its entirety (i.e., with respect to all countries in the Licensed Territory) by GSK under Section 12.2, or by Impax under Section 12.3, or under Section 12.4, or under Section 12.5 due to GSK’s uncured material breach, or under Section 12.6 due to GSK’s Bankruptcy, or by Impax under Section 6.4(b)(ii) or 6.4(b)(iii), this Agreement shall be terminated in its entirety with respect to the terminated countries, including with respect to all licenses granted to GSK under Sections 2.1(a) and 2.1(b), the covenant set forth in Section 2.1(f), and the obligations of the Parties under Section 2.6, subject to the continued effect of the provisions expressly set forth to survive under Section 12.8 and the following provisions (a) through (f) of this Section 12.7 which are to apply with respect to such terminated countries:

(a) Regulatory Submissions; Data. To the extent permitted by applicable Laws, GSK shall transfer and assign to Impax all Regulatory Submissions, Regulatory Approvals, data from clinical and non-clinical studies conducted by or on behalf of GSK, its Affiliates or sublicensees on the Licensed Products and pharmacovigilance data on the Licensed Products, in each case relating to a Licensed Product in the terminated countries and only to the extent any such data is owned by GSK.

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(b) GSK License. GSK hereby grants to Impax, effective upon such termination, a non-exclusive, fully paid, royalty free, perpetual, irrevocable license (with the right to grant sublicenses through multiple tiers), under the GSK Technology (to the extent not assigned to Impax pursuant to Section 12.7(a)), to Develop, make, have made, use, sell, offer for sale, import and otherwise Commercialize Licensed Products in the terminated countries.

(c) Trademarks. To the extent that GSK is commercializing any Licensed Product under any Product Marks (excluding any such trademarks or trade names that include, in whole or part, any corporate name or logo of GSK) that is neither (i) used for any other products in GSK’s portfolio nor (ii) confusingly similar to any other trade mark used for any other products in GSK’s portfolio, GSK shall, upon Impax’s request, promptly assign such Product Marks to Impax in the terminated countries; provided, however, that before GSK assigns such Product Marks to Impax, Impax shall reimburse GSK for all costs that have been incurred by GSK through the date of termination in developing, registering and protecting such Product Marks.

(d) Transition Assistance.

(i) In the event of a termination of this Agreement in its entirety, GSK shall promptly return to Impax, at no cost to Impax, all Impax Know-How, materials, and other data transferred by Impax to GSK.

(ii) GSK shall reasonably cooperate with Impax to facilitate orderly transition of the Development and Commercialization of the Licensed Products to Impax in the terminated countries, including (A) assigning or amending as appropriate, upon request of Impax, any agreements or arrangements with Third Party vendors (including distributors) to Develop, package, label, distribute, sell or otherwise Commercialize the Licensed Product or, to the extent any such Third Party agreement or arrangement is not assignable to Impax, reasonably cooperating with Impax to arrange to continue to provide such services for a reasonable time after termination, not exceeding XXXXXX (XXXXXX) months after termination; (B) to the extent that GSK or its Affiliate is performing any activities described above in (A), reasonably cooperating with Impax to transfer such activities to Impax and continuing to perform such activities on Impax’s behalf for a reasonable time after termination until such transfer is completed, not exceeding XXXXXX (XXXXXX) months after termination; and (C) transferring to Impax or its designee of Regulatory Authority reporting responsibilities (including adverse event reporting) and the safety database for the Licensed Product for the terminated countries.

(iii) To avoid a disruption in the supply of Licensed Products to patients, if the Agreement is terminated in a country after the First Commercial Sale in such terminated country, GSK, its Affiliates and sublicensees (as applicable) shall continue to distribute the Licensed Products in such terminated countries, in accordance with the terms and conditions of this Agreement, until XXXXXX (XXXXXX) months after the effective date of any termination of this Agreement (the “Wind-down Period”); provided, however, that during such Wind-down Period, GSK’s and its Affiliates’ and sublicensees’ rights with respect to the Licensed Products in such terminated country shall be non-exclusive and, without limiting the foregoing, Impax shall have the right to engage one or more other distributor(s) and/or licensee(s) of the Licensed Products in such terminated country. Any Licensed Product sold or disposed by GSK, its Affiliates and sublicensees in such terminated country during the Wind-down Period shall be subject to applicable payment obligations under Article 7 above.

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(e) Ongoing Clinical Trials.

(i) GSK shall continue to be responsible for any additional Development Costs resulting from any Additional GSK Modifications that are incurred by Impax after the termination of this Agreement and shall reimburse Impax within sixty (60) days of receiving an invoice therefor.

(ii) GSK shall continue to be responsible for XXXXXX percent (XXXXXX%) of the previously contemplated and budgeted Development Costs incurred by Impax while conducting Other Shared Development Activities, and if GSK has exercised the Option, XXXXXX percent (XXXXXX%) of the previously contemplated and budgeted Development Costs for the Improved Product incurred by Impax, in each case up to the effective date of termination as well as during the period XXXXXX. In addition, to the extent Impax seeks to cancel, during the period three (3) months after such effective date of termination, previously contemplated and budgeted Development Costs, and Impax is unable to do so after using commercially reasonable efforts, GSK shall further be responsible for XXXXXX percent (XXXXXX%) of such previously contemplated and budgeted Development Costs which have proven to be non-cancellable, and shall reimburse Impax within sixty (60) days of receiving an invoice therefor. Except as expressly set forth in the foregoing two sentences, GSK shall have no further liability for or responsibility for reimbursing Impax’s expenses incurred after the effective date of termination relating to any Development Costs in such an event of termination of this Agreement.

(iii) With respect to any ongoing clinical trials of the Licensed Products being conducted by GSK for which Impax has notified GSK prior to the effective date of termination that it wishes to assume responsibility, (A) each Party shall cooperate with the other Party to facilitate the orderly transfer to Impax of the conduct of such clinical trials as soon as reasonably practicable after the effective date of termination, (B) until such time as the conduct of such clinical trials has been successfully transferred to Impax, GSK shall continue such clinical trials, (C) between the effective date of termination and the date on which the conduct of such clinical trials has been successfully transferred to Impax, Impax shall be responsible for, and shall reimburse GSK with respect to, all costs and expenses reasonably incurred by GSK in the conduct of such clinical trials, and (D) following the date on which the conduct of such clinical trials has been successfully transferred to Impax, Impax shall be solely responsible for all costs and expenses of such ongoing clinical trials.

(iv) With respect to any ongoing clinical trials of the Licensed Products being conducted by GSK for which Impax has not notified GSK prior to the effective date of termination that it wishes to assume responsibility, GSK shall, at GSK’s cost and expense, complete such clinical trial with regard to those patients enrolled at the date of termination. Promptly after the completion of such clinical trials, GSK shall provide Impax with copies of all data and results and all supporting documentation (e.g. protocols, CRFs, analysis plans) generated from such clinical trial and Impax shall have the right to use, without additional consideration, any and all such data and results solely for obtaining and maintaining Regulatory Approval and reimbursement of the Licensed Product and otherwise Commercializing the Licensed Products in the terminated countries and outside the Licensed Territory.

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(v) Notwithstanding any of the foregoing in Sections 12.7(e)(iii) and 12.7(e)(iv), GSK may prematurely suspend or terminate any such trial if (A) a priori protocol defined stopping rules are met for safety or efficacy or (B) unacceptable safety signals are observed by GSK or the Data and Safety Monitoring Board with respect to a Licensed Product that present an unacceptable risk to patients participating in such trials.

(f) Inventories. In the event of such a termination of this Agreement in its entirety: (i) Impax shall have the right to purchase from GSK any and all of the inventory of the Licensed Products held by GSK as of the date of termination at a price equal to the XXXXXX; and (ii) XXXXXX.

12.8 Survival. Termination or expiration of this Agreement shall not affect rights or obligations of the Parties under this Agreement that have accrued prior to the date of termination or expiration. Notwithstanding anything to the contrary, the following provisions shall survive any expiration or termination of this Agreement: Sections 2.2, 2.5, 4.8, 5.8 (with respect to Licensed Product sold in the Licensed Territory prior to termination), 7.2 through 7.6 (solely with respect to payments accrued before the effective date of termination), 7.7, 7.8, 7.9, 8.1, Articles 1, 9, 10, 11 (for five years following such termination), 12 (except for Section 12.3), 13 and 14 (except for Section 14.6).

ARTICLE 13

DISPUTE RESOLUTION

13.1 Disputes. The Parties recognize that disputes as to certain matters may from time to time arise that relate to either Party’s rights and/or obligations hereunder, including the interpretation, alleged breach, enforcement, termination or validity of this Agreement, including matters within the JSC’s authority upon with the JSC does not reach consensus within the ten (10) Business Day period set forth in Section 3.2(e), but excluding matters to be resolved under Section 3.3, (for the purposes of this Section 13.1 and Section 13.2, each a “Dispute”). It is the objective of the Parties to establish procedures to facilitate the resolution of such Disputes arising under this Agreement in an expedient manner by mutual cooperation. To accomplish this objective, the Parties agree that, if such a Dispute arises under this Agreement, and the Parties are unable to resolve such Dispute within twenty (20) Business Days after such Dispute is first identified by either Party in writing to the other, the Parties shall refer such Dispute to the Chief Executive Officer of Impax and a Senior Vice President of Research and Development of GSK (or their respective designees) (the “Executive Officers”) for attempted resolution by good faith negotiations within twenty (20) Business Days after such notice is received. If the Executive Officers of the Parties are not able to resolve such Dispute within twenty (20) Business Days, then the Parties agree to submit the dispute for non-binding mediation (with the understanding that the role of the mediator shall not be to render a decision but to assist the Parties in reaching a mutually acceptable resolution), which shall occur within a period of not more than twenty (20) Business Days. If the dispute is not resolved within such twenty (20) Business Days, either Party may commence litigation with respect to the subject matter of the dispute and with respect to any other claims it may have and thereafter neither Party hereto shall have any further obligation under this Section 13.1. Notwithstanding the foregoing, and without waiting for the expiration of any such twenty (20)-Business Day periods, Impax and GSK shall each have the right to apply to any court of competent jurisdiction for appropriate interim or provisional relief, as necessary to protect the rights or property of that Party.

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13.2 Jurisdiction; Governing Law. If the Parties are unable to resolve any Disputes arising under this Agreement through negotiations as described above in Section 13.1, then, subject to Section 13.3, such Disputes shall be resolved by the federal or state court sitting in Wilmington, Delaware (collectively, the “Courts”). Each Party hereby (a) irrevocably submits to the exclusive jurisdiction of the Courts, for purposes of any action, suit or other proceeding relating to or arising out of this Agreement, (b) agrees not to raise any objection at any time to the laying or maintaining of the venue of any such action, suit or proceeding in any of the Courts, (c) irrevocably waives any claim that such action, suit or proceeding has been brought in an inconvenient forum, and (d) further irrevocably waives the right to object, with respect to such action, suit or proceeding, that such Court does not have any jurisdiction over such Party. This Agreement and all Disputes arising out of or related to this Agreement or any breach hereof shall be governed by and construed under the laws of the State of Delaware, without giving effect to any choice of law principles that would require the application of the laws of a different state.

13.3 Patent and Trademark Disputes. Notwithstanding Sections 13.1 and 13.2, any dispute, controversy or claim relating to the scope, validity, enforceability or infringement of any Patent or trademark rights outside the U.S. covering the Manufacture, use importation, offer for sale or sale of a Licensed Product shall be submitted to the Joint Patent Committee. If after a period of twenty (20) Business Days the Joint Patent Committee is unable to reach a unanimous decision on such matter, then either Party may, by written notice to the other, have such matter referred to a conflict free external patent counsel mutually agreed to by the Parties. If such patent counsel is unable after a period of twenty (20) Business Days to reach a resolution on such matter that is mutually acceptable to the Parties, then either Party may, by written notice to the other, have such matter referred for non-binding mediation in accordance with Section 13.1.

ARTICLE 14

MISCELLANEOUS

14.1 Entire Agreement; Amendment. This Agreement, including the Exhibits hereto, sets forth the complete, final and exclusive agreement and all the covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties hereto with respect to the subject matter hereof and supersedes, as of the Effective Date, all prior and contemporaneous agreements and understandings between the Parties with respect to the subject matter hereof, including the Confidentiality Agreement. The foregoing shall not be interpreted as a waiver of any remedies available to either Party as a result of any breach, prior to the Effective Date, by the other Party of its obligations under the Confidentiality Agreement. There are no covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties other than as are set forth in this Agreement. No subsequent alteration, amendment, change or addition to this Agreement shall be binding upon the Parties unless reduced to writing and signed by an authorized officer of each Party.

58.

14.2 Force Majeure. Both Parties shall be excused from the performance of their obligations under this Agreement to the extent that such performance is prevented by force majeure and the nonperforming Party promptly provides notice of the prevention to the other Party. Such excuse shall be continued so long as the condition constituting force majeure continues and the nonperforming Party takes reasonable efforts to remove the condition. For purposes of this Agreement, force majeure shall include conditions beyond the control of the Parties, including an act of God, war, civil commotion, terrorist act, labor strike or lock-out, epidemic, failure or default of public utilities or common carriers, destruction of production facilities or materials by fire, earthquake, storm or like catastrophe, and failure of plant or machinery (provided that such failure could not have been prevented by the exercise of skill, diligence, and prudence that would be reasonably and ordinarily expected from a skilled and experienced person engaged in the same type of undertaking under the same or similar circumstances). Notwithstanding the foregoing, a Party shall not be excused from making payments owed hereunder because of a force majeure affecting such Party. If a force majeure persists for more than ninety (90) days, then the Parties will discuss in good faith the modification of the Parties’ obligations under this Agreement in order to mitigate the delays caused by such force majeure.

14.3 Notices. Any notice required or permitted to be given under this Agreement shall be in writing, shall specifically refer to this Agreement, and shall be addressed to the appropriate Party at the address specified below or such other address as may be specified by such Party in writing in accordance with this Section 14.3, and shall be deemed to have been given for all purposes (a) when received, if hand-delivered or sent by confirmed facsimile or a reputable courier service, or (b) five (5) Business Days after mailing, if mailed by first class certified or registered airmail, postage prepaid, return receipt requested.

If to Impax:	Impax Laboratories, Inc. 30831 Huntwood Avenue Hayward, CA 94544 Attn: President, Impax Pharmaceuticals Fax: 510-972-7756
With copies to (which shall not constitute notice):	Impax Laboratories, Inc. 30831 Huntwood Avenue Hayward, CA 94544 Attn: Legal Department Fax: 510-972-7756 Cooley LLP Five Palo Alto Square 3000 El Camino Real Palo Alto, CA 94306 Attn: Marya A. Postner, Ph.D. Fax: (650) 849-7400

59.

If to GSK:	Glaxo Group Limited Glaxo Wellcome House, Berkeley Avenue Greenford, Middlesex UB6 0NN, England Attn: Company Secretary Fax: 44 20 8 047 6904
With a copy to (which shall not constitute notice):	GlaxoSmithKline, LLC 2301 Renaissance Boulevard Mail Code RN0220 King of Prussia, PA 19406
	Attn: Vice President and Associate General Counsel, Legal
	Operations — Business Development
	Fax: 610-787-7084

14.4 No Strict Construction; Headings. This Agreement has been prepared jointly by the Parties and shall not be strictly construed against either Party. Ambiguities, if any, in this Agreement shall not be construed against any Party, irrespective of which Party may be deemed to have authored the ambiguous provision. The headings of each Article and Section in this Agreement have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular Article or Section. Except where the context otherwise requires, the use of any gender shall be applicable to all genders, and the word “or” is used in the inclusive sense (and/or). The term “including” as used herein means including, without limiting the generality of any description preceding such term.

14.5 Assignment. Subject to Section 4.11 and GSK’s right to grant sublicenses pursuant to Section 2.1(e) in a manner consistent with Section 2.3(b), neither Party may assign or transfer this Agreement or any rights or obligations hereunder without the prior written consent of the other, except that a Party may make such an assignment without the other Party’s consent: (a) to its Affiliates; or (b) to a Third Party successor to substantially all of the business of such Party to which this Agreement relates (such Third Party, an “Acquiror”), whether in a merger, sale of stock, sale of assets or other transaction, except that Impax’s prior written consent shall be required for assignment by GSK in connection with any Sale of the Neuroscience Business unless the proposed assignee has at least substantially the same commercial capabilities throughout the Licensed Territory as the Neuroscience Business has prior to such Sale of the Neuroscience Business (including all relevant GSK support functions, including sales representatives, that are made available to the Neuroscience Business). Any successor or assignee of rights and/or obligations permitted hereunder shall, in writing to the other Party, expressly assume performance of such rights and/or obligations. The Impax Technology, in the case of Impax as assignor or transferor shall exclude any Patents and Information Controlled by any Acquiror (or any Affiliate thereof, excluding a Party hereto as a result of such transaction) prior to the acquisition or developed outside of any activities under this Agreement. Any permitted assignment shall be binding on the successors of the assigning Party. Any assignment or attempted assignment by either Party in violation of the terms of this Section 14.5 shall be null, void and of no legal effect.

60.

14.6 Change of Control of Impax. From and after a Change of Control of Impax:

(a) GSK shall have the right to require Impax, including the Change of Control party, to adopt reasonable procedures to be agreed upon in writing with GSK to limit the dissemination of Sensitive Information to XXXXXX, including without limitation, XXXXXX. Without limiting the foregoing or being limited thereby, at a minimum in such circumstances, no Sensitive Information shall be disclosed to or used XXXXXX. For the purpose of this Section 14.6(a), “Sensitive Information” means all Confidential Information of GSK with respect to: the Development Plan, as described in Section 4.3; copies of data, results, or supporting documentation provided pursuant to Section 4.6; written reports, timelines, or the status of Development activities provided pursuant to Section 4.7; information obtained pursuant to the right to review and copy Development records pursuant to Section 4.8; information regarding regulatory developments and draft Regulatory Submissions provided pursuant to Section 5.1; the Commercialization Plan, as described in Section 6.2; financial assessments or other commercially-sensitive GSK information with respect to failure to launch a Licensed Product provided pursuant to Section 6.4(b); reports provided pursuant to Section 6.6; invoice details or other commercially-sensitive GSK information provided pursuant to Section 7.2(b); reports regarding clinical trials provided pursuant to Section 7.3(b); royalty related reports pursuant to Section 7.4(f); disclosure of Sole Inventions provided pursuant to Section 8.2; information related to GSK prosecution efforts provided pursuant to Section 8.3(b); information related to the status of GSK enforcement efforts or the status, progress or results of Development activities provided pursuant to Section 8.4(c); information regarding publications provided pursuant to Section 11.3(b).

(b) The governance structure, including the Alliance Manager, the JSC, the JPC and any Subcommittee shall continue as set forth in Article 3; provided, however, XXXXXX.

14.7 Performance by Affiliates. Each Party may discharge any obligations and exercise any right hereunder through any of its Affiliates. Each Party hereby guarantees the performance by its Affiliates of such Party’s obligations under this Agreement, and shall cause its Affiliates to comply with the provisions of this Agreement in connection with such performance. Any breach by a Party’s Affiliate of any of such Party’s obligations under this Agreement shall be deemed a breach by such Party, and the other Party may proceed directly against such Party without any obligation to first proceed against such Party’s Affiliate.

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

61.

14.9 Severability. If any one or more of the provisions of this Agreement is held to be invalid or unenforceable by any court of competent jurisdiction from which no appeal can be or is taken, the provision shall be considered severed from this Agreement and shall not serve to invalidate any remaining provisions hereof. The Parties shall make a good faith effort to replace any invalid or unenforceable provision with a valid and enforceable one such that the objectives contemplated by the Parties when entering this Agreement may be realized.

14.10 No Waiver. Any delay in enforcing a Party’s rights under this Agreement or any waiver as to a particular default or other matter shall not constitute a waiver of such Party’s rights to the future enforcement of its rights under this Agreement, except with respect to an express written and signed waiver relating to a particular matter for a particular period of time.

14.11 Independent Contractors. Each Party shall act solely as an independent contractor, and nothing in this Agreement shall be construed to give either Party the power or authority to act for, bind, or commit the other Party in any way. Nothing herein shall be construed to create the relationship of partners, principal and agent, or joint-venture partners between the Parties.

14.12 English Language. This Agreement was prepared in the English language, which language shall govern the interpretation of, and any dispute regarding, the terms of this Agreement.

14.13 Counterparts. This Agreement may be executed in one (1) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

62.

In Witness Whereof, the Parties have executed this License, Development and Commercialization Agreement in duplicate originals by their duly authorized representatives as of the Effective Date.

Glaxo Group Limited			Impax Laboratories, Inc.
By:	/s/ Paul Williamson		By:	/s/ Larry Hsu
	Name:	Paul Williamson		Name: Larry Hsu
	Title:	Authorised Signatory For and on behalf of Edinburgh Pharmaceutical Industries Limited Corporate Director		Title: President & CEO

EXHIBIT A

PIVOTAL PHASE III TRIALS AND GSK MODIFICATIONS

Phase 3, Study 1: IPX066 B08-05

Title: A Placebo-Controlled Study to Evaluate the Safety and Efficacy of IPX066 in Subjects with Parkinson’s disease

This is a randomised, placebo-controlled, fixed-dose, parallel-arm study of three doses of IPX066 versus placebo.

XXXXXX.

XXXXXX.

Phase 3 Study 2: IPX066 B09-02

Title: A Study to Evaluate the Safety and Efficacy of IPX066 in Advanced Parkinson’s Disease Subjects

This is a randomized, double-blind, active-control, parallel-group 13-week comparison of IPX066 versus immediate-release (IR) carbidopa-levodopa (CD-LD). XXXXXX.

XXXXXX.

XXXXXX.

Phase 3 Study 3: IPX066 B09-06

Title: A Study to Compare IPX066 and carbidopa/Levodopa/Entacapone (CLE) in Advanced Parkinson’s Disease

XXXXXX.

CONFIDENTIAL

EXHIBIT B

INITIAL DEVELOPMENT PLAN

XXXXXX.

XXXXXX

EXHIBIT C

JOINT PRESS RELEASE

[See attached]

PRESS RELEASE

GlaxoSmithKline and Impax Pharmaceuticals Enter Global Agreement to Develop and Commercialize
a late stage compound for Parkinson’s Disease

London & Hayward, Calif., December XX, 2010 — GlaxoSmithKline (GSK) and Impax Pharmaceuticals, the brand products division of Impax Laboratories, Inc. (Impax), today announced an agreement for the development and commercialization of IPX066, Impax’s novel extended release carbidopa-levodopa product, outside the United States and Taiwan. IPX066, an investigational product under development for the treatment of Parkinson’s Disease (PD), is currently in Phase III clinical trials.

Under the terms of the agreement, GSK will receive an exclusive license to sell IPX066 throughout the world except in the U.S. and Taiwan. Impax will receive an $11.5 million upfront payment and is eligible to receive potential payments of up to $175 million upon the successful achievement of development and commercialization milestones. Impax will also receive tiered, double-digit royalty payments on GSK sales of IPX066. Impax will manufacture and supply IPX066 to GSK.

Impax will complete the current Phase III program for IPX066, which includes the recently completed APEX-PD trial in early PD. The results from the remaining Phase III study program are expected to be available in 2011. In the U.S., Impax expects to file a New Drug Application for Parkinson’s Disease in late 2011 and will be responsible for commercialization. In other regions, excluding Taiwan, GSK will be responsible for further development and registration of IPX066 and commercialization of the product in those markets. A team structure with representatives from both companies is being established to enable effective coordination of planned global regulatory and commercialization activities.

“We are very pleased to announce this development and collaboration agreement with GSK, which is a significant milestone in the development of Impax Pharmaceuticals and an important achievement in the planned global commercialization for IPX066 for the treatment of Parkinson’s Disease,” stated Michael Nestor, President of Impax Pharmaceuticals. “GSK is an ideal partner for IPX066, combining global best-in-class development, regulatory and commercial experience in Parkinson’s Disease, which will be an asset in the successful commercialization of IPX066.”

“We are excited by the opportunity IPX066 represents to patients,” commented, Atul Pande, Senior Vice President, Neurosciences Medicines Development Center, GSK. “There is a significant need for a therapy which can improve on clinical symptom management and control in Parkinson’s Disease. We look forward to collaborating with Impax and hope to deliver an improved treatment option to the millions of people living with this devastating disease.”

PRESS RELEASE

About IPX066

IPX066 is an investigational extended release carbidopa-levodopa product with an enhanced pharmacokinetic profile. The IPX066 pharmacokinetic profile has the potential to offer reliable control of Parkinson’s Disease symptoms, such as the reduction in “off time” throughout the day, which has been observed in preliminary studies of IPX066.

“Off time” is the functional state when patients’ medication effect has worn off and there is a return of Parkinson symptoms.

The phase III clinical development program for the registration of IPX066 in the U.S. includes the recently completed APEX-PD trial in early PD, the ADVANCE-PD study in advanced PD subjects, an open label extension study for subjects from the ADVANCE-PD and APEX-PD studies. Additionally, for the European application, Impax is conducting the ASCEND-PD comparative study of IPX066 and carbidopa-levodopa and entacapone, which is currently enrolling subjects.

About Parkinson’s Disease

Parkinson’s Disease is a chronic neurodegenerative movement disorder affecting over three million people in the U.S., Europe and Japan.

About Impax Laboratories, Inc.

Impax Laboratories, Inc. is a technology based specialty pharmaceutical company applying its formulation expertise and drug delivery technology to the development of controlled-release and specialty generics in addition to the development of branded products. Impax markets its generic products through its Global Pharmaceuticals division and markets its branded products through the Impax Pharmaceuticals division. Additionally, where strategically appropriate, Impax has developed marketing partnerships to fully leverage its technology platform. Impax Laboratories is headquartered in Hayward, California, and has a full range of capabilities in its Hayward, Philadelphia and Taiwan facilities. For more information, please visit the Company’s Web site at: www.impaxlabs.com.

Impax Laboratories, Inc: Company Contact:
Mark Donohue
Sr. Director
Investor Relations and Corporate Communications
(215) 933-3526
www.impaxlabs.com

PRESS RELEASE

GlaxoSmithKline — one of the world’s leading research-based pharmaceutical and healthcare companies — is committed to improving the quality of human life by enabling people to do more, feel better and live longer. For further information please visit www.gsk.com

GlaxoSmithKline Enquiries:
UK Media enquiries:	David Mawdsley	(020) 8047 5502
	Claire Brough	(020) 8047 5502
	Stephen Rea	(020) 8047 5502
	Alexandra Harrison	(020) 8047 5502
	Jo Revill	(020) 8047 5502
US Media enquiries:	Nancy Pekarek	(919) 483 2839
	Mary Anne Rhyne	(919) 483 2839
	Kevin Colgan	(919) 483 2839
	Jennifer Armstrong	(919) 483 2839
European Analyst/Investor enquiries:	Sally Ferguson	(020) 8047 5543
	Gary Davies	(020) 8047 5503
	Ziba Shamsi	(020) 8047 3289
US Analyst/ Investor enquiries:	Tom Curry	(215) 751 5419
	Jen Hill Baxter	(215) 751 7002

Impax Laboratories, Inc.”Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995:

To the extent any statements made in this news release contain information that is not historical, these statements are forward-looking in nature and express the beliefs and expectations of management. Such statements are based on current expectations and involve a number of known and unknown risks and uncertainties that could cause the Company’s future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Such risks and uncertainties include the effect of current economic conditions on the Company’s industry, business, financial position, results of operations and market value of its common stock, the ability to maintain an effective system of internal control over financial reporting, fluctuations in revenues and operating income, reductions or loss of business with any significant customer, the impact of competitive pricing and products and regulatory actions on the Company’s products, the ability to sustain profitability and positive cash flows, the ability to maintain sufficient capital to fund operations, the ability to successfully develop and commercialize pharmaceutical products, the uncertainty of patent litigation, consumer acceptance and demand for new pharmaceutical products, the difficulty of predicting FDA filings and approvals, the inexperience of the Company in conducting clinical trials and submitting new drug applications, reliance on key alliance and collaboration agreements, the availability of raw materials, the ability to comply with legal and regulatory requirements governing the healthcare industry, the regulatory environment, exposure to product liability claims and other risks described in the Company’s periodic reports filed with the SEC. Forward-looking statements speak only as to the date on which they are made, and Impax undertakes no obligation to update publicly or revise any forward-looking statement, regardless of whether new information becomes available, future developments occur or otherwise.

GSK’s cautionary statement regarding forward-looking statements

Under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, GSK cautions investors that any forward-looking statements or projections made by GSK, including those made in this announcement, are subject to risks and uncertainties that may cause actual results to differ materially from those projected. Factors that may affect GSK’ s operations are described under ‘Risk Factors’ in the ‘Business Review’ in the company’ s Annual Report on Form 20-F for 2009.

###

Schedule 1.34

FTE Rates

With respect to activities undertaken by Impax, an annual rate of $XXXXXX per FTE (which rate shall include customary overhead).

With respect to activities undertaken by GSK, an annual rate of $XXXXXX per FTE (which rate shall include customary overhead).

Schedule 1.51
List of Impax Patents

Patent Family “A”

		Filing/Submission
Appl. No.	Country/Region	Date	Priority Date	Priority Application	Status
10/241,837	United States	September 12, 2002	May 29, 2002	USSN 10/158,412	Issued (USPN 7,094,427)
03756204.8	Europe	May 23, 2003	May 29, 2002	PCT/US03/016391	Pending
2003/247409	Australia	May 23, 2003	May 29, 2002	PCT/US03/016391	Granted (AUPN 2003247409)
2,486,859	Canada	May 23, 2003	May 29, 2002	PCT/US03/016391	Granted (CAPN 2,486,859)
5107265.8	Hong Kong	May 23, 2003	May 29, 2002	PCT/US03/016391	Pending
164856	Israel	May 23, 2003	May 29, 2002	PCT/US03/016391	Granted (ILPN 164856)
2004-508790	Japan	May 23, 2003	May 29, 2002	PCT/US03/016391	Pending
10-2004-7019167	South Korea	May 23, 2003	May 29, 2002	PCT/US03/016391	Pending

Schedule 1.51
List of Impax Patents (cont.)

Patent Family “B”

		Filing/Submission
Appl. No.	Country/Region	Date	Priority Date	Priority Application	Status
12/599,668	United States	November 10, 2009	December 28, 2007	PCT/US08/014080	Pending
2008343787	Australia	December 26, 2008	December 28, 2007	PCT/US08/014080	Pending
2,711,014	Canada	December 26, 2008	December 28, 2007	PCT/US08/014080	Pending
200880122755.1	China	December 26, 2008	December 28, 2007	PCT/US08/014080	Pending
08866933.8	Europe	December 26, 2008	December 28, 2007	PCT/US08/014080	Pending
206756	Israel	December 26, 2008	December 28, 2007	PCT/US08/014080	Pending
1350/MUMN/2010	India	December 26, 2008	December 28, 2007	PCT/US08/014080	Pending
100114775	Japan	December 26, 2008	December 28, 2007	PCT/US08/014080	Pending
10-2010-7016189	South Korea	December 26, 2008	December 28, 2007	PCT/US08/014080	Pending
MX/a2010/007207	Mexico	December 26, 2008	December 28, 2007	PCT/US08/014080	Pending
586870	New Zealand	December 26, 2008	December 28, 2007	PCT/US08/014080	Pending
Not yet known	Singapore	December 26, 2008	December 28, 2007	PCT/US08/014080	Pending

EX-10.15

EXHIBIT 10.15

XXXXXX INDICATES MATERIAL THAT WAS OMITTED AND FOR WHICH CONFIDENTIAL TREATMENT WAS REQUESTED. ALL SUCH OMITTED MATERIAL WAS FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

EXECUTION COPY

SUPPLY AGREEMENT

This Supply Agreement (the “Supply Agreement”) is entered into as of December 15, 2010 (the “Effective Date”) by and between Impax Laboratories, Inc., a Delaware corporation with its principal place of business at 30831 Huntwood Avenue, Hayward, CA 94544 (“Impax”), and Glaxo Group Limited, doing business as GlaxoSmithKline, a company organized and existing under the laws of England and having an office and place of business at Glaxo Wellcome House, Berkeley Avenue, Greenford, Middlesex, UB6 ONN, United Kingdom (“GSK”). Impax and GSK are sometimes referred to herein individually as a “Party” and collectively as the “Parties”.

RECITALS

Whereas, Impax is developing a controlled release carbidopa-levodopa capsule product for the treatment of Parkinson’s disease;

Whereas, Impax and GSK are parties to a certain License, Development and Commercialization Agreement of even date hereof (the “License Agreement”), under which Impax has granted GSK the right to develop and commercialize such product in the Licensed Territory and an option to obtain such right with respect to an improved version of such product; and

Whereas, the License Agreement contemplates that Impax will manufacture and supply such product to GSK for development and commercial use, and Impax is willing to manufacture and supply such product to GSK, on the terms and conditions set forth below.

Now, Therefore, in consideration of the foregoing premises and the mutual promises, covenants and conditions contained in this Supply Agreement, the Parties agree as follows:

ARTICLE 1
DEFINITIONS

Capitalized terms used in this Supply Agreement but not defined herein shall have the meanings set forth in the License Agreement.

1.1 “Backup Manufacturer” has the meaning set forth in Section 2.9.

1.2 “Capacity Planning Forecast” has the meaning set forth in Section 2.2(e).

1.3 “Certificate of Analysis” means a document identified as such and provided by Impax to GSK with each shipment of Product that sets forth the Specifications and the analytical test results, approved by the quality assurance department, for the batch of Product shipped to GSK.

1.4 “Certificate of Conformance” means a document identified as such and provided by Impax to GSK with each shipment of Product that states that (a) the batch of Products shipped to GSK thereunder was manufactured in accordance with the Specifications and cGMPs, and (b) the batch of Products shipped to GSK thereunder is in conformance with each applicable Regulatory Approval in the Licensed Territory.

1.5 “Certificates” shall mean all or any one or combination of Certificate of Analysis and/or Certificate of Conformance.

1.6 “Change Control Operating Procedures” has the meaning set forth in Section 4.12(a).

1.7 “Clinical Supply Forecast” has the meaning set forth in Section 2.2(a).

1.8 “Consent” means consent, authorization, permit, certificate, license or approval of, exemption by, or filing or registration with, any Governmental Authority or other person.

1.9 “Current Good Manufacturing Practices,” “cGMPs” or “GMPs” means (a) the principles detailed in the U.S. Current Good Manufacturing Practices, 21 C.F.R. Parts 11, 210 and 211 and Directive 2003/94/EC, as each may be amended from time to time; (b) comparable Laws promulgated by any Governmental Authority having jurisdiction over the manufacture of the Product, or (c) comparable guidance documents (including but not limited to advisory opinions, compliance policy guides and guidelines) promulgated by any Governmental Authority having jurisdiction over the Manufacture of the Product, which guidance documents are being implemented within the pharmaceutical manufacturing industry for such Product.

1.10 “Environmental, Health and Safety Guiding Principles” has the meaning set forth in Section 4.10.

1.11 “Facility” means, collectively, Impax’s manufacturing facility located in Hayward, California, and the manufacturing facility of its Affiliate, Impax Laboratories (Taiwan), Inc. (TW) (“Impax Taiwan”), which manufacturing facility is located in Jhunan, Taiwan.

1.12 “Firm Zone” has the meaning set forth in Section 2.2(d).

1.13 “Launch Forecast” has the meaning set forth in Section 2.2(b).

1.14 “Laws” means all applicable laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of any federal, national, multinational, state, provincial, county, city or other political subdivision, domestic or foreign, including Regulatory Acts, whether now or hereafter enacted.

1.15 “License Agreement” has the meaning set forth in the Recitals.

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1.16 “Manufacture” with a correlative meaning for “Manufacturing” means all activities related to the manufacturing and production of the Original Product (including, without limitation, inspection, processing, labeling, packaging, testing, storing, distribution, transport and other handling), and if GSK exercises an Option, all activities (both prior to and after GSK’s exercise of such Option) related to the manufacturing and production of the particular Improved Product in question, in each case in bulk finished form for use in Development or Commercialization, including in-process and finished product testing, release of Product or any component or ingredient thereof, quality assurance activities related to manufacturing and release of Product, stability testing for intermediates and bulk finished Product to support expiration dating, conformance testing and regulatory activities related to any of the foregoing.

1.17 “Manufacturing Cost” means, with respect to Product that is (a) Manufactured by Impax or its Affiliates, Impax’s and/or its Affiliates’ fully burdened product manufacture costs, including costs reductions due to continuous improvement efforts, computed in accordance with generally accepted accounting principles applicable in the United States of America (“USA GAAP”) by application of Impax’s accounting policies, procedures, and/or conventions applied on a consistent basis, or (b) manufactured for and supplied to Impax by a Backup Manufacturer, XXXXXX. For clarity, if GSK exercises one or more Options pursuant to the License Agreement, the Manufacturing Cost shall be calculated separately for the Original Product and each Improved Product, on a Product-by-Product basis.

1.18 “Manufacturing Invention” has the meaning set forth in Section 8.1.

1.19 “Materials” mean (i) all raw materials, API, components, work-in-process, and other ingredients required to Manufacture the Product and (ii) all packaging materials used in the Manufacturing, storage, and shipment of the Product.

1.20 “Operating Expenses” means costs of plant operations and plant support services for the Facility where the Product is manufactured, including utilities, maintenance, engineering, safety, human resources, information technology, finance, plant management and other similar activities, to the extent allocable to Product ordered by GSK pursuant to this Supply Agreement.

1.21 “Product” means the Original Product or, following GSK’s timely exercise of the Option pursuant to the License Agreement, the Improved Product, in each case delivered in bulk finished form.

1.22 “Quality Agreement” has the meaning set forth in Section 2.10.

1.23 “Regulatory Acts” means all applicable laws and regulations of any of the countries in the Licensed Territory that govern the approval, manufacture, sale or licensing of pharmaceutical products, or ingredients for inclusion therein, including, without limitation, the United States Federal Food, Drug and Cosmetic Act, as amended, and the rules and regulations promulgated thereunder.

1.24 “Regulatory Authority” means any division of the United States Food and Drug Administration (as applicable) and any other applicable counterpart agency that administers the Regulatory Acts.

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1.25 “Rolling Forecast” has the meaning set forth in Section 2.2(c).

1.26 “Specification” means the written specification for the Product to be Manufactured and supplied to GSK pursuant to this Supply Agreement, as the same may be amended from time to time by Impax or in accordance with FDA requirements, or upon GSK’s reasonable request in accordance with requirements of Regulatory Authorities in the Licensed Territory. Specifications may be required to be different for the Product for use in different countries in the Licensed Territory due to individual Regulatory Authority requirements in such countries. For clarity, if GSK exercises the Option pursuant to the License Agreement, there will be separate Specifications, those for the Original Product and those for the Improved Product(s).

1.27 “Term” has the meaning set forth in Section 12.1.

1.28 “Transfer Price” has the meaning set forth in Section 3.1.

ARTICLE 2
PRODUCT SUPPLY

2.1 Purchase and Sale. Pursuant to the terms and conditions of this Supply Agreement, Impax, itself or through its Affiliates or Third Party subcontractors shall use Commercially Reasonable Efforts to Manufacture and supply to GSK, its Affiliates or permitted sublicensees, and GSK shall purchase from Impax, all of GSK’s and its Affiliates’ and sublicensees’ requirements for the Product for use in Development and Commercialization in the Field in the Licensed Territory pursuant to and in accordance with the License Agreement, in such quantities as GSK shall order pursuant to and in accordance with this Article 2. For clarity, Impax may perform its obligations under this Supply Agreement through one or more Third Party subcontractors, provided that Impax remains responsible for the work allocated to, and payment to, such subcontractors as it selects, to the same extent it would if it had done such work itself. The use of any Third Party subcontractor shall be approved by the Parties using the agreed Change Control Operating Procedures. Impax shall ensure audit rights for GSK with any Third Party subcontractors.

2.2 Forecasts.

(a) Clinical Supply Forecast. Within three (3) months after the Effective Date, GSK shall provide Impax with a written monthly rolling forecast (“Clinical Supply Forecast”) of its and its Affiliates’ and sublicensees’ anticipated requirements for the Product, in mutually agreed full batch sizes (“Full Batch Sizes”) for each Product configuration, for use in Development of the Product for the following eighteen (18) months, which Clinical Supply Forecast shall be updated thereafter on a monthly basis by GSK no later than ten (10) Business Days prior to the beginning of the next calendar month.

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(b) Launch Forecast. No less than nine (9) months prior to the anticipated first delivery date of Product that is intended for commercial sale in any XXXXXX, GSK shall provide Impax with a written monthly forecast (a “Launch Forecast”) of its and its Affiliates’ and sublicensees’ anticipated requirements for the Product for such XXXXXX, in Full Batch Sizes for each Product configuration for use in Commercialization for the XXXXXX (XXXXXX) month period following such anticipated first delivery date. No later than fifteen (15) Business Days after Impax’s receipt of a Launch Forecast, the Parties shall meet and shall work collaboratively to prepare and adopt a supply plan for such XXXXXX, including the month of release (a “Supply Plan”), for the launch of the Product in such XXXXXX. GSK will provide monthly updates to each Launch Forecast in a rolling fashion, and the Parties will update the corresponding Supply Plan accordingly, until such time as GSK provides the first Rolling Forecast pursuant to Section 2.2(c) that includes the forecast for the applicable XXXXXX, at which time the Rolling Forecast shall supersede the then-current Launch Forecast and corresponding Supply Plan for such XXXXXX. GSK will keep Impax apprised as to timing and Product requirements due to subsequent Product launches in other regulatory jurisdictions in the Licensed Territory, will notify Impax as soon as is practicable regarding any unique Specifications required by any Regulatory Authority, and will work with Impax to develop a launch plan for such subsequent Product launches in other regulatory jurisdictions in the Licensed Territory. XXXXXX. For the sake of clarity, XXXXXX.

(c) Rolling Forecast. No less than three (3) months prior to the first delivery date of Product that is intended for commercial sale in the Licensed Territory, GSK shall provide Impax with a written monthly rolling forecast (“Rolling Forecast”) of its and its Affiliates’ and sublicensees’ anticipated requirements for the Product, in Full Batch Sizes for each Product configuration for use in Commercialization for the following eighteen (18) months, which Rolling Forecast shall (i) specify a quantity of Product for each of the first five (5) months of such forecast, which quantity is no less than fifty percent (50%) and no more than one hundred twenty percent (120%) of the quantity forecasted for such month when such month was the sixth (6^th) month in the Launch Forecast, (ii) supersede the then-current Launch Forecast and corresponding Supply Plan, and (iii) be updated thereafter on a monthly basis by GSK no later than ten (10) Business Days prior to the beginning of the next calendar month.

(d) Binding Commitment. The first three (3) months of each Clinical Supply Forecast and Rolling Forecast shall constitute a binding commitment for Impax to Manufacture and supply and GSK to purchase the full batch quantity of Product specified therein as set forth below in Section 2.3, such quantity shall not be altered in subsequent monthly updates and such quantity for each month therein shall be no less than fifty percent (50%) and no more than one hundred twenty percent (120%) of the quantity forecasted for such month when such month was the sixth (6^th) month in the applicable previous forecast (each such three (3)-month period shall be referred to herein as the “Firm Zone”). For example, under a forecast with January as month 1 and June as month 6, if the forecast for June (month 6) is for a quantity of 1,000 units, then when the June forecast moves into month 3 of the Firm Zone, the minimum quantity of Product that GSK would be required to order and Impax would be required to supply for such month would be 500 units (50% of the 1,000 units forecasted) and the maximum quantity of Product that Impax would be required to supply (to the extent ordered by GSK) for such month would be 1,200 units (120% of the 1,000 units forecasted). Months four (4) through eighteen (18) of each Clinical Supply Forecast and Rolling Forecast shall be made in good faith and shall be nonbinding on GSK or Impax, provided however that the forecast for any month in the fourth (4^th) and fifth (5^th) months of any Clinical Supply Forecast or Rolling Forecast shall be no less than fifty percent (50%) and no more than one hundred twenty percent (120%) of the quantity forecasted for such month when such month was the sixth (6^th) month in the applicable previous forecast.

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(e) Capacity Planning Forecast. Within three (3) months after the Effective Date, GSK shall provide Impax with a written quarterly rolling forecast (“Capacity Planning Forecast”) of its and its Affiliates’ and sublicensees’ anticipated requirements for the Product, in Full Batch Sizes for each Product configuration, for use in Development or Commercialization of the Product for the five (5) year period following the eighteen (18) months covered by the Clinical Supply Forecast or Rolling Forecast, as the case may be, which Capacity Planning Forecast shall be updated thereafter on a semi-annual basis by GSK in January and July of each calendar year. The Capacity Planning Forecast shall be made in good faith for budget and capacity planning purposes only and shall be nonbinding on GSK and Impax.

(f) Forecasts for Improved Product. For clarity, if GSK exercises one or more Options pursuant to the License Agreement, GSK shall thereafter provide one (1) set of forecasts pursuant to this Section 2.2 for each Product, on a Product-by-Product basis.

2.3 Orders.

(a) GSK shall place orders for the Product with Impax using GSK’s electronic global trading platform, XXXXXX (or such similar system as GSK may deploy from time to time) for those quantities of Product identified in the applicable Firm Zone, which orders shall be in Full Batch Sizes for each Product configuration. Impax shall work with GSK, or GSK’s nominated representative, to ensure that Impax is able to accept purchase orders via such global trading platform. XXXXXX. GSK shall obtain for Impax, at GSK’s expense and request, all licenses and other rights necessary for Impax to use GSK’s electronic global trading platform in connection with this Supply Agreement. Each purchase order submitted to Impax by GSK shall specify the quantity ordered and the requested date of delivery to GSK at the Facility pursuant to Section 2.6, which delivery date shall not be less than ninety (90) days after the date such purchase order is received by Impax and may be extended only to the extent as reasonably necessary to allow Impax to implement any changes to the Manufacture of the Product requested by GSK or Regulatory Authorities in the Licensed Territory. Each purchase order placed for any Firm Zone (a “Firm Order”) shall constitute a firm obligation for GSK to purchase and for Impax to Manufacture and supply the ordered quantities of the Product, provided that such quantities comply with the next sentence. When a month enters the Firm Zone, GSK’s aggregate orders for such month shall equal the quantity specified in the corresponding month of the then current Clinical Supply Forecast or Rolling Forecast, as applicable. Within one (1) week after receipt of any Firm Order, Impax shall notify GSK in writing if Impax is not able to deliver the quantities so ordered by the requested delivery date and such notice shall indicate the portion of such Firm Order that Impax cannot supply by the requested delivery date and specify alternative delivery dates therefor; provided, however, that the foregoing shall not be deemed to provide Impax a right to reject any Firm Order. The terms and conditions of this Supply Agreement shall be controlling over any conflicting terms and conditions stated in any purchase order submitted pursuant to this Supply Agreement or Impax’s invoice or confirmation. Any other document that shall conflict with or be in addition to the terms and conditions of this Supply Agreement is hereby expressly rejected (unless the Parties shall have mutually agreed to the contrary in writing in respect of a particular instance).

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(b) From time to time, due to significant unforeseen circumstances, GSK may deliver to Impax a purchase order for Product volumes in excess of those specified in any Firm Zone. In the event that GSK delivers a purchase order requesting that Impax provide Product volumes in excess the Product volume specified in any Firm Zone, Impax shall use Commercially Reasonable Efforts to provide GSK with such excess Product volumes up to one hundred twenty percent (120%) of such Firm Zone if such request is received by Impax at least sixty (60) days prior to the desired delivery date pursuant to Section 2.6. For clarity, it shall not be a breach of this Supply Agreement if Impax, after using Commercially Reasonable Efforts, fails to provide GSK with such excess Product volumes.

2.4 Supply. Impax shall supply the Product as bulk unlabeled finished dosage form. If Impax delivers to GSK all Products Manufactured in the number of batches specified in the applicable Firm Order and the quantity of the Product delivered per batch is no more than one hundred ten percent (110%) and no less than ninety percent (90%) of the quantity of Product anticipated to be Manufactured in each such batch, then Impax shall be deemed to have fulfilled its obligation to supply the Product under such Firm Order and GSK shall accept and pay for all Product in such delivery. Impax shall calculate the quantity (number in capsules) of Product delivered by dividing the weight of the Product delivered by the average weight of sample Product capsules. Impax shall invoice GSK based on such calculation and GSK shall pay such invoice pursuant to Section 3.2, provided that if the actual quantity (number of capsules) of the Product delivered is less than ninety eight percent (98%) or more than one hundred two percent (102%) of the quantity (number of capsules) billed by Impax in the invoice, GSK shall promptly notify Impax and provide Impax with supporting documentation, and the Parties shall adjust the invoice and payment to reflect the quantity of the Product actually delivered. Impax shall use its Commercially Reasonably Efforts to deliver the Product to GSK, pursuant to Section 2.6, as released bulk within forty-five (45) days after encapsulation. The Parties acknowledge that investigations may be required prior to release of a batch and that Impax’s satisfaction of the obligations set forth in Section 6.2(f) may lengthen the time between encapsulation and delivery of Product, as released bulk, pursuant to Section 2.6.

2.5 Capacity. Impax shall at all times (i) maintain sufficient Manufacturing capacity at the Facility to satisfy its obligations for the Product requirements set forth in each Clinical Supply Forecast, (ii) maintain sufficient Manufacturing capacity at the Facility to satisfy its obligations for the Product requirements set forth in the Supply Plan (before it is superseded by the Rolling Forecast), and (iii) maintain sufficient Manufacturing capacity at the Facility to satisfy its obligations for the Product requirements set forth in each Rolling Forecast, provided however, that if there is a Significant Increase (as defined below) in the Product requirements set forth in a Clinical Supply Forecast, Supply Plan or Rolling Forecast, as applicable, relative to previous forecasts or plans, it may take some time for Impax to increase its Manufacturing capacity to meet GSK’s increased Product requirements, and it shall not be a breach of this Section 2.5 if Impax does not have sufficient Manufacturing capacity to satisfy GSK’s increased Product requirements during such period of time. For purposes of this Section 2.5, a “Significant Increase” means one that would require Impax to make a capital investment in order to have sufficient Manufacturing capacity to satisfy the Product requirements specified in the applicable forecast or plan. Impax shall use its Commercially Reasonable Efforts to implement its capital investment plan for additional capacity in order to timely meet the Significant Increase in GSK’s Product requirements in accordance with this Section 2.5.

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2.6 Shipping and Delivery. Delivery of Product from Impax to GSK shall take place FCA at the Facility designated by Impax (INCOTERMS 2000). Impax shall be responsible for obtaining all licenses or other authorizations for the exportation of the Product from the country of such Facility. GSK shall be responsible for obtaining all licenses or other authorizations for the importation of the Product into the Licensed Territory, and shall contract for shipment and insurance of the Product from such Facility, at GSK’s cost and expense. GSK shall arrange for pick up by GSK’s designated freight forwarder and Impax shall load the Product at the Facility into the means of transport provided by GSK’s designated freight forwarder, at which time risk of loss for Product shall transfer to GSK (i.e., Product shall be deemed delivered to GSK at the Facility after the Product is loaded). GSK shall bear the risk of damage to the Product after delivery to GSK at the Facility pursuant to this Section 2.6. If the Product is damaged thereafter, including during shipping, and GSK wants to order replacement Product, GSK shall promptly notify Impax of the damage and any orders for replacement Product shall be subject to acceptance by Impax. Notwithstanding any provision in this Supply Agreement to the contrary, neither payment by nor passing of the title of the Product to GSK shall be deemed to constitute acceptance of the Product. For clarity, acceptance of the Product by GSK is governed by Section 6.2(b).

2.7 Business Continuity Plan. Impax shall maintain and update as necessary during the Term a disaster recovery and business continuity plan in respect of the Manufacture of Product at the Facility and shall make copies of the plan (and any updates) available to GSK on request.

2.8 Allocation in the Event of Product Shortages. This Section 2.8 shall apply in the event that Impax is unable to supply, with respect to a calendar quarter, the total quantity of (a) Product ordered by GSK pursuant to Section 2.3 for delivery in such calendar quarter plus (b) Product required by Impax or its Affiliates or licensees, with respect to such calendar quarter, for use to fulfill Impax’s Development responsibilities pursuant to Section 4.2 of the License Agreement or for use outside the Licensed Territory, wherein such Product is Manufactured to the same applicable Specification (such event, a “Shortfall”). The purpose of these allocation rules is to permit GSK (with respect to the Licensed Territory) and Impax (with respect to its Development responsibilities pursuant to Section 4.2 of the License Agreement and with respect to countries outside the Licensed Territory) to independently make their respective long-term purchase decisions for the Product, with the benefits and risks of such purchase decisions to be allocated to GSK or Impax, as the case may be. In the event of a Shortfall, Impax shall not be obligated to fulfill any portion of any GSK order for such Product scheduled for delivery in that calendar quarter that exceeds one hundred percent (100%) of the quantity forecasted for any month in such calendar quarter when such month was the sixth (6^th) month in the applicable forecast. If Impax is still unable to supply the total quantity of (i) Product ordered by GSK pursuant to Section 2.3 (to the extent the quantity so ordered does not exceed one hundred percent (100%) of the quantity forecasted for such month when it was the sixth (6^th) month in the applicable forecast) plus (ii) Product required by Impax or its Affiliates or licensees for use to fulfill Impax’s Development responsibilities pursuant to Section 4.2 of the License Agreement or for use outside the Licensed Territory, wherein such Product is Manufactured to the same applicable Specification, then the available Product that is Manufactured to such applicable Specification in each calendar quarter in which a Shortfall occurs shall be allocated as between GSK (including its Affiliates and sublicensees) and Impax (including its Affiliates and its licensees outside the Licensed Territory) pro rata on the basis of the aggregate quantities scheduled for delivery in that calendar quarter based upon GSK’s orders for such calendar quarter (to the extent the quantity so ordered for each month in such calendar quarter does not exceed one hundred percent (100%) of the quantity forecasted for such month when it was the sixth (6^th) month in the applicable forecast) and the Product requirements of Impax, its Affiliates and its licensees outside the Licensed Territory for such calendar quarter (to the extent the quantities of Impax, its Affiliates and licensees for each month in such calendar quarter do not exceed one hundred percent (100%) of the quantity forecasted for such month when it was the sixth (6^th) month in the applicable forecast). The allocation rules set forth in this Section 2.8 shall restart for each calendar quarter, without any carryover of a Shortfall realized for either GSK or Impax in the prior calendar quarter.

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2.9 Backup Manufacturing. GSK understands and acknowledges that Impax is planning to Manufacture the Product in the Facility of its Affiliate, Impax Taiwan, and to use Impax’s Facility in Hayward, California as a backup manufacturing facility to supply the Product to GSK. Impax shall provide GSK with Manufacturing data for GSK to include both the Taiwan Facility and Hayward Facility in the MAA and all other Regulatory Submissions in the Licensed Territory. XXXXXX. Impax shall maintain the equipment at Hayward Facility in a state of readiness as necessary and shall initiate commercial manufacture using available capacity at the Hayward Facility in the event that XXXXXX. XXXXXX. Impax shall also take immediate action to ensure additional capacity is added to the Hayward Facility or the Taiwan Facility in a commercially reasonable timeframe such that the combined capacity in Hayward Facility and Taiwan Facility can meet one hundred percent (100%) of the Rolling Forecast; provided however, that Impax shall not be obligated to add capacity to the Hayward Facility or the Taiwan Facility if Impax reasonably believes that sufficient existing capacity at the Taiwan Facility, together with the Hayward Facility, can be restored or made available to meet one hundred percent (100%) of the Rolling Forecast before the time when it is reasonably anticipated that Product Manufactured from such additional capacity will become available for supply to GSK. Impax shall keep GSK apprised, through meetings pursuant to Section 2.13 or through the JSC, of Impax’s plan for adding, restoring or making available capacity in the Taiwan Facility and/or Hayward Facility to enable Impax to meet GSK’s orders for the Product in the Rolling Forecast (such plan, the “Impax Plan”). In the event that XXXXXX, Impax shall select a Third Party manufacturer (a “Backup Manufacturer”) that is reasonably acceptable to GSK to Manufacture the Product for supply to GSK solely to the extent Impax is unable to meet GSK’s orders for the Product in the applicable Firm Zone. For clarity, GSK and its Affiliates and sublicensees shall not have the right to Manufacture the Product themselves, subject to Section 12.3. Impax shall use Commercially Reasonable Efforts to negotiate and enter into an agreement with such Backup Manufacturer to allow such Backup Manufacturer to Manufacture and supply the Product to GSK on behalf of Impax solely to the extent Impax is unable to meet GSK’s orders for the Product in the applicable Firm Zone. Pursuant to such agreement, Impax shall transfer to such Backup Manufacturer all Information that is Controlled by Impax or its Affiliates as of the Effective Date or during the Term that is necessary, or is used by or on behalf of Impax, for the Manufacture of the Product. XXXXXX. For the sake of clarity, Impax shall enter into a supply agreement with the Backup Manufacturer (the “Impax-Backup Manufacturer Agreement”) and GSK shall have no obligations under such Impax-Backup Manufacturer Agreement. Notwithstanding the foregoing, GSK shall continue to provide Impax with the forecasts for the Product as set forth in Section 2.2, shall continue to place purchase orders for the Product with Impax as set forth in Section 2.3, and shall continue to purchase the Product directly from Impax. XXXXXX.

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2.10 Quality Agreement. No later than ninety (90) days following the Effective Date, the Parties shall enter into a quality agreement (the “Quality Agreement”) setting forth in detail the quality assurance arrangements and procedures with respect to the Manufacture of the Product, which Quality Agreement shall be incorporated herein by reference following its execution by both Parties. To the extent that the terms of this Supply Agreement and those of the Quality Agreement are in conflict, the terms of this Supply Agreement shall control except with respect to quality issues, which shall be governed by the Quality Agreement. For clarity, if there are any financial terms in the Quality Agreement that are in conflict with this Supply Agreement, this Supply Agreement shall control with respect to such financial terms.

2.11 Packaging by GSK. GSK shall package the Product into appropriate configurations and stock keeping units (“SKUs”) for use in Development or Commercialization in the Licensed Territory. GSK shall package the Product with labels, product inserts or outserts and other labeling conforming to all applicable Laws, including cGMPs, Regulatory Approval, approved labeling, and all other requirements of applicable Regulatory Authorities in the Licensed Territory.

2.12 Key Performance Indicators. GSK and Impax will use Key Performance Indicators to evaluate Impax’s performance of its obligations under this Supply Agreement. For purposes of this Supply Agreement, the indicators set forth on Schedule 2.12 to this Supply Agreement are the “Key Performance Indicators”. The Key Performance Indicators will reflect the Parties’ joint understanding as to the standards to be met by Impax consistent with GSK Global Manufacturing and Supply Key Performance Indicators.

2.13 Meetings and Reports. Unless otherwise mutually agreed in writing, the Parties shall meet via teleconference no less than on a monthly basis to discuss the forecasts delivered by GSK pursuant to this Supply Agreement, the Key Performance Indicators and other matters relevant to the supply of Products hereunder, including Materials inventory. The Parties shall also meet on a quarterly basis to discuss strategies for improving the processes related to the Manufacture of the Product for the Licensed Territory, to report other developments in the Impax supply chain for the Product for the Licensed Territory and, without relieving either Party of, or amending, any obligations under this Supply Agreement, to designate additional persons for communications relating to the performance of this Supply Agreement.

2.14 Continuous Improvement. The Parties acknowledge their common goal in reducing the costs associated with Manufacturing the Product. The Parties will discuss possible cost reduction mechanisms through the Joint Steering Committee. Any reduction in Manufacturing Costs will be reflected when the Transfer Price is calculated.

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ARTICLE 3
FINANCIALS

3.1 Price.

(a) GSK shall pay the transfer price (the “Transfer Price”) for each unit of Product supplied by Impax to GSK and such Transfer Price shall be equal to the XXXXXX. If it is necessary for Impax to obtain a license from a Third Party under any Patent to permit Impax, its Affiliates, or a Backup Manufacturer to Manufacture a Product in the country in which Impax is Manufacturing or having Manufactured such Product for the purposes of supplying such Product to GSK pursuant to this Supply Agreement, XXXXXX (“Third Party Patent Costs”), and XXXXXX. For clarity, Impax shall be solely responsible for seeking and maintaining any such license needed from a Third Party. Notwithstanding the foregoing, if Impax obtains a license from a Third Party under any Patent to permit Impax, its Affiliates, or a Backup Manufacturer to Manufacture a Product in the country in which Impax is Manufacturing or having Manufactured such Product for the purposes of supplying such Product to GSK, its Affiliate or permitted sublicensees pursuant to this Supply Agreement as a settlement of a dispute or litigation with a Third Party in which such Third Party alleged that Impax’s Manufacture of the Product infringes such Third Party’s Patent(s), XXXXXX. In addition, in the event of a breach of a representation or warranty made by Impax under Section 9.2(c) of the License Agreement, Impax shall be responsible for obtaining and paying for any license that is necessary to cure or otherwise remedy such breach, other than any license necessary to permit Impax, its Affiliates, or a Backup Manufacturer to Manufacture a Product in the country in which Impax is Manufacturing or having Manufactured such Product for the purposes of supplying such Product to GSK, its Affiliates or permitted sublicensees pursuant to this Supply Agreement.

(b) Within three (3) months after the receipt of the first forecast submitted by GSK, Impax shall set and notify GSK of the initial Transfer Price for the Product, which Transfer Price will be based on the Product quantities specified in such forecast. Thereafter, the Parties shall meet each once every six (6) months to review (i) Impax’s XXXXXX in the immediately preceding six (6) months, and (ii) any implemented or planned continuous improvements. Impax shall provide GSK with reasonable and customary cost accounting schedules and supporting documentation thereto that were used by Impax to calculate the Transfer Price, so that GSK can confirm the accuracy of such calculation. Impax shall adjust the Transfer Price after such review to reflect any updates to the calculation of XXXXXX. Impax and GSK agree that the information in Section 3.1(b)(i)-(ii) will be used as the primary basis to adjust the Transfer Price. In addition, if the aggregate cost of Materials to Manufacture the Product increases or decrease more than XXXXXX percent (XXXXXX%) since the date of the last Transfer Price adjustment, or if Impax’s Manufacturing Cost increases or decreases due to changes requested by GSK (including significant changes in its forecasts for the Product) or Regulatory Authorities in the Licensed Territory, then Impax will increase or decrease the Transfer Price, and such increase or decrease will be implemented in the next Firm Order and all subsequent Firm Orders until the next Transfer Price adjustment.

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(c) In addition to Section 3.1(b) and not in limitation thereof, no later than April 15^th and October 15^th of each year, Impax shall provide a reconciliation report to GSK (the “Reconciliation Report”). The Reconciliation Report shall provide Impax’s XXXXXX during the last half of the prior calendar year (for the April 15^th report) or the first half of the current calendar year (for the October 15^th report) (the “Verified Transfer Price”) and shall be accompanied by reasonable and customary cost accounting schedules and supporting documentation thereto that were used by Impax to calculate the XXXXXX, so that GSK can confirm the accuracy of such calculation. The Reconciliation Report shall also contain a calculation of the difference between the amount paid by GSK for Product during the applicable time period using the Transfer Price and the amount that should have been paid by GSK using the Verified Transfer Price. A positive numerical result shall result in a rebate or credit (at GSK’s discretion) being made to GSK for its overpayment. A negative numerical result shall result in a payment to Impax by GSK for GSK’s underpayment. To allow for GSK to confirm Impax’s calculation of XXXXXX, Impax agrees, subject to the obligations of confidentiality contained in this Supply Agreement and the License Agreement, to operate on an open book cost basis with respect to the cost accounting schedules and supporting documentation described above and shall meet with GSK regularly, but no less than twice per calendar year, to determine the XXXXXX to be invoiced GSK. Unless GSK notifies Impax within thirty (30) days after its receipt of the Reconciliation Report that it objects to the computation (the “Reconciliation Review Period”), the report shall be binding and conclusive. If GSK notifies Impax during the Reconciliation Review Period that it has a good faith objection to the computation, GSK shall select an independent certified public accounting firm of internationally recognized standing and reasonably acceptable to Impax, and Impax shall permit such accounting firm, at GSK’s expense, to have access to the relevant books and records of Impax during Impax’s normal business hours to verify the Reconciliation Report. Such accounting firm will endeavor during such inspection to minimize disruption of the normal business activities of Impax to the extent reasonably practicable, and shall complete such inspection and verification within thirty (30) days after GSK notifies Impax of its objection. The accounting firm shall disclose to GSK and Impax only whether the Verified Transfer Price is correct or incorrect and the specific details concerning any discrepancies, and such accounting firm’s conclusion shall be binding on the Parties absent manifest error.

(d) In addition to the foregoing in this Section 3.1, during the Term, Impax shall use Commercially Reasonable Efforts to provide GSK with at least ninety (90) days notice should it determine that its Transfer Price will increase by more than ten percent (10%) over the immediately preceding Transfer Price.

(e) For the avoidance of doubt, all costs incurred by Impax in relation to non-binding forecasts provided by GSK, except where this Supply Agreement expressly obligates GSK to make payment to Impax for any such costs (including without limitation Sections 2.2(d) and 4.8), shall be Impax’s sole responsibility.

(f) No later than April 15^th of each year, Impax shall invoice GSK for costs associated with bad batches incurred during the prior calendar year in Manufacturing the Product, to the extent not exceeding XXXXXX percent (XXXXXX%) of the cumulative Transfer Price of all Products delivered to GSK in the prior calendar year. GSK shall pay the amount invoiced within sixty (60) days of the receipt of such invoice. For the avoidance of doubt, GSK shall not be responsible for costs associated with bad batches incurred in Manufacturing the Product in any calendar year in excess of XXXXXX percent (XXXXXX%) of the cumulative Transfer Price of all Products delivered to GSK in such calendar year. For the purpose of this Section 3.1(f), “bad batches” means Materials, finished bulk Product and intermediate components that were either determined by Impax as not available for batch release or use, or terminated during production with no portion thereof subsequently made available to GSK or for further processing. By way of example, if the sum of Transfer Price of all units of Products delivered to GSK in a particular calendar year (i.e. the cumulative Transfer Price for such calendar year) is $XXXXXX (XXXXXX capsules with a Transfer Price of $XXXXXX per capsule), then GSK’s maximum liability to Impax for bad batches incurred during such calendar year under this Section 3.1(f) shall be $XXXXXX (XXXXXX% of $XXXXXX).

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3.2 Invoice and Payment. Upon delivery of the Product to GSK, Impax shall submit to GSK an invoice for payment, in U.S. dollars, of the Transfer Price for each unit of Product included in such delivery. GSK shall pay each invoice, in U.S. dollars, within sixty (60) days following the date of such invoice by wire transfer of immediately available funds into an account designated by Impax, or by GSK check drawn on a U.S. bank. Late payments shall bear interest as set forth in Section 7.7 of the License Agreement.

3.3 Other Manufacture Related Costs. GSK shall be responsible for the XXXXXX, subject to the remainder of this Section 3.3. Within thirty (30) days after the end of each calendar quarter during which such work has been performed by or on behalf of Impax at GSK’s request, Impax shall submit to GSK a reasonably detailed invoice, in U.S. dollars, setting forth XXXXXX. GSK shall pay to Impax the amount invoiced, in U.S. dollars, within sixty (60) days after the receipt of the invoice by wire transfer of immediately available funds into an account designated by Impax, or by GSK check drawn on a U.S. bank. Late payments shall bear interest as set forth in Section 7.7 of the License Agreement. For the sake of clarity, XXXXXX.

3.4 Tax.

(a) GSK shall pay Impax (if Impax is obligated to collect such amount from GSK) or the applicable Government Authority (if Impax is not obligated to collect such amount from GSK) any and all taxes (other than taxes calculated by reference to the income, profits or gains of Impax or any of its Affiliates), duties, and other charges and expenses imposed by any Government Authority in connection with the supply and transfer of the Product to GSK, provided that Impax provides GSK with an invoice for any such taxes that Impax is obligated to collect from GSK.

(b) GSK, Impax and each of its Affiliates shall use reasonable efforts to minimize any and all such taxes, duties, charges and expenses covered by the payment obligation of GSK in Section 3.4(a), including, where it is reasonable to do so, appealing against any assessment made by any Government Authority in respect of such taxes, duties, charges or expenses. Any appeal under this Section 3.4(b) made by Impax at the request of GSK shall be at GSK’s expense.

ARTICLE 4
MANUFACTURE OF PRODUCT

4.1 General. Impax shall Manufacture the Product in accordance with the Specifications, the applicable Consents, the Quality Agreement, cGMPs, Laws, and the Environmental, Health and Safety Guiding Principles, and ensure that all Products supplied under this Supply Agreement comply with the Specifications.

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4.2 Specification Changes.

(a) GSK Requested Changes. GSK shall be entitled to change the Specifications for a Product from time to time, and Impax shall make all revisions to the Specifications requested by GSK in accordance with the Change Control Operating Procedures, to the extent that such revisions are technically feasible. GSK retains the right and responsibility for final approval of the Specifications for the Product. Impax shall evaluate and provide to GSK in writing the estimated costs, timing and technical feasibility of potential revisions to the Specifications and GSK must approve such evaluation in writing before implementation of a change under this Section 4.2(a).

(b) Impax Changes. All Impax initiated changes to the Specifications shall be made in accordance with the Change Control Operating Procedures. GSK retains the right and responsibility for final approval of the Specifications for the Product. All requests by Impax for such revisions shall be submitted in writing to GSK on the forms prescribed by the Quality Agreement. Impax shall notify GSK, in writing and in reasonable detail, of (i) Impax’s suggested change; (ii) the reasons for the suggested change; (iii) the perceived benefits of the suggested change to Impax and GSK, respectively; and (iv) the estimated costs and timing of implementing such change.

(c) Allocation of Costs. Except for the costs of implementing any Specification changes required for compliance with Laws (which costs are governed by Section 4.2(e) below), the costs for implementing any Specification changes initiated by either GSK or Impax shall be allocated between the Parties as follows:

(i) If the Specification changes only apply to Product supplied to GSK under this Supply Agreement, XXXXXX.

(ii) If the Specification changes apply to both Product supplied to GSK under this Supply Agreement and Product for Impax’s own use, XXXXXX.

(iii) For clarity, the cost allocation set forth above only covers the one-time costs (including internal costs) incurred by Impax in implementing a Specification change, and XXXXXX.

(d) Purchase Orders; Documentation. If a change to the Specifications is implemented in accordance with Section 4.2(a) or Section 4.2(b), the Parties shall negotiate any changes in any affected Purchase Order to provide reasonable accommodation for changed circumstances. Impax shall be responsible for documenting all revisions to the Specifications, subject to GSK’s prior approval, in accordance with the Quality Agreement.

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(e) Payment for Certain Changes. Either Party may request a Specification change intended to maintain compliance with Laws or to bring the Specifications into compliance with Laws. Payment for Specification changes required for compliance with Laws will be made per the following standards:

(i) The costs of revisions requested by either Party in order to maintain the Specifications in conformity with that Product’s Regulatory Approval in the Licensed Territory, cGMPs, or Laws (including with respect to any of the Materials used in that Product), and not generally applicable to the manufacture of pharmaceutical products or types of dosage forms (e.g., sterile vials or blister packs) generally, shall be borne by GSK.

(ii) The costs of revisions requested by either Party to maintain the Specifications in conformity with cGMPs, or Laws that are generally applicable to the manufacture of pharmaceutical products or applicable dosage form (e.g., sterile vials or tablets in blister packs), shall be borne by Impax and reasonably allocated between the Product supplied to GSK (which allocation shall be included in the Transfer Price) and other pharmaceutical products that benefit from such revision.

4.3 Storage Obligations. When storing Product, Materials or Product-derived wastes, Impax shall comply with, and shall maintain all storage facilities in compliance with, Specifications, cGMPs, Laws, and the Quality Agreement.

4.4 Manufacturing Facility. Any change to the site of Manufacture of the Product to be supplied to GSK (or the site of manufacture of any of the Materials used in the Manufacture of the Product to be supplied to GSK), the Materials used in the Manufacture of the Product to be supplied to GSK, or the process used in the Manufacture of the Product to be supplied to GSK, or any other change which may be expected to have a regulatory impact, affect the Regulatory Approval in the Licensed Territory or materially affect the quality or physical characteristics of the Product to be supplied to GSK shall be made in accordance with the Change Control Operating Procedures.

4.5 Premises, Equipment. Impax shall use Commercially Reasonable Efforts to (a) provide and maintain premises of sufficient size and quality and all labor, plant, machinery, equipment and services necessary to enable Impax to fulfill all its obligations under this Supply Agreement including, in particular, the Manufacture of the Product; and (b) maintain all premises, plant, machinery and equipment used for or in connection with the performance of its obligations under this Supply Agreement in good working condition and in compliance with cGMPs, applicable Laws and any other relevant regulatory or manufacturer’s requirements

4.6 Certificates. Each time Impax ships Products to GSK, Impax shall provide GSK with the appropriate Certificates as required under this Supply Agreement.

4.7 Validation and Stability Studies.

(a) General. Impax shall perform on an on-going basis all validations and stability studies of intermediates and bulk packaged Product to support expiration dating as required by the Specifications, cGMPs, the Quality Agreement or Laws in connection with the regular course of Manufacturing the Products for commercial supply. XXXXXX. GSK shall be responsible for all finished goods stability studies of the Product.

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(b) Duties. In performing its duties under Section 4.7(a) above, Impax shall perform the following tasks:

(i) Collect, analyze, and maintain, for periods of time reasonably acceptable to GSK, the resulting stability data; and

(ii) transfer to GSK the analytical methods Controlled by Impax that are necessary for GSK to perform finished goods stability studies of Product as set forth in the Quality Agreement.

4.8 Materials. Impax shall timely purchase and test, as applicable, all Materials (unless GSK agrees in writing that no testing is required) as specified by the Specifications, XXXXXX. Impax will use Commercially Reasonable Efforts to obtain the lowest possible prices for equivalent quality Materials consistent with its obligations under this Supply Agreement. Impax shall prepare or cause to be prepared by its suppliers, as the case may be, all certifications as to any Materials required by the Quality Agreement, cGMPs, or Laws (each, a “Materials Certification”). Such Materials Certifications shall include, without limitation, any and all required certifications related to Materials derived from animal products. All Materials used by Impax in Manufacturing the Product for supply to GSK, its Affiliates or permitted sublicensees should satisfy the applicable local compendial requirements for the country in the Licensed Territory in which such Product will be sold, provided that GSK identifies such country in writing to Impax at least six (6) months prior to placing an order therefor pursuant to Section 2.3. Title to all such Materials shall reside with Impax until such Materials are incorporated into the Product and delivered to GSK. During the Term, if any of the Materials procured by Impax for the Manufacture of the Product for GSK based on months XXXXXX (XXXXXX) through XXXXXX (XXXXXX) of the then-current Clinical Forecast, Rolling Forecast or the Supply Plan is not consumed within XXXXXX (XXXXXX) months of its intended usage, GSK shall reimburse Impax the cost of any such unconsumed Materials, provided that Impax shall use Commercially Reasonable Efforts to mitigate such costs by trying to use such Materials in the Manufacture of the Product for its own use or in the manufacture of other products.

4.9 Quality Control and Quality Assurance. Impax shall implement and perform operating procedures and controls of Impax for sampling, stability and other testing of Materials and Products, and for validation, documentation and release of the Products to GSK as required by the Specifications, the Quality Agreement, cGMPs and Laws and such other quality assurance and quality control procedures of Impax. Only Materials complying with Specifications, the Quality Agreement, cGMPs and Laws may be released for use in Products.

4.10 Compliance with Environmental, Health and Safety Guiding Principles. Impax shall comply with its environmental, health, and safety guiding principles as set forth in Schedule 4.10 (the “Environmental, Health and Safety Guiding Principles”). Impax is solely responsible for the safety and health of its employees, consultants and visitors and compliance with all Laws and Regulatory Acts related to health, safety and the environment, including, without limitation, providing its employees, consultants and visitors with all appropriate information and training concerning any potential hazards involved in the manufacture, packaging, storage and supply of the Products and/or Materials and taking any precautionary measures to protect its employees from any such hazards. Impax shall: (i) provide GSK with information within three (3) Business Days of the occurrence of any significant adverse event that is specifically related to the Product or Materials or arose as a result of work carried out for GSK hereunder (e.g. employee illness due to exposure to Materials, significant injuries occurring to personnel while conducting work for the Products or major spills of the Products or Materials); (ii) provide GSK with information within three (3) Business Days of the occurrence of any significant adverse event that could reasonably be expected to affect the Manufacture of Product for GSK; and (iii) ensure that all waste generated in the manufacturing or packaging of the Products is managed and disposed of in accordance with all Laws. Impax acknowledges and agrees that XXXXXX. Notwithstanding the foregoing in this Section 4.10, the Parties agree that GSK will conduct its Environmental, Health, and Safety audits in accordance with GSK’s environmental, health, and safety standards, and any differences between Impax’s standards and GSK’s standards that are identified by GSK during such environmental, health, and safety audit will be included in the list of issues raised by GSK based on such audit conducted pursuant to Section 5.4.

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4.11 Certain Prohibitions. Impax shall not, as applicable, manufacture, store or process any Materials or Product in the same building in which Impax manufactures, stores or processes cytotoxics, penicillin, genetically modified organisms, cephalosporins, sex hormones, anabolic steroids, or infectious agents (e.g., spore-bearing and live viruses) (collectively, “Potential Contaminants”) unless the Potential Contaminants are stored or manufactured in contained environments and in compliance with cleaning, validation and changeover standards of the Quality Agreement, cGMPs, and all Laws (including, without limitation, the National Health Surveillance Agency (Anvisa)), provided that, if Impax’s storage or manufacture of Potential Contaminants does not comply with the Quality Agreement, cGMPs, or Laws, then following the receipt of such non-compliance from GSK, Impax shall promptly commence action to cure such non-compliance and shall cure such non-compliance within a commercially reasonable time period. GSK may terminate this Supply Agreement and the License Agreement on account of Impax’s breach of this Section 4.11 only if following the receipt of such non-compliance from GSK, Impax fails to promptly commence action to cure such non-compliance or fails cure such non-compliance within a commercially reasonable time period. Notwithstanding the foregoing, nothing in this Section 4.11 shall be deemed to limit any other rights or remedies available to GSK under this Supply Agreement, the License Agreement, under law or in equity.

4.12 Change Control Operating Procedure.

(a) General. The procedure set forth in the Quality Agreement shall establish the procedure to be followed in the event either GSK or Impax desires to change any aspect of the process by which the Products to be supplied to GSK are Manufactured, including but not limited to, any change in the Product or Specifications (the “Change Control Operating Procedure”). Impax may not implement a change to the Manufacturing procedure for the Product to be supplied to GSK hereunder unless it has complied with the Change Control Operating Procedure.

(b) Amendment of Change Control Operating Procedure. Any change under the Change Control Operating Procedure shall be completed under the Change Control Operating Procedure in effect when the request for change was commenced.

(c) Governmental Approval. The Change Control Operating Procedure shall contain a mechanism to assure that all required regulatory filings are made, and, to the extent required, that the applicable Governmental Authority has approved any changes to the Specifications. The Parties shall discuss the way and manner to implement any changes in the Specifications required by any such Governmental Authority, and the costs associated with any changes shall be borne in accordance with Section 4.2(e).

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ARTICLE 5
REGULATORY AND QUALITY; COMPLIANCE

5.1 Transfer of Manufacture to Taiwan. Impax is currently Manufacturing the Original Product in its facility in Hayward, California and is in the process of transferring the Manufacture of the Original Product to the facility of its Affiliate, Impax Taiwan. In connection with such transfer, Impax shall be responsible for conducting Manufacture technology transfer, including the Bioequivalence Study pursuant to the License Agreement.

5.2 GSK Assistance. At Impax’s request and expense, GSK shall provide Impax with reasonable support and assistance in connection with Impax’s transfer of Manufacture of the Original Product to Impax Taiwan’s facility. Within thirty (30) days after the end of each calendar quarter during which GSK has provided Impax with such assistance and support, GSK shall submit to Impax a reasonably detailed invoice setting forth the number of GSK FTEs that were dedicated to providing such assistance and support during such calendar quarter, including, with respect to each individual comprising a GSK FTE or portion thereof, such individual’s name, number of hours worked, and description of work performed. Impax shall reimburse GSK, in U.S. dollars, for such FTEs at GSK’s then current FTE Rate within thirty (30) days after the receipt of the invoice.

5.3 Regulatory Inspections. Impax shall cooperate with any inspection of its Facility by any Regulatory Authority overseeing the Manufacture of Product for use in the Licensed Territory. Impax shall notify GSK within two (2) Business Days after Impax becomes aware of any such inspection and shall permit GSK’s representative to observe such inspection to the extent permitted by applicable Laws.

5.4 EHS, GMP and QA Audits. Upon written request to Impax not less than fifteen (15) Business Days prior to the requested visit date, GSK shall have the right to have its representatives visit the Facilities of Impax during normal business hours to assess Impax’s compliance with the Environmental, Health and Safety Guiding Principles, cGMPs and quality assurance standards and to discuss any Manufacturing related issues with Impax management personnel, including inspection of Impax’s records and those portions of the Facility used in the Manufacture, testing, packaging, storing, labeling, releasing or delivery of any Product to be supplied to GSK or Materials therefor. GSK shall have the right to audit and inspect all inventory of Products to be supplied to GSK and Materials therefor contained at the Facility; provided that such audit is conducted on reasonable notice to Impax. Purposes for such inspections may include cGMPs compliance, system audits, pre-approval inspections (PAI), compiling information for reporting obligations, compliance with Specifications, compliance with Quality Agreement, and/or investigations of complaints and/or compliance with any Laws, the Environmental, Health and Safety Guiding Principles, or the terms of this Supply Agreement (including all representations and warranties of Impax). GSK’s audit and inspection rights under this Section 5.4 shall not extend to

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any portions of the Facility, documents, records or other information which do not relate to Products or Materials therefor, or to the extent they relate or pertain to Product for Impax’s own use or Materials therefor (except to the extent that Product for Impax’s own use and Product supplied to GSK share common raw Materials and/or intermediates), Impax’s other products or materials or Third Parties or their products or materials. Impax may redact information relating to Product for Impax’s own use or Materials therefor (to the extent that Product for Impax’s own use and Product supplied to GSK do not share common raw Materials and/or intermediates), Impax’s other products or materials, or Third Parties and their respective products or materials from any documents deliverable to GSK in connection with GSK’s exercise of its audit and inspection rights hereunder. Impax shall participate in GSK’s audit and respond to any issues raised by GSK based on such audit, and if Impax agrees with the result of such audit, with a correction action plan within thirty (30) calendar days following receipt of GSK’s audit report. GSK may exercise such audit right no more than one (1) time per calendar year and each audit should not last for more than three (3) days; provided, however, that GSK may conduct a reasonable number of additional “for cause” audits with reasonable prior notice to Impax. For the purpose of this Section 5.4, examples of “for cause” include a recall of the Product is reasonably expected or underway, a stability failure has been identified, a Manufacture-related Adverse Event has occurred, or other emergency involving any Product supplied to GSK, or Material therefor or Facility to the extent relating to any Product supplied to GSK.

5.5 cGMP Documentation. Each Party shall maintain, in accordance with and for the period required under the applicable MAA, cGMPs, and Laws, complete and adequate records pertaining to the methods and facilities used for the cGMPs manufacture, processing, testing, packing, labeling, holding and distribution of the Products. Impax shall also maintain all records related to its compliance with its Environmental, Health and Safety Guiding Principles in accordance with Section 5.6.

5.6 Records Retention. During the Term and, thereafter, in accordance with Impax’s standard records retention policy, Impax shall keep complete and systematic written records of all documentation relating to the Manufacture of Products by Impax under this Supply Agreement, including, without limitation, and retain samples (per Section 6.11) of such bulk finished Products and raw Material thereof as are necessary to comply with manufacturing regulatory requirements applicable to Impax, as well as to assist with resolving Product complaints and other similar investigations in accordance with the Quality Agreement and incorporated herein by reference. Such records shall include any operational documentation pertaining to Impax’s supply of Products under this Supply Agreement, including records relevant to any costs or expenses incurred by Impax on behalf of GSK, any financial records, procedures (including records for compliance with federal, state and local law) and such other documentation pertaining to Impax’s supply of Products under this Supply Agreement. All financial records shall be kept in sufficient detail to permit accurate determination of all figures necessary for verification of payment obligations set forth in Article 3 of this Supply Agreement. Impax shall preserve all such records in accordance with Impax’s standard records retention policy. GSK acknowledges that Impax has provided GSK with a copy of its current standard records retention policy as of the Effective Date, and Impax will provide updated copies to GSK as its standard records retention policy is updated from time to time.

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5.7 Supply Consents. Impax holds all Consents now required by Impax for the performance of its obligations under this Supply Agreement. At all times, Impax shall maintain and comply with all the Consents which may from time to time be required by any Governmental Authority having jurisdiction with respect to its manufacturing operations and facilities and otherwise to be obtained by Impax to permit the performance of its then current obligations under this Supply Agreement. Impax shall bear all expenses incurred in connection with its obligations under this Section 5.7. In the event any Consent held by Impax relating to the Facility or its ability to manufacture the Products in accordance with this Supply Agreement is hereafter suspended or revoked, or Impax has material restrictions imposed upon it by any Governmental Authority affecting any of the Products or the Facility, Impax shall immediately notify GSK and shall promptly provide a schedule of compliance and such other information related thereto as is reasonably requested by GSK.

5.8 Product Consents. GSK and GSK Affiliates shall, at their expense, obtain and maintain any Consents which may from time to time be required by any Governmental Authority with respect to ownership of the Regulatory Approval for the Product in the Licensed Territory or with respect to the marketing, distribution, clinical investigation, import or export of the Products in the Licensed Territory. GSK shall, with Impax’s assistance and cooperation, in both cases at GSK’s expense, be responsible for responding to all requests for information required by GSK’s Consents from, and making all legally required filings relating to GSK’s Consents with, any Governmental Authority in the Licensed Territory having jurisdiction to make such requests or require such filings. In the event any Consent held by GSK relating directly to any of the Products is hereafter suspended or revoked, GSK shall promptly notify Impax of the event and shall promptly inform Impax of the impact on GSK’s purchases of the affected Product (when known by GSK) and GSK’s general intentions with respect to the affected Product.

ARTICLE 6
TESTING; ACCEPTANCE AND REJECTION

6.1 Acceptance; Reliance by GSK. In determining whether to accept any shipment of Product and authorize any subsequent release of Product to the market, GSK shall be entitled to rely upon the Certificate of Analysis provided by Impax, except to the extent that GSK has actual knowledge that such Certificate of Analysis is inaccurate. Except as agreed to by the Parties in writing, GSK shall be under no obligation to accept any shipment of Product without the accompanying Certificate of Analysis.

6.2 Rejection; Determination of Deficiency; Notice.

(a) General. GSK has the right to reject all or any portion of any shipment of Products that deviates from the Specifications, the Quality Agreement, cGMPs or Laws.

(b) Inspection. GSK shall inspect the Products manufactured by Impax upon receipt thereof and shall give Impax written notice (a “Deficiency Notice”) of all claims for Products that deviate from the Specifications, the Quality Agreement, cGMPs or Laws within thirty (30) days after GSK’s or GSK’s designee’s receipt thereof. Should GSK fail to provide Impax with the Deficiency Notice within the applicable thirty (30) day period, then the delivery shall be deemed to have been accepted by GSK, subject to Section 6.2(c), on the thirty-first (31st) day after delivery; provided, however, that Impax shall continue to be liable for (i) the failure of any Products to conform to Specifications (unless and to the extent the failure to conform to Specifications is caused by occurrences after the title to such Products passes to GSK pursuant to Section 2.6), or (ii) the failure of Impax to Manufacture the Product in accordance with the Quality Agreement, cGMPs and Laws.

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(c) Latent Defects. Except where the shelf-life of a Product has expired, GSK shall have the right to reject Product if it later discovers non-obvious defects not reasonably susceptible to discovery upon receipt of the Product and provides notice to Impax within ten (10) Business Days after discovery thereof by GSK; provided the latent defect must be attributable to Impax’s failure to Manufacture the Product in accordance with Specifications, the Quality Agreement, cGMPs or Laws.

(d) Determination of Deficiency.

(i) Upon receipt of a Deficiency Notice, Impax shall have fifteen (15) Business Days to advise GSK by notice in writing that Impax disagrees with the contents of such Deficiency Notice. Should Impax provide such a notice of disagreement, Impax’s most senior quality assurance officer and GSK’s Quality Head, Contract Manufacturing Quality, or such other persons as they may designate in writing, shall confer to review samples and/or batch records, as appropriate to determine whether any Products identified in the Deficiency Notice deviate from the Specifications, the Quality Agreement, cGMPs or Laws. If the Parties are unable to resolve whether any Products identified in the Deficiency Notice deviate from the Specifications, the Quality Agreement, cGMPs or Laws, Impax and GSK shall conduct an investigation pursuant to Section 6.5 and the Quality Agreement. If as a result of such investigation Impax and GSK resolve that the Products in question: (A) deviates from the Specifications (other than due and to the extent the deviation is caused by occurrences after the title to such Product passes to GSK pursuant to Section 2.6), (B) were not Manufactured in accordance with cGMPs, Laws or the Quality Agreement, or (C) is nonconforming due to the failure of a Impax-supplied Material or any Materials purchased by Impax, then GSK shall be entitled to reject the Products, and the cost of the investigation shall be borne by Impax. If as a result of such investigation Impax and GSK resolve that the Products in question: (X) meet the Specifications; (Y) were Manufactured in accordance with the Quality Agreement, cGMPs and Laws, and (Z) the nonconformity of the Product is caused by occurrences after the title to such Product passes to GSK pursuant to Section 2.6, then GSK shall thereafter be deemed to have accepted delivery of such Products, and the cost of such investigation shall be borne by GSK.

(ii) If, after completion of an investigation pursuant to the Quality Agreement and this Supply Agreement, GSK and Impax fail to resolve whether any Products identified in the Deficiency Notice deviate from the Specifications, the Quality Agreement, cGMPs or Laws, then the Parties shall mutually select an independent laboratory to evaluate if the Products in question deviate from the Specifications, the Quality Agreement, cGMPs or Laws. If the independent laboratory’s evaluation certifies that the Products in question: (A) deviate from the Specifications (other than and to the extent caused by occurrences after the title to such Product passes to GSK pursuant to Section 2.6), (B) were not Manufactured in accordance with cGMPs, Laws or the Quality Agreement, or (C) is nonconforming due to the failure of a Impax-supplied Material or any Materials purchased by Impax, then GSK shall be entitled to reject the Products, and the cost of the testing, evaluation by the independent laboratory shall be borne by Impax. If the independent laboratory’s evaluation certifies that the Products in question: (X) meet the Specifications; (Y) were Manufactured in accordance with the Quality Agreement, cGMPs or Laws, or (Z) the nonconformity is caused by occurrences after the title to such Product passes to GSK pursuant to Section 2.6, then GSK shall thereafter be deemed to have accepted delivery of such Products, and the cost of the testing and evaluation by the independent laboratory shall be borne by GSK.

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(iii) In the event that the independent laboratory cannot determine that the failure of Product to meet Specifications, the Quality Agreement, cGMPs or Laws could be attributed to either Party, per Section 6.2(d)(ii) above, Impax shall invoice GSK for fifty percent (50%) of the Transfer Price for such Product unless otherwise mutually agreed by both Parties in writing. Impax and GSK shall share equally the cost of the testing and evaluation by the independent laboratory.

(e) Shortages. GSK shall inform Impax of any claim relating to quantitative deficiencies in any shipment of Products within thirty (30) days following receipt of any shipment. In the event there is a quantitative deficiency in any shipment, with respect to the Product volumes indicated on the applicable invoice, GSK shall only pay for actual quantities delivered. All quantitative deficiencies and actual quantities shall be determined in accordance with Section 2.4.

(f) Deviation Reports. If, during the Manufacture or other handling of a Product by Impax, (i) the process or analytical parameters vary from typical or established report ranges, release guidelines or release limits, (ii) there is reasonable evidence that Specifications, the Quality Agreement, cGMPs or Laws were not followed in production of the Products, (iii) there is reasonable evidence that the Products fail to conform to Specifications, (iv) other events or conditions occur (including, without limitation, events first identified as affecting non-GSK products) that could reasonably be expected to adversely affect the strength, safety, identity, purity and quality of the Products or otherwise are unusual or not expected, or (v) any physical characteristic or attribute of the Products is recognizable at any time during the manufacturing process to be unusual, atypical or irregular by an individual with appropriate technical knowledge and experience exercising his or her best professional judgment, then Impax shall investigate the matter pursuant to provisions of the Quality Agreement and this Supply Agreement and, only if such matter is a Critical Deviation or Major Deviation (as such terms are defined in the Quality Agreement), prepare as soon as practicable following the discovery of such Critical Deviation or Major Deviation a written report detailing such Critical Deviation or Major Deviation (a “Deviation Report”) and send such Deviation Report, along with all supporting documentation, to GSK prior to the shipment of the Product. Impax shall include in its Deviation Report its analysis and recommendation for the disposition of the Product in the Deviation Report.

(g) Nonconformity. If either Party becomes aware or has a reasonable basis to believe that any batch or shipment of Products may have a Nonconformity, at any time regardless of the status of Impax’s testing and quality assurance activities or of GSK’s acceptance as provided above, such Party shall notify the other Party within two (2) Business Days of becoming aware of a Nonconformity. “Nonconformity” means a product characteristic, or potential for existence of product characteristic, that is attributable to Impax’s failure to Manufacture, test, package, store, label, release or deliver any Product in accordance with the Specifications, the Quality Agreement, cGMPs or Laws. In the event of a Nonconformity, Impax shall immediately conduct an investigation in accordance with this Supply Agreement and, until resolution of the investigation, handle the Products as provided in Section 6.2(h) of this Supply Agreement.

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(h) Products Subject to a Nonconformity or Deviation Report. Any batch or shipment of Product that is the subject of a Nonconformity or of a Deviation Report shall be handled as follows:

(i) Such Products held in inventory at the Facility shall be placed on quarantine status and shall not be shipped to GSK or its Affiliates, unless directed otherwise by GSK;

(ii) For any such Products shipped to GSK and held in stock by GSK, GSK shall maintain a “quarantine” or “unpassed” status until Impax has completed any investigations pursuant to this Supply Agreement and approved the disposition of the Product subject to GSK’s review and approval of the Nonconformity or the Deviation Report; and

(iii) Payment for such Products whether shipped or unshipped shall not be due from GSK until Impax has completed any investigations pursuant to this Supply Agreement and GSK has approved the acceptability of the Product subject to the Nonconformity or Deviation Report. For the avoidance of doubt, GSK shall be responsible for payment of invoices relating to Products which are ultimately not rejected pursuant this Article 6.

(k) Suspension of Manufacture. Upon learning of any Nonconformity of Product or in connection with a Remedial Action pursuant to Section 6.7, Impax shall have the right to suspend Manufacture of the affected Products at the Facility until the cause of such Nonconformity has been remedied or addressed. Impax shall notify GSK in writing within two (2) Business Days of Impax’s decision to suspend Manufacture of the affected Product. Impax shall provide GSK with a written summary of the cause of such suspension of Manufacture and GSK shall have the right to conduct a “for cause” audit pursuant to Section 5.4. During the period of suspended production, and until the suspension is lifted, GSK shall be relieved of all financial obligations associated with any Firm Orders or portion thereof that is not Manufactured as a direct consequence of the suspension.

6.3 Product Complaints. GSK shall have the sole responsibility for responding to questions and complaints from GSK’s customers. Questions or complaints received by Impax from GSK’s customers shall be promptly referred to GSK’s Quality Head, Contract Manufacturing Quality, or his designee. GSK shall promptly inform Impax of any and all complaints that GSK receives which implicate Impax’s Manufacturing or other processes at the Facility. Impax shall cooperate as reasonably required to allow GSK to determine the cause of and resolve any customer questions and complaints. Such assistance shall include follow-up investigations, including testing. In addition, Impax shall provide GSK with all mutually agreed upon information that will enable GSK to respond properly to questions or complaints relating to the Products as provided in the Quality Agreement to the extent that such complaint involves an issue involving the Manufacture of the Product supplied to GSK under this Supply Agreement. GSK shall bear the costs of activities performed pursuant to this Section 6.3, unless it is determined that the cause of any customer complaint resulted from Impax’s failure to Manufacture the applicable Product in accordance with the Specifications, the Quality Agreement, cGMPs or Laws and to the extent not caused by any occurrence after the title to such Product passes to GSK pursuant to Section 2.6, in which case Impax shall bear the reasonable costs of activities performed pursuant to this Section 6.3. In the event that either Party believes it has incurred significant internal costs in providing assistance to the other Party under this Section 6.3, upon the written request of either Party, GSK and Impax shall consider in good faith a fair allocation of such significant internal costs.

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6.4 Adverse Events. Impax and GSK shall comply with their obligations set forth in Section 5.7 of the License Agreement with respect to adverse event reporting and safety data exchange until the execution of the Pharmacovigilance Agreement, at which time the adverse event reporting and safety data exchanges shall be superseded and governed by the provisions of the Pharmacovigilance Agreement. The Pharmacovigilance Agreement or the relevant portions thereof shall be attached to or included in the Quality Agreement.

6.5 Investigations. The Parties shall act promptly and shall cooperate fully with each other in any investigation required under this Supply Agreement, the Quality Agreement, and the License Agreement, including, but not limited to, Nonconforming Product, Product complaints, stability failures, Remedial Actions. Such cooperation shall include, but not be limited to, all necessary or appropriate testing, analysis of retained samples, review of batch records, and other reasonably requested assistance and information in connection with such investigation.

6.6 Corrective Action. Impax shall implement corrective actions under the Quality Agreement to solve root causes of any factory-related complaints or Nonconformities.

6.7 Certain Product Events.

(a) The Parties shall establish a joint product incident review team to consider any proposed Remedial Action with respect to Product in the Licensed Territory. If either Party is aware of a defect, incident or other information in respect of Product that they believe may lead to a Remedial Action, then it shall promptly inform the other Party’s primary contact on the Product incident review team. Upon such notice, the Product incident review team shall promptly meet to consider the appropriate action. Each Party shall cooperate fully with the other with respect to the consideration of any such matter. If the Product incident review team cannot agree upon how to proceed, such matter shall be escalated to the head of quality for each Party (or his or her designee) for determination. In the event of a deadlock on such matter, GSK will have the right to make the decision; except that, after such deadlock, GSK shall commence the proposed Remedial Action in the Licensed Territory upon Impax’s request, notwithstanding such deadlock, if Impax reasonably believes that the proposed Remedial Action is appropriate due to Impax’s nonconformance with cGMP requirements. Notwithstanding any provision in this Supply Agreement to the contrary, including this Section 6.7, GSK shall not be required to commence any Remedial Action (including, without limitation, Remedial Action requested by Impax), that would violate applicable Laws in any jurisdiction in the Licensed Territory.

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The conduct of any Remedial Action will be handled in accordance with the Quality Agreement. For the avoidance of doubt, none of the Alliance Managers, Joint Steering Committee or Joint Patents Committee shall have any responsibility for decisions in respect of a Remedial Action.

Without limiting the generality of the foregoing, with respect to Remedial Action, each Party shall:

(i) Inform the other Party immediately of any defect found, subsequent to release, which may be grounds to initiate a Remedial Action;

(ii) Maintain a procedure to cover Remedial Action, including contact arrangements for hours falling outside the typical Business Day;

(iii) Provide all support reasonably necessary to support any investigation and subsequent actions in connection with Remedial Action; and

(iv) Maintain component traceability records of Products for the periods required by the Quality Agreement, cGMPs or Laws, enabling traceability at the Product batch number level to customers of the Products supplied by Impax.

(b) Contacts and Statements. With respect to any Remedial Action in the Licensed Territory with respect to any Product, GSK shall make all contacts with the applicable Governmental Authority or Regulatory Authority and shall be responsible for coordinating all of the necessary activities in connection with any such Remedial Action, and GSK shall make all statements to the media, including press releases and interviews for publication or broadcast as provided in Section 11.4 of the License Agreement. GSK agrees to make no statement to the media referencing Impax or the Facility, unless otherwise required by Laws and, in any such event, GSK shall provide notice to and collaborate with Impax on the content of any such Impax reference. Impax agrees to make no statement to the media referencing GSK with respect to any Remedial Action in the Licensed Territory unless otherwise required by Laws and, in any such event, Impax shall collaborate with GSK on the content of any such statement.

(c) Remedies. GSK shall bear the costs of any Remedial Action with respect to any Product in the Licensed Territory, except for any Remedial Action that is initiated (i) upon Impax’s request in accordance with Section 6.7(a) or (ii) because of a defect arising from Impax’s failure to Manufacture, test, package, store, label, release or deliver that Product or any Materials in compliance with the Specifications, the Quality Agreement, cGMPs and Laws and to the extent not caused by occurrences after the title to such Product passes to GSK pursuant to Section 2.6, in which case Impax shall bear all reasonable costs of such Remedial Action and GSK shall, in addition to any other remedies available to it, be obligated to handle the affected Product and charges relating thereto as provided in Sections 6.8 and 6.9.

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(d) Responsibility for Recalled Products. Any batch or shipment of Product that is the subject of a Remedial Action shall be handled as follows:

(i) Such Products held in inventory at Impax shall be placed on “Hold” status and shall not be shipped to GSK or its Affiliates, unless directed otherwise by GSK;

(ii) For any such Products shipped to GSK and held in stock by GSK may maintain a “Hold” or “Unpassed” status until Impax has completed any investigations pursuant to this Supply Agreement and GSK has approved, acting reasonably, the disposition of the Product subject to GSK’s review and approval of investigation report; and

(iii) Payment for Products that are the subject of a Remedial Action that is (1) initiated upon Impax’s request in accordance with Section 6.7(a), or (2) because of a defect arising from Impax’s failure to Manufacture, test, package, store, label, release or deliver that Product or any Materials in compliance with the Specifications, the Quality Agreement, cGMPs or Laws and to the extent not caused by occurrences after the title to such Product passes to GSK pursuant to Section 2.6, whether shipped or unshipped, shall not be due from GSK until Impax and GSK have completed any investigations pursuant to the Quality Agreement and this Supply Agreement, and GSK has approved the disposition of the Product subject to the Remedial Action. For the avoidance of doubt, GSK shall be responsible for payment of invoices relating to Products which are ultimately not subject to Remedial Action per this Article 6 and for payment of invoices relating to Products which are subject to Remedial Action to the extent not due to the failure of Impax to Manufacture, test, package, store, label, release or deliver that Product in accordance with the Specifications, the Quality Agreement, cGMPs and Laws.

6.8 Disposition of Certain Products. In the event any quantity of a Product is found not to comply with Specifications, or in the event any Remedial Action, or Third Party return of any Product, in each case determined to be a result of Impax’s failure to Manufacture, test, package, store, label, release or deliver that Product in accordance with the Specifications, the Quality Agreement, cGMPs and Laws and to the extent not caused by occurrences after the title to such Product passes to GSK pursuant to Section 2.6, then GSK or the GSK Affiliate receiving the Product shall, at Impax’s option, either (a) return the Product to Impax for rework or reprocessing by Impax, all at Impax’s expense; (b) return the affected Products to Impax for destruction by Impax at Impax’s expense; or (c) have the Product disposed of by a Third Party designated by GSK at Impax’s expense and in accordance with applicable Laws. In addition, GSK may seek a credit under Section 6.9 below. The Party undertaking destruction of the Product shall be solely responsible for compliance with all Laws in connection with the destruction and shall be liable for any losses resulting from such destruction.

6.9 Credits. In the event any quantity of a Product is found (i) to not comply with Specifications, or (ii) in the event any Remedial Action or Third Party return of any Product, in each case is determined to be a result of Impax’s failure to Manufacture, test, package, store, label, release or deliver that Product in accordance with the Specifications, the Quality Agreement, cGMPs or Laws and to the extent not caused by occurrences after the title to such Product passes to GSK pursuant to Section 2.6, then Impax shall, at GSK’s election: (a) reimburse or credit GSK the price paid by GSK for the affected Product; (b) reimburse or credit GSK for the actual costs for shipping (including freight and insurance), applicable transit charges, insurance premiums, duties, or taxes paid in connection with such Product, in each case to the extent incurred by GSK; (c) reimburse or credit GSK for any out-of-pocket costs

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paid by GSK to Third Parties for transportation and destruction of such Product; and (d) reimburse or credit GSK for the actual administrative expenses and all other reasonable costs incurred by GSK outside of the ordinary course of business in connection with the disposition of such Product under Section 6.8. GSK shall provide Impax with such information and documentation as Impax may reasonably request to confirm any of the foregoing charges, costs or expenses. Alternatively, GSK may apply any amounts due to GSK pursuant to Sections 6.9(a)-(d) above to one or more outstanding invoices issued pursuant to Article 6 above provided GSK gives Impax timely notice of such invoice reductions. If there is outstanding credit to GSK on the termination or expiration of this Supply Agreement, Impax shall reimburse GSK for the amount of such credit within forty five (45) days after this Supply Agreement is terminated or expires. Notwithstanding anything to the contrary in this Supply Agreement, the remedy set forth in this Section 6.9 shall be the sole and exclusive remedy and recourse with respect to any shortages, Nonconformity, Deviation Report, Remedial Action, Third Party return or complaint with respect to any Product delivered to GSK by Impax hereunder or breach by Impax of the representations and warranties set forth in Section 10.2; provided, however, that the foregoing shall not be deemed to in any way limit Impax’s obligations under Section 11.1.

6.10 Product Returns from the Field. GSK shall instruct its distributors and customers to direct any returns of Products to GSK in accordance with GSK’s standard return policy. Impax shall promptly notify GSK in writing (including all information Impax has relating thereto) in the event that any distributor, customer or other Third Party returns any Product to Impax. Impax shall, at GSK’s expense, promptly forward all such Product to the location specified by GSK and shall take no other action regarding such Product (except for safeguarding such Product), unless requested in writing by GSK or required by Laws. After a commercially reasonable period of time safeguarding the Products so held, Impax may destroy the Products, at GSK’s expense, if it has given written notice of its intention to GSK and GSK has not directed otherwise within ten (10) Business Days of receipt of that notice.

6.11 Retained Samples. Impax shall retain samples from each batch of bulk finished Products supplied to GSK, excipients, and Active Pharmaceutical Ingredient (API) thereof for a period of one (1) year after expiration of such Product as packaged by GSK, provided that GSK promptly notifies Impax of such expiry date, or such longer period required by applicable Laws for record keeping, testing and regulatory purposes or specified in the Quality Agreement. When storing Products, Materials, Nonconforming Products or Product-derived wastes, Impax shall comply with, and shall maintain all storage facilities in compliance with, Specifications and in accordance with the Quality Agreement, cGMPs and Laws.

6.12 Annual Product Review. During the Term, upon GSK’s request, Impax shall prepare and provide to GSK an annual review for the Products as required by cGMPs and applicable regulations (each, an “Annual Product Review”). Each Annual Product Review will cover all aspects of manufacturing that occur at the Facility or at the facility of any party with whom Impax subcontracts pursuant to this Supply Agreement. Unless otherwise specified, each Annual Product Review will include, without limitation, summaries of changes, Deviation Report trends, release testing records trends, production record trends and other relevant data as more particularly set forth in the Quality Agreement, to allow GSK to produce an annual product quality review as required.

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ARTICLE 7
CONFIDENTIALITY

7.1 Confidentiality. Any and all Information disclosed by a Party to the other Party under this Supply Agreement shall be deemed Confidential Information of such Party under the License Agreement and subject to the confidentiality provisions set forth in Article 11 of the License Agreement.

ARTICLE 8
INTELLECTUAL PROPERTY

8.1 Ownership of Inventions. Impax shall solely own any and all inventions, whether or not patentable, generated solely by Impax (including its Affiliates, employees, agents and independent contractors) in the course of conducting their activities under this Supply Agreement. Impax shall solely own any and all inventions, whether or not patentable, generated solely by GSK (including its Affiliates, employees, agents and independent contractors), or jointly by Impax and GSK (including their respective Affiliates, employees, agents and independent contractors) in the course of conducting their activities under this Supply Agreement to the extent that they relate to the Product or that are necessary or useful for the Manufacture of the Product (all such inventions together with all intellectual property rights therein collectively, “Manufacturing Inventions”). Impax hereby grants to GSK a non-exclusive, irrevocable, worldwide, fully paid up, royalty-free license (with the right to grant sublicenses), under the Manufacturing Inventions, to make, have made, use, import, sell and offer for sale products that are not Products. For inventions made by GSK (including its Affiliates, employees, agents and independent contractors) or jointly made by Impax and GSK which do not relate to the Product and are not necessary or useful for the Manufacture of the Product, ownership will follow inventorship as determined in accordance with U.S. patent laws. GSK hereby assigns to Impax its interest in and to any and all Manufacturing Inventions, and shall perform, and shall ensure that its Affiliates, employees, agents and independent contractors perform, any and all acts necessary to assist Impax in perfecting its rights to any and all Manufacturing Inventions, including executing or have executed any documents affecting the appropriate assignment to Impax. If Impax decides to cease the Prosecution or Maintenance of any Patents covering the Manufacturing Inventions after such Patents have been published, it shall notify GSK in writing sufficiently in advance so that GSK may, at its discretion, assume the responsibility for the Prosecution or Maintenance of such Patents, at GSK’s cost and expense. For clarity, if Impax decides not to file a Patent covering the Manufacturing Inventions, or decides to withdraw or abandon a Patent covering the Manufacturing Inventions before such Patent is published, GSK shall not have any rights pursuant to the preceding sentence.

8.2 Disclosure of Inventions. GSK shall use best efforts to promptly disclose to Impax any and all Manufacturing Inventions either made by GSK (including its Affiliates, employees, agents and independent contractors), whether solely or jointly with Impax (including its respective Affiliates, employees, agents and independent contractors), including any invention disclosures, or other similar documents, submitted to it by its Affiliates, employees, agents or independent contractors describing inventions that are Manufacturing Inventions, and all Information relating to such inventions to the extent necessary or useful for the preparation, filing and maintenance of any Patent with respect to such invention.

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8.3 Prosecution and Enforcement of Patents. As the sole owner of Manufacturing Inventions, Impax shall have the sole rights, but not the obligation, to Prosecute and Maintain (as defined below), and enforce any Patents covering Manufacturing Inventions, and shall bear all related expenses and retain all related recoveries. For purposes of this Supply Agreement, “Prosecute and Maintain” shall mean with respect to a Patent, the preparing, filing, maintenance and prosecution of such Patent, as well as the conduct of interferences, oppositions, re-examination, re-issues and other similar proceedings.

8.4 Covenant Not to Sue. Impax or its Affiliates will not assert any Patent covering Manufacturing Inventions, or any other Patent directed to the Manufacture of the Product and Controlled by Impax or its Affiliates, against GSK with respect to GSK’s use, sale, offer to sell, import or other Commercialization of Product in the Licensed Territory during the Term as permitted by the License Agreement, provided that such Product has been (a) Manufactured by Impax, its Affiliates, or a Third Party on behalf of Impax and (b) supplied to GSK or its Affiliates or permitted sublicensees under this Supply Agreement.

ARTICLE 9
FORCE MAJEURE

9.1 Force Majeure. In the event that a Party is unable to perform any of its obligations under this Supply Agreement because of a Force Majeure Event (as defined below), such Party shall immediately give written notice to the other Party of the occurrence of a Force Majeure Event, the nature thereof, and the extent to which the affected Party will be unable to fully perform its obligations hereunder and shall do everything reasonably possible to resume performance. Upon receipt of such notice, the performance of the obligations by the Party claiming a Force Majeure Event (except for payment obligations) shall be suspended during the continuation of the Force Majeure Event. Upon cessation of such Force Majeure Event, the affected Party shall promptly resume performance hereunder or, if not able to promptly resume full performance, the affected Party shall develop a plan (with the involvement and the written approval of the other Party) for the prompt resolution of any failure of performance under this Supply Agreement. For purposes of this Supply Agreement, the term “Force Majeure Event” means, with respect to a Party, (i) fire, natural disaster, act of God, action or decrees of governmental bodies, terrorism, war, or embargos, or (ii) any other act or event, whether foreseen or unforeseen, that (a) prevents such Party, in whole or in part, from performing its obligations under this Supply Agreement and (b) is beyond the reasonable control of and not the fault of such Party. For the avoidance of doubt, a Force Majeure Event shall not include economic hardship, changes in market conditions, or insufficiency of funds.

ARTICLE 10
REPRESENTATIONS AND WARRANTIES

10.1 Mutual Representations and Warranties. Each Party hereby represents and warrants to the other Party as of the Effective Date as follows:

(a) such Party is a company or corporation duly organized, validly existing, and in good standing under the Laws of the state of its incorporation;

(b) such Party has the corporate/company power and authority and the legal right to enter into this Supply Agreement and to perform its obligations hereunder, and there is no contractual restriction or obligation binding on such Party which would be materially contravened by execution and delivery of this Supply Agreement or by the performance or observance of its terms; and

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(c) the execution, delivery, and performance of this Supply Agreement have been duly authorized by all necessary corporate/company actions, and this Supply Agreement constitutes a valid obligation of such Party and is binding and enforceable against such Party in accordance with the terms hereof.

10.2 Product Warranties. Impax represents and warrants to GSK that:

(a) the Manufacture of each Product supplied to GSK pursuant to this Supply Agreement (and the handling and storage, handling, disposal of any Materials) shall (i) be in accordance with and conform to (i) cGMPs, (ii) the Quality Agreement, and (iii) otherwise conform to the Environmental, Health and Safety Guiding Principles, the Regulatory Approvals and Laws;

(b) each Product supplied to GSK pursuant to this Supply Agreement, at the time title to such Product passes to GSK pursuant to Section 2.6, will strictly comply with the Specifications for such Product then in effect, and will not be adulterated or misbranded within the meaning of the FD&C Act and similar provisions of Regulatory Acts in the Licensed Territory, and will not be an article which may not, under the provisions of the FD&C Act and similar provisions of Regulatory Acts in the Licensed Territory, be introduced into interstate commerce (or provisions of similar import);

(c) each Product supplied to GSK pursuant to this Supply Agreement will, at the time title to such Product passes to GSK pursuant to Section 2.6, be free and clear of all liens, security interests and other encumbrances;

(d) Impax has not used, in any capacity associated with or related to the Manufacture of the Product, the services of any persons who have been, or are in the process of being, debarred under Sections 306(a) or 306(b) of the FD&C Act or any comparable Regulatory Act; further, neither Impax nor any of its officers, employees, or consultants has been convicted of an offense under (i) either a federal or state law that is cited in Section 306 of the FD&C Act as a ground for debarment, denial of approval, or suspension, or (ii) any other law cited in any comparable Regulatory Act as a ground for debarment, denial of approval or suspension;

(e) Impax has all Consents necessary in performance of its obligations hereunder and the Manufacture of the Product;

(f) Impax will evaluate participation in the Customs Trade Partnership Against Terrorism (C-TPAT) initiative sponsored by the United States Customs Service (Customs). Notwithstanding the foregoing in this Section 10.2(f), during the Term, Impax represents and warrants that it shall fully ensure the security of the supply chain of the Product until delivery of Product to GSK pursuant to Section 2.6.

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(g) To actual knowledge of Impax, (1) the Manufacture of the Product does not and will not infringe any issued patents owned or controlled by a Third Party, and (2) there are no outstanding orders, judgments or settlements against or owed by Impax or any of its Affiliates, and there are no pending or threatened claims or litigation, in either case relating to the Manufacture or Materials for Product used or practiced by Impax.

10.3 Corporate Responsibility. Unless otherwise required or prohibited by Laws, Impax warrants, to the best of its knowledge, that, in relation to the supply of Product under the terms of this Supply Agreement:

(a) it does not employ, engage, or otherwise use any child labor in circumstances such that the tasks performed by any such child labor could reasonably be foreseen to cause either physical or emotional impairment to the development of such child;

(b) it does not use forced labor in any form (prison, indentured, bonded or otherwise) and its employees are not required to lodge papers or deposits on starting work;

(c) it provides a safe and healthy workplace, presenting no immediate risks to its employees; any housing provided by Impax to its employees is safe for habitation; and access to clean water, food, and emergency healthcare is provided to its employees in the event of accidents or incidents at Impax’s workplace;

(d) it does not discriminate against any employees on any ground (including race, religion, disability or gender); and it does not engage in or support the use of corporal punishment, mental, physical, sexual or verbal abuse and does not use cruel or abusive disciplinary practices in the workplace;

(e) it pays each employee at least the minimum wage and provides each employee with all legally mandated benefits;

(f) it complies with the Laws on working hours and employment rights in the countries in which it operates; and

(g) it complies with the Laws with respect to its employees’ right to join and form independent trade unions and freedom of association.

10.4 DISCLAIMERS. EXCEPT AS EXPRESSLY STATED IN THIS SUPPLY AGREEMENT, NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, ARE MADE OR GIVEN BY OR ON BEHALF A PARTY, AND ALL REPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE, ARE HEREBY EXPRESSLY EXCLUDED.

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ARTICLE 11
INDEMNIFICATION

11.1 Indemnification by Impax. Impax shall defend, indemnify, and hold the GSK Indemnitees harmless from and against all Claims to the extent such Claims arise out of, are based on, or results from: (a) any negligence or willful misconduct of Impax, its Affiliates, or the officers, directors, employees or agents of Impax or its Affiliates; (b) any breach of any of Impax’s covenants, obligations, representations or warranties under this Supply Agreement; (c) failure by Impax to obtain, maintain, or comply in any respect with any of its Consents which are required to perform any of its obligations hereunder or under the Regulatory Acts or other Laws; (d) any violation of Laws by Impax in the performance of its obligations hereunder; (e) any infringement or misappropriation of Third Party rights to intellectual property that is a result of the use or practice in the Manufacturing process for the Product. The foregoing indemnity obligations shall not apply to the extent that (i) the GSK Indemnitees fail to comply with the indemnification procedure set forth in Section 11.3 and Impax’s defense of the relevant Claims is prejudiced by such failure; or (ii) any Claim is based on or results from any activities set forth in Section 11.2(a), 11.2(b), or 11.2(c) for which GSK is obligated to indemnify the Impax Indemnitees under Section 11.2.

11.2 Indemnification by GSK. GSK shall defend, indemnify, and hold the Impax Indemnitees harmless from and against all Claims to the extent such Claims arise out of, are based on, or results from: (a) any negligence or willful misconduct of GSK, its Affiliates, or the officers, directors, employees or agents of GSK or its Affiliates; (b) any breach of any of GSK’s covenants, obligations, representations or warranties under this Supply Agreement; (c) failure by GSK to obtain, maintain, or comply in any respect with any of its Consents which are required to perform any of its obligations hereunder or under the Regulatory Acts or other Laws; (d) any violation of Laws by GSK in the performance of its obligations hereunder; or (e) the import, storage, packaging or labeling, by or on behalf of GSK or its Affiliates or sublicensees, of any Product supplied by Impax hereunder. The foregoing indemnity obligations shall not apply to the extent that (i) the Impax Indemnitees fail to comply with the indemnification procedure set forth in Section 11.3 and GSK’s defense of the relevant Claims is prejudiced by such failure; or (ii) any Claim is based on or results from any activities set forth in Section 11.1(a), 11.1(b), 11.1(c), 11.1(d) or 11.1(e) for which Impax is obligated to indemnify the GSK Indemnitees under Section 11.1.

11.3 Indemnification Procedures. The Party claiming indemnity under this Article 11 (the “Indemnified Party”) shall give written notice to the Party from whom indemnity is being sought (the “Indemnifying Party”) promptly after learning of such Claim. The Indemnified Party shall provide the Indemnifying Party with reasonable assistance, at the Indemnifying Party’s expense, in connection with the defense of the Claim for which indemnity is being sought. The Indemnified Party may participate in and monitor such defense with counsel of its own choosing at its sole expense; provided, however, the Indemnifying Party shall have the right to assume and conduct the defense of the Claim with counsel of its choice. The Indemnifying Party shall not settle any Claim without the prior written consent of the Indemnified Party, not to be unreasonably withheld, unless the settlement involves only the payment of money. So long as the Indemnifying Party is actively defending the Claim in good faith, the Indemnified Party shall not settle or compromise any such Claim without the prior written consent of the Indemnifying Party. If the Indemnifying Party does not assume and conduct the defense of the Claim as provided above, (a) the Indemnified Party may defend against, consent to the entry of any judgment, or enter into any settlement with respect to such Claim in any manner the Indemnified Party may deem reasonably appropriate (and the Indemnified Party need not consult with, or obtain any consent from, the Indemnifying Party in connection therewith), and (b) the Indemnifying Party shall remain responsible to indemnify the Indemnified Party as provided in this Article 11.

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11.4 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR INDIRECT DAMAGES ARISING FROM OR RELATING TO ANY BREACH OF THIS SUPPLY AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING THE FOREGOING, NOTHING IN THIS SECTION 11.4 IS INTENDED TO OR SHALL LIMIT OR RESTRICT CLAIMS TO THE EXTENT ARISING IN CONNECTION WITH (A) THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF ANY PARTY UNDER SECTION 11.1 OR 11.2, (B) A PARTY’S BREACH OF CONFIDENTIALITY OBLIGATIONS IN ARTICLE 7, OR (D) THE WILLFUL MISCONDUCT OF EITHER PARTY.

ARTICLE 12
TERM AND TERMINATION

12.1 Term. This Supply Agreement shall become effective on the Effective Date and, unless earlier terminated pursuant to this Article 12, shall remain in effect on a country-by-country and, if GSK exercises the Option, Product-by-Product basis, until the expiration of the Royalty Term of such Product in such country (the “Term”).

12.2 Termination.

(a) Termination for Breach. Each Party shall have the right to terminate this Supply Agreement and the License Agreement for the other Party’s uncured material breach of this Supply Agreement or the License Agreement as set forth in Section 12.5 of the License Agreement.

(b) Termination Due to Termination of the License Agreement. This Supply Agreement shall automatically terminate upon termination of the License Agreement.

12.3 Continuing Supply; Manufacture Transfer. At least two (2) years prior to the expiration of the Royalty Term for a Product in any country in the Licensed Territory, Impax and GSK shall negotiate in good faith an agreement under which Impax will continue to Manufacture and supply the Product to GSK, its Affiliates or sublicensees, transfer to GSK, or to transfer to a Third Party manufacturer selected by GSK and reasonably acceptable to Impax, all Information that is Controlled by Impax or its Affiliates as of the Effective Date or during the Term and is necessary, or is used by or on behalf of Impax, for the Manufacture of the Product. Impax shall provide reasonable cooperation and assistance in effecting the Product transfer at a reasonable expense to GSK.

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12.4 Performance on Termination; Survival. Termination or expiration of this Supply Agreement shall not affect rights or obligations of the Parties under this Supply Agreement that have accrued prior to the date of termination or expiration. Upon termination of this Supply Agreement for any reason: (a) Products manufactured pursuant to purchase orders shall be delivered on the scheduled delivery dates and, if accepted by GSK, GSK shall pay Impax not later than sixty (60) days after the invoice date (provided, that GSK makes advance payment prior to shipment in the event of termination due to payment default by GSK); and (b) XXXXXX in the event that Impax terminates this Supply Agreement pursuant to Section 12.2(a) or that this Supply Agreement is terminated pursuant to Section 12.2(b) as a result of termination of the License Agreement by GSK pursuant to Section 12.2 of the License Agreement or by Impax pursuant to Section 12.3 of the License Agreement or 12.5 of the License Agreement, provided that Impax shall use Commercially Reasonable Efforts to mitigate such costs by trying to use such Materials in the Manufacture of the Product for its own use or in the manufacture of other products. Notwithstanding anything to the contrary, the following provisions shall survive any expiration or termination of this Supply Agreement: Sections 2.2(b) (last sentence only), 4.2(c) (solely with respect to implementation costs incurred prior to the effective date of termination), 4.2(e) (solely with respect to implementation costs incurred prior to the effective date of termination), 4.7 (solely with respect to on-going obligations of stability studies), 5.2 (solely with respect to GSK FTEs dedicated prior to the effective date of termination), 5.5 5.6, 6.2 — 6.11 (solely with respect to Product ordered before the effective date of termination), 8.1, 8.2, 8.3, 10.2 (solely with respect to Product ordered before the effective date of termination), 10.4, 12.4 and 13.1 and Articles 3 (solely with respect to Product ordered before the effective date of termination or, with respect to Section 3.3, the costs and expenses described therein to the extent incurred by Impax before the effective date of termination), 7, 11, and 14.

ARTICLE 13
INSURANCE

13.1 Coverage Requirements. During the Term and for three (3) years after its expiration or termination in accordance with Article 12, Impax shall at all times maintain in full force and effect, with financially sound and reputable carriers, product liability, property, and fidelity insurance in such amounts and with such scope of coverage as are appropriate for companies of like size, taking into account the nature of the Product to be manufactured hereunder. Notwithstanding the immediately preceding sentence, Impax shall maintain the following types of insurance in the following minimum amounts: (a) product liability insurance in the minimum amount of XXXXXX dollars ($XXXXXX) per occurrence and in the aggregate annually, (b) property and fidelity coverage in an amount as appropriate for the Product and Materials then in the care, custody and control of Impax, (c) statutory workers’ compensation insurance and employer liability coverage in a minimum amount of XXXXXX dollars ($XXXXXX) with respect to occupational diseases; (d) general liability insurance in the minimum amount of XXXXXX dollars ($XXXXXX) per occurrence; and (e) umbrella liability insurance in the minimum amount of XXXXXX dollars ($XXXXXX). Impax acknowledges and agrees that the requirements of this Article 13 in no way constitute a limitation on Impax’s liabilities, including obligations to indemnify GSK under this Supply Agreement.

13.2 Certificates of Insurance. Upon GSK’s request, Impax shall have its insurance carrier or carriers furnish to GSK certificates that all insurance required under this Supply Agreement is in force, such certificates to indicate any deductible and/or self-insured retention, and the effective expiration dates of policies.

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13.3 Additional Insured and Waiver of Subrogation. GSK shall be named as an additional insured on all product liability policies of Impax. Impax also agrees to waive, and will require its insurers to waive, all rights of subrogation against GSK, its directors, officers and employees on all the foregoing coverages.

ARTICLE 14
MISCELLANEOUS

14.1 Entire Agreement; Amendment. This Supply Agreement, including the Exhibits hereto, together with the License Agreement, sets forth the complete, final and exclusive agreement and all the covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties hereto with respect to the subject matter hereof and supersedes, as of the Effective Date, all prior and contemporaneous agreements and understandings between the Parties with respect to the subject matter hereof, including the Confidentiality Agreement. The foregoing shall not be interpreted as a waiver of any remedies available to either Party as a result of any breach, prior to the Effective Date, by the other Party of its obligations under the Confidentiality Agreement. There are no covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties other than as are set forth in this Supply Agreement or the License Agreement. No subsequent alteration, amendment, change or addition to this Supply Agreement shall be binding upon the Parties unless reduced to writing and signed by an authorized officer of each Party. No modification to this Supply Agreement shall be effected by the acknowledgment or acceptance of any purchase order or shipping instruction forms or similar documents containing terms or conditions at variance with or in addition to those set forth herein.

14.2 Notices. Any notice required or permitted to be given under this Supply Agreement shall be in writing, shall specifically refer to this Supply Agreement, and shall be addressed to the appropriate Party at the address specified below or such other address as may be specified by such Party in writing in accordance with this Section 14.2, and shall be deemed to have been given for all purposes (a) when received, if hand-delivered or sent by confirmed facsimile or a reputable courier service, or (b) five (5) Business Days after mailing, if mailed by first class certified or registered airmail, postage prepaid, return receipt requested.

If to Impax:	Impax Laboratories, Inc. 30831 Huntwood Avenue Hayward, CA 94544 Attn: President, Impax Pharmaceuticals Fax: 510-972-7756
With copies to (which shall not constitute notice):	Impax Laboratories, Inc. 30831 Huntwood Avenue Hayward, CA 94544 Attn: Legal Department Fax: 510-972-7756

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	Cooley LLP Five Palo Alto Square 3000 El Camino Real Palo Alto, CA 94306 Attn: Marya A. Postner, Ph.D. Fax: (650) 849-7400
If to GSK:	Glaxo Group Limited Glaxo Wellcome House, Berkeley Avenue Greenford, Middlesex UB6 0NN, England Attn: Company Secretary Fax: 44 20 8 047 6904
With a copy to (which shall not constitute notice):	GlaxoSmithKline LLC Five Moore Drive Research Triangle Park, NC 27709 Attn: Paul Noll, VP, Associate General Counsel Fax: (919) 483-2881

14.3 No Strict Construction; Headings. This Supply Agreement has been prepared jointly by the Parties and shall not be strictly construed against either Party. Ambiguities, if any, in this Supply Agreement shall not be construed against any Party, irrespective of which Party may be deemed to have authored the ambiguous provision. The headings of each Article and Section in this Supply Agreement have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular Article or Section. Except where the context otherwise requires, the use of any gender shall be applicable to all genders, and the word “or” is used in the inclusive sense (and/or). The term “including” as used herein means including, without limiting the generality of any description preceding such term.

14.4 Assignment. Neither Party may assign or transfer this Supply Agreement or any rights or obligations hereunder without the prior written consent of the other, except that a Party may make such an assignment without the other Party’s consent to its Affiliates or to a Third Party successor to substantially all of the business of such Party to which this Supply Agreement relates, whether in a merger, sale of stock, sale of assets or other transaction; provided that the License Agreement is also assigned to such Affiliate or a Third Party successor. Any successor or assignee of rights and/or obligations permitted hereunder shall, in writing to the other Party, expressly assume performance of such rights and/or obligations. Any permitted assignment shall be binding on the successors of the assigning Party. Any assignment or attempted assignment by either Party in violation of the terms of this Section 14.4 shall be null, void and of no legal effect.

14.5 Performance by Affiliates. Each Party may discharge any obligations and exercise any right hereunder through any of its Affiliates. Each Party hereby guarantees the performance by its Affiliates of such Party’s obligations under this Supply Agreement, and shall cause its Affiliates to comply with the provisions of this Supply Agreement in connection with such performance. Any breach by a Party’s Affiliate of any of such Party’s obligations under this Supply Agreement shall be deemed a breach by such Party, and the other Party may proceed directly against such Party without any obligation to first proceed against such Party’s Affiliate

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

14.7 Severability. If any one or more of the provisions of this Supply Agreement is held to be invalid or unenforceable by any court of competent jurisdiction from which no appeal can be or is taken, the provision shall be considered severed from this Supply Agreement and shall not serve to invalidate any remaining provisions hereof. The Parties shall make a good faith effort to replace any invalid or unenforceable provision with a valid and enforceable one such that the objectives contemplated by the Parties when entering this Supply Agreement may be realized.

14.8 No Waiver. Any delay in enforcing a Party’s rights under this Supply Agreement or any waiver as to a particular default or other matter shall not constitute a waiver of such Party’s rights to the future enforcement of its rights under this Supply Agreement, except with respect to an express written and signed waiver relating to a particular matter for a particular period of time.

14.9 Independent Contractors. Each Party shall act solely as an independent contractor, and nothing in this Supply Agreement shall be construed to give either Party the power or authority to act for, bind, or commit the other Party in any way. Nothing herein shall be construed to create the relationship of partners, principal and agent, or joint-venture partners between the Parties.

14.10 English Language. This Supply Agreement was prepared in the English language, which language shall govern the interpretation of, and any dispute regarding, the terms of this Supply Agreement.

14.11 Counterparts. This Supply Agreement may be executed in one (1) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

14.12 Governing Law; Dispute Resolution. This Supply Agreement and all disputes arising out of or related to this Supply Agreement or any breach hereof shall be governed by and construed under the laws of the State of Delaware, without giving effect to any choice of law principles that would require the application of the laws of a different state. The application of the U.N. Convention on Contracts for the International Sale of Goods (1980) is excluded. Any controversy or claim arising out of, relating to, or in connection with any provision of this Supply Agreement shall be resolved in accordance with Article 13 of the License Agreement.

14.13 Compliance with Laws. Each Party shall comply in all material respects with all applicable Laws and regulations, including, but not limited to, those concerning drugs, drug manufacture regulatory requirements, or exportation or importation of the Product, including but not limited to proper declaration of dutiable values. GSK shall be responsible for obtaining all exportation and importation license or other authorizations.

14.14 Debarment. Each Party certifies to the other that it is not debarred under subsections 306(a) or 306(b) of the FD&C Act, as amended, and that it has not and will not use in any capacity the services of any person debarred under such law with respect to services to be performed under this Supply Agreement. Each Party further certifies that it will amend this certification as necessary in light of new information.

37

In Witness Whereof, the Parties have executed this Supply Agreement in duplicate originals by their duly authorized representatives as of the Effective Date.

Glaxo Group Limited			Impax Laboratories, Inc.
By:	/s/ Paul Williamson		By:	/s/ Larry Hsu
	Name:	Paul Williamson		Name: Larry Hsu
	Title:	Authorised Signatory For and on behalf of Edinburgh Pharmaceutical Industries Limited Corporate Director		Title: President & CEO

38

Schedule 2.12

Key Performance Indicators for the Manufacture of the Product to be supplied to GSK under this
Supply Agreement

XXXXXX

39

Schedule 4.10
Impax’s Environmental, Health and Safety Guiding Principles

XXXXXX.

40

EX-21.1

Exhibit 21.1

Subsidiaries of the Registrant

	Jurisdiction of Incorporation
Name of Subsidiary	or Organization	Ownership
Impax Laboratories (Taiwan) Inc.	Taiwan, Republic of China		100	%
Impax Laboratories (Cayman), Ltd.	Cayman Islands		100	%
Prohealth Biotech, Inc.	Taiwan, Republic of China		57.54	%

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We have issued our reports dated February 25, 2011, with respect to the consolidated financial statements, schedule, and internal control over financial reporting included in the Annual Report of Impax Laboratories, Inc. and Subsidiaries on Form 10-K for the year ended December 31, 2010. We hereby consent to the incorporation by reference of said reports in the Registration Statements of Impax Laboratories, Inc. and Subsidiaries on Form S-8 (File No. 333-158259 effective March 27, 2009 and File No. 333-168584 effective August 6, 2010).

/s/ GRANT THORNTON LLP

Philadelphia, Pennsylvania
February 25, 2011

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Larry Hsu, certify that:

1.	I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2010 of Impax Laboratories, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 25, 2011	By:	/s/ Larry Hsu, Ph.D.
		Larry Hsu, Ph.D.
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Arthur A. Koch, Jr., certify that:

1.	I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2010 of Impax Laboratories, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 25, 2011	By:	/s/ Arthur A. Koch, Jr.
		Arthur A. Koch, Jr.
		Senior Vice President, Finance, and Chief Financial Officer

EX-32.1

Exhibit 32.1

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 on Form 10-K of Impax Laboratories, Inc. (the “Company”) for the fiscal year ended December 31, 2010 (the “Report”), Larry Hsu, President and Chief Executive Officer, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code), that:

(1)	the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, 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: February 25, 2011	By:	/s/ Larry Hsu, Ph.D.
		Larry Hsu, Ph.D.
		President and Chief Executive Officer

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being filed as part of the Report or as a separate disclosure document.

EX-32.2

Exhibit 32.2

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 on Form 10-K of Impax Laboratories, Inc. (the “Company”) for the fiscal year ended December 31, 2010 (the “Report”), Arthur A. Koch, Jr., Senior Vice President, Finance, and Chief Financial Officer, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code), that:

(1)	the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, 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: February 25, 2011	By:	/s/ Arthur A. Koch, Jr.
		Arthur A. Koch, Jr.
		Senior Vice President, Finance, and Chief Financial Officer

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being filed as part of the Report or as a separate disclosure document.