10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

(Mark One)

x 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

¨ 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: 001-15989

ENDO PHARMACEUTICALS HOLDINGS INC.

(Exact name of registrant as specified in its charter)

Delaware	13-4022871
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
100 Endo Boulevard Chadds Ford, Pennsylvania	19317
(Address of Principal Executive Offices)	(Zip Code)

(Registrant’s Telephone Number, Including Area Code): (610) 558-9800

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

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock of $0.01 par value	The NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: N/A

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every interactive data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months.    Yes  ¨    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of 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.  x

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.

Large accelerated filer  x	Accelerated filer  ¨	Non-accelerated filer  ¨	Smaller reporting company  ¨
		(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  ¨    No  x

The aggregate market value of the voting common equity held by non-affiliates as of June 30, 2010 was $2,251,905,366 based on a closing sale price of $21.82 per share as reported on the NASDAQ Global Select Market on June 30, 2010. Shares of the registrant’s common stock held by each officer and director and each beneficial owner of 10% or more of the outstanding common stock of the registrant have been excluded since such persons and beneficial owners may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. The registrant has no shares of non-voting common stock authorized or outstanding.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of February 18, 2011: 117,286,788

Documents Incorporated by Reference

Portions of the registrant’s proxy statement to be filed with the SEC pursuant to Regulation 14A in connection with the registrant’s 2011 Annual Meeting of Stockholders, to be filed subsequent to the date hereof, are incorporated by reference into Part III of this Form 10-K. Such proxy statement will be filed with the SEC not later than 120 days after the conclusion of the registrant’s fiscal year ended December 31, 2010.

ENDO PHARMACEUTICALS HOLDINGS INC.

INDEX TO FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2010

Forward-Looking Statements		1
PART I		2
Item 1	Business	2
Item 1A	Risk Factors	36
Item 1B	Unresolved Staff Comments	66
Item 2	Properties	66
Item 3	Legal Proceedings	67
Item 4	(Removed and Reserved)	67
PART II		67
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	67
Item 6	Selected Financial Data	69
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	70
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	129
Item 8	Financial Statements and Supplementary Data	131
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	131
Item 9A	Controls and Procedures	131
Item 9B	Other Information	132
PART III		132
Item 10	Directors, Executive Officers and Corporate Governance	132
Item 11	Executive Compensation	132
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	133
Item 13	Certain Relationships and Related Transactions, and Director Independence	133
Item 14	Principal Accountant Fees and Services	133
PART IV		133
Item 15	Exhibits, Financial Statement Schedules	133
Signatures		135
Certifications
Exhibit Index

FORWARD-LOOKING STATEMENTS

Statements contained or incorporated by reference in this document contain information that includes or is based on “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements, including estimates of future revenues, future expenses, future net income and future earnings per share, contained in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is included in this document, are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed results of operations. Also, statements including words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plan,” “will,” “may” or similar expressions are forward-looking statements. We have based these forward-looking statements on our current expectations and projections about the growth of our business, our financial performance and the development of our industry. Because these statements reflect our current views concerning future events, these forward-looking statements involve risks and uncertainties. Investors should note that many factors, as more fully described in Item 1A under the caption “Risk Factors” in this document, supplement, and as otherwise enumerated herein, could affect our future financial results and could cause our actual results to differ materially from those expressed in forward-looking statements contained or incorporated by reference in this document. Important factors that could cause our actual results to differ materially from the expectations reflected in the forward-looking statements contained or incorporated by reference in this document include those factors described in this document under Item 1A titled “Risk Factors,” including, but not limited to:

• our ability to successfully develop, commercialize and market new products;

• timing and results of pre-clinical or clinical trials on new products;

• our ability to obtain regulatory approval of any of our pipeline products;

• the effect of healthcare reform on our business;

• competition for the business of our branded and generic products, and in connection with our acquisition of rights to intellectual property assets;

• our ability to sustain our sales and profitability on generic pharmaceutical products over time;

• our ability to keep our Qualitest manufacturing facilities in compliance with regulatory requirements;

• market acceptance of our future products;

• government regulation of the pharmaceutical industry;

• our dependence on a small number of products;

• our dependence on outside manufacturers for the manufacture of most of our products;

• our dependence on third parties to supply raw materials and to provide services for certain core aspects of our business;

• new regulatory action or lawsuits relating to our use of narcotics in most of our core products;

• our exposure to product liability claims and product recalls and the possibility that we may not be able to adequately insure ourselves;

• our ability to protect our proprietary technology;

• the successful efforts of manufacturers of branded pharmaceuticals to use litigation and legislative and regulatory efforts to limit the use of generics and certain other products;

• our ability to successfully implement our acquisition and in-licensing strategy;

• regulatory or other limits on the availability of controlled substances that constitute the active ingredients of some of our products and products in development;

• the availability of third-party reimbursement for our products;

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• the outcome of any pending or future litigation or claims by third parties or the government, and the performance of indemnitors with respect to claims for which we have the right to be indemnified;

• our dependence on sales to a limited number of large pharmacy chains and wholesale drug distributors for a large portion of our total revenues;

• significant litigation expenses to defend or assert patent infringement claims;

• any interruption or failure by our suppliers, distributors and collaboration partners to meet their obligations pursuant to various agreements with us;

• a determination by a regulatory agency that we are engaging or have engaged in inappropriate sales or marketing activities, including promoting the “off-label” use of our products;

• existing suppliers become unavailable or lose their regulatory status as an approved source, causing an inability to obtain required components, raw materials or products on a timely basis or at commercially reasonable prices;

• the loss of branded product exclusivity periods and related intellectual property;

• our ability to successfully execute our strategy;

• disruption of our operations if our information systems fail or if we are unsuccessful in implementing necessary upgrades or new software;

• our ability to maintain or expand our business if we are unable to retain or attract key personnel and continue to attract additional professional staff;

• our ability to successfully integrate HealthTronics, Inc. (HealthTronics), Penwest Pharmaceuticals Co. (Penwest), and Generics International (US Parent), Inc. (Qualitest or Qualitest Pharmaceuticals), and realize all anticipated benefits of our acquisitions;

• HealthTronics’ ability to establish or maintain relationships with physicians and hospitals; and

• HealthTronics’ ability to comply with special risks and requirements related to its medical products manufacturing business.

We do not undertake any obligation to update our forward-looking statements after the date of this document for any reason, even if new information becomes available or other events occur in the future. You are advised, however, to consult any further disclosures we make on related subjects in our reports filed with the Securities and Exchange Commission (SEC). Also note that we provide the preceding cautionary discussion of the risks, uncertainties and possibly inaccurate assumptions relevant to our business. These are factors that, individually or in the aggregate, we think could cause our actual results to differ materially from expected and historical results. We note these factors for investors as permitted by Section 27A of the Securities Act and Section 21E of the Exchange Act. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the preceding to be a complete discussion of all potential risks or uncertainties.

PART I

Item 1. Business

Overview

Endo Pharmaceuticals Holdings Inc., which we refer to as “Endo”, “we”, “us”, or the “Company”, is a United States-based, specialty healthcare solutions company focused on branded products and generics, and devices and services. We are redefining our position in the healthcare marketplace by anticipating and embracing the evolution of health decisions based on the need for high-quality and cost-effective care. We aim to be the

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premier partner to healthcare professionals and payment providers, delivering an innovative suite of complementary branded and generic drugs, devices, services and clinical data to meet the needs of patients in areas such as pain management, urology, oncology and endocrinology. Most recently, we have moved in this direction through our acquisition of Qualitest, which expands and diversifies our generic drug product offerings and enhances our pain management portfolio, and through our acquisition of HealthTronics, which has expanded and diversified our reach as a provider of healthcare services and medical devices and our presence in urology.

We have a portfolio of branded pharmaceuticals that includes established brand names such as Lidoderm^®, Opana^® ER and Opana^®, Percocet^®, Frova^®, Voltaren^® Gel, Vantas^®, Valstar^®, and Supprelin^® LA. Branded products comprised approximately 86% of our total revenues in 2010. Our non-branded generic portfolio, which accounted for 9% of total revenues in 2010, currently consists of products primarily focused in pain management. We focus on selective generics that have one or more barriers to market entry, such as complex formulation, regulatory or legal challenges or difficulty in raw material sourcing. Revenue from our devices and services portfolio accounted for the remainder of our revenues for the year ended December 31, 2010. We generated total revenues of $1.72 billion for the year ended December 31, 2010.

In November, 2010, we acquired Qualitest, a leading United States based privately-held generics company. As a combined company, we expect to deliver more comprehensive healthcare solutions across our diversified businesses in Branded Pharmaceuticals, Generics, and Devices and Services in key therapeutic areas including pain and urology. Qualitest, the sixth largest U.S. generics company, as measured by prescriptions filled in the year ended December 31, 2010, is focused on cost-competitive, high-quality manufactured products with cost advantages or with high barriers to entry. We believe Qualitest brings critical mass to our current generics business, further diversifies our business lines and product offerings and enhances our portfolio of pain management products.

In September 2010, we acquired our partner on Opana^® ER, Penwest, a drug delivery company focused on applying its drug delivery technologies and drug formulation expertise to the formulation of its collaborators’ product candidates under licensing collaborations. In July 2010, we acquired HealthTronics, a provider of healthcare services and manufacturer of medical devices, primarily for the urology community.

Financial information presented herein reflects the operating results of HealthTronics from July 2, 2010, Penwest from September 20, 2010, and Qualitest from November 30, 2010.

In February 2009, we completed our acquisition of Indevus Pharmaceuticals, Inc. (now, Endo Pharmaceuticals Solutions Inc., which we refer to herein as Indevus), a specialty pharmaceutical company engaged in the acquisition, development and commercialization of products to treat conditions in urology, endocrinology and oncology. Financial information presented herein reflects the operating results of Indevus from February 23, 2009.

We have established research and development expertise in analgesics and have expanded our research and development capabilities in other therapeutic areas such as endocrinology, oncology, and urology. As such, we believe we are well positioned to pursue research and development opportunities across these therapeutic areas.

Certain of our functions are outsourced, including some of our manufacturing and distribution. Currently, our primary suppliers of contract manufacturing services are Novartis Consumer Health, Inc. and Teikoku Seiyaku Co., Ltd.

We have dedicated sales forces in the United States, consisting of 493 Endo pharmaceutical sales representatives and 228 contracted sales representatives focusing primarily on pain products, 81 Endo sales representatives focusing primarily on bladder and prostate cancer products, 34 Endo medical center representatives focusing on the treatment of central precocious puberty and 51 Endo account executives focusing on managed markets customers. We market our branded pharmaceuticals to primary care physicians and

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specialty physicians, including those specializing in pain management, orthopedics, neurology, rheumatology, surgery, anesthesiology, urology and pediatric endocrinology. Our sales force also targets retail pharmacies and other healthcare professionals throughout the United States.

On a continuous basis, we evaluate and, where appropriate, pursue acquisition opportunities. In particular, we look to continue to enhance our product line by acquiring or licensing rights to additional products and compounds and therefore regularly evaluate selective acquisition and license opportunities. Such acquisitions or licenses may be effected through the purchase of assets, joint ventures and licenses or by acquiring other companies.

Our wholly-owned subsidiary, Endo Pharmaceuticals Inc. (EPI), commenced operations in 1997 by acquiring certain pharmaceutical products, related rights and assets of The DuPont Merck Pharmaceutical Company, which subsequently became DuPont Pharmaceuticals Company and was thereafter purchased by the Bristol-Myers Squibb Pharma Company in 2001. EPI was formed by certain members of the then-existing management of DuPont Merck and an affiliate of Kelso & Company who were also parties to the purchase agreement under which we acquired these initial assets.

We were incorporated in Delaware as a holding company on November 18, 1997 and have our principal executive offices at 100 Endo Boulevard, Chadds Ford, Pennsylvania 19317 (telephone number: (610) 558-9800).

Our Strategy

Our core strategy is to continue to build a healthcare company better able to respond to the changing economics that drive the U.S. healthcare environment and to improve outcomes for patients, providers and payers. The execution of our strategy will enable us to be the premier partner to healthcare professionals and payment providers, delivering an innovative suite of complementary branded and generic drugs, devices, services and clinical data to meet the needs of patients in areas such as pain management, urology, oncology and endocrinology.

Over the past two years, we have evolved from a product-driven pharmaceutical company to a healthcare solutions provider with an integrated business model that includes both branded and generic prescription drugs, as well as medical devices and healthcare services. Our diversified business across therapeutic areas with a core focus in pain management and urology enables us to strengthen our partnerships with providers, payers and patients by offering multiple products and platforms to deliver healthcare solutions. For example, our recent acquisitions have had or are expected to have the following results:

• In February 2009, we acquired Indevus, which helped us expand beyond our legacy pain management business and secured a position in urology;

• In July 2010, we acquired HealthTronics, which gave us an established presence in the devices and healthcare services space and added critical mass in urology;

• In September 2010, we acquired Penwest, which strengthened our pain management franchise by enhancing flexibility around our product Opana^® ER, including a tamper resistant formulation of Opana^® ER, which is currently under Food and Drug Administration (FDA) review; and

• In November 2010, we acquired Qualitest, which enhanced our solutions platform with the addition of a comprehensive generics business, adding critical mass to our existing generics business while also strengthening our pain management franchise offerings. The combined generics business has 46 abbreviated new drug applications (ANDAs) under active FDA review in multiple therapeutic areas, including pain management, urology, central nervous system (CNS) disorders, immunosuppression, oncology and hypertension. We anticipate that 24 ANDAs will be filed in 2011 and 2012.

We believe that recent healthcare reform in the United States places a premium on providing cost-effective healthcare solutions like those we offer, including those that we expect the combination of the Qualitest and

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Endo generics businesses will provide. Applying the Qualitest and Endo technology platforms to Endo’s already substantial business holds the potential for significant advantages in the new healthcare environment that will enhance our product offerings and accelerate growth.

See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K for further discussion.

Our Competitive Strengths

We believe that, to execute our strategy successfully, we must continue to capitalize on our following core strengths:

Proactive anticipation of the evolution of healthcare delivery in the U.S. by diversifying our business away from that of a product-driven pharmaceutical company to that of a healthcare solutions provider. In light of the evolving healthcare industry, we have thoughtfully and deliberately executed a number of corporate acquisitions in 2010 in order to diversify our business and become a healthcare solutions provider with an integrated business model that includes both branded and generic prescription drugs, as well as medical devices and healthcare services. This diversification will enable us to provide customers with quality outcomes and economic value and offer unique solutions along targeted disease pathways of care. As a result of recent strategic actions combined with strategic investments in our core business, we have redefined our position in the healthcare marketplace and successfully reduced the revenue concentration of Lidoderm^®. Lidoderm^® contributed approximately 46% of our business’ revenue in 2010, compared to 52% and 61% of our business’ revenue in 2009 and 2008, respectively. Our acquisitions of Qualitest and HealthTronics have also contributed to our diversification. Through HealthTronics, we provide healthcare services and manufacture medical devices for the urology community. See “Providing healthcare services and the manufacture of medical devices” in this section.

Established portfolio of branded products. On the branded pharmaceuticals side of our business, we have assembled a portfolio of branded prescription products to treat and manage pain. In addition, as a result of our acquisition of Indevus, we have added several branded products to treat conditions in urology and endocrinology. Our branded products include: Lidoderm^®, Opana^® ER and Opana^®, Percocet^®, Percodan^®, Frova^®, Voltaren^® Gel, Supprelin^® LA, Vantas^®, Valstar^®, and Fortesta^TM Gel. For a more detailed description of each of our products, see “Product Overview.”

Focused pipeline. As a result of our focused research and development efforts, we believe we have a promising development pipeline and are well-positioned to capitalize on our core development products. Currently, our core development pipeline consists of two NDAs filed with the FDA, two products in Phase III trials and two products in Phase II trials. We have also initiated development efforts for medical devices and have multiple programs at concept and developments stages across urology, uro-oncology, endocrinology and urogynocology. For a more detailed description of our development pipeline, see “Products in Development.”

Research and development expertise. Our research and development effort is focused on the development of a balanced, diversified portfolio of innovative and clinically differentiated products. We are continuously seeking opportunities that deepen our presence in the pain management area as well as in the areas of oncology, urology and endocrinology. We will continue to capitalize on our core expertise with analgesics and expand our abilities to both capture earlier-stage opportunities and pursue other therapeutic areas. Additionally, subsequent to our acquisition of Qualitest, we have increased our efforts to seek out and develop generic products with complex formulations and high barriers to entry. We continue to invest in research and development because we believe it is critical to our long-term competitiveness. At December 31, 2010, our research and development and regulatory affairs staff consisted of 243 employees, based primarily in Westbury, New York, Huntsville, Alabama, and at our corporate headquarters in Chadds Ford, Pennsylvania. Our research and development expenses, including upfront and milestone payments were $144.5 million in 2010, $185.3 million in 2009, and $110.2 million in 2008.

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We have assembled an experienced and multi-disciplined research and development team of scientists and technicians with drug discovery and development expertise, medical device design and development expertise, and broad experience in working with the FDA. To supplement our internal efforts, we engage the services of various independent research organizations, physicians and hospitals to conduct and coordinate our pre-clinical and clinical studies to establish the safety and effectiveness of new products.

Targeted national sales and marketing infrastructure. We market our branded products directly to physicians through a sales force, consisting of 493 Endo pharmaceutical sales representatives and 228 sales contracted representatives focusing primarily on pain products, 81 Endo sales representatives focusing primarily on bladder and prostate cancer products, 34 Endo medical center representatives focusing on the treatment of central precocious puberty and 51 Endo account executives focusing on managed markets customers. We distribute our products principally through independent wholesale distributors, but we also sell directly to retailers, clinics, government agencies, doctors and retail and specialty pharmacies. Our marketing policy is designed to assure that products and relevant, appropriate medical information are immediately available to physicians, pharmacies, hospitals, public and private payers, and appropriate healthcare professionals throughout the United States. We work to gain access to healthcare authority, pharmacy benefit managers and managed care organizations’ formularies (lists of recommended or approved medicines and other products), including Medicare Part D plans and reimbursement lists by demonstrating the qualities and treatment benefits of our products within their approved indications. Our managed markets staff as of December 31, 2010 consisted of 51 employees.

Expanding focus on generic products. Following the Qualitest acquisition, the combined generics business has 46 ANDAs under active FDA review in multiple therapeutic areas, including pain management, urology, CNS disorders, immunosuppression, oncology and hypertension. We anticipate that 24 ANDAs will be filed in 2011 and 2012 combined. We develop generic products including those that involve significant barriers to entry such as complex formulation, regulatory or legal challenges or difficulty in raw material sourcing. We believe products with these characteristics will face a lesser degree of competition and therefore provide longer product life cycles and higher profitability than commodity generic products. Likewise, Qualitest, a leading generics company in the United States, has a business model focused on being the lowest-cost producer of products, in categories with high barriers to entry and a lower level of competition. Qualitest’s business is focused in categories where there are fewer challenges from low-cost operators in markets such as China and India, with approximately 32% of Qualitest’s product portfolio being comprised of controlled substances, which cannot be manufactured off-shore and imported into the United States. In addition, approximately 21% of Qualitest’s product portfolio is made up of liquids, which are uneconomical to ship into the United States. We expect that the Qualitest acquisition will provide us with an opportunity to improve our overall profitability by optimizing our combined portfolio for high volume and growth and strengthening our U.S. generics competitive position, product pipeline, portfolio and capabilities.

Providing healthcare services and the manufacture of medical devices. Through our HealthTronics subsidiary, we provide healthcare services and manufacture medical devices, primarily for the urology community. Specifically, the HealthTronics business and applicable services include lithotripsy services, a medical procedure where a device called a lithotripter transmits high energy shockwaves through the body to break up kidney stones, prostate treatment services for benign and cancerous conditions of the prostate, laboratory services, known as anatomical pathology services, for urologists, medical products manufacturing, sales, and maintenance, and image guided radiation therapy (IGRT) technical services for cancer treatment centers such as providing technical (non-physician) personnel to operate equipment, leasing equipment, or helping physicians establish or manage IGRT treatment centers.

Strong balance sheet and significant cash flow. Historically, we have generated significant cash flow from operating activities due to a unique combination of strong brand equity, attractive margins and low capital expenditures. For the year ended December 31, 2010, we generated $454 million of cash from operations. We expect that sales of our currently marketed products and HealthTronics’ devices and services, together with our stronger U.S. generics competitive position, product pipeline portfolio and capabilities that we obtained from our

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acquisition of Qualitest, will allow us to continue to generate significant cash flow from operations in the future. We maintain a strong balance sheet with modest leverage levels and ample liquidity, which gives us flexibility to make strategic investments in our business. As of December 31, 2010, we had $490 million of cash and marketable securities and up to $500 million of availability under the Revolving Credit Facility, not including an expansion option of up to $200 million thereunder.

Experienced and dedicated management team. Our senior management team has a proven track record of building businesses through internal growth as well as through licensing and acquisitions, and their expertise has contributed to our success in identifying, consummating and integrating such acquisitions. Members of our management team have consummated four acquisitions since 2009 (Indevus, HealthTronics, Penwest, and Qualitest), have received FDA approval on more than nineteen new products and product line extensions since 1997, and, as a result of several successful product launches, have grown our total revenues from $108 million in 1998 to over $1.7 billion in 2010.

Our Industry

Pain Management Market

According to IMS Health data, the total U.S. market for pain management pharmaceuticals, excluding over-the-counter products, totaled $22.2 billion in 2010. This represents an approximate 7% compounded annual growth rate since 2006. Our primary area of focus within this market is analgesics and, specifically, opioid analgesics. In 2010, analgesics were the third most prescribed medication in the United States with nearly 311 million prescriptions written for this classification.

Opioid analgesics is a segment that comprised approximately 80% of the analgesic prescriptions for 2010 and represented almost 58% of the overall U.S. pain management market. Total U.S. sales for the opioid analgesic segment were $8.5 billion in 2010, representing a compounded annual growth rate of 10% since 2006. With the launch of Voltaren^® Gel in 2008, Endo gained presence in the osteoarthritis market competing in the analgesic non-narcotic and anti-arthritic classes which together had over 179 million prescriptions written in 2010, representing 42% of the U.S. pain management market. The U.S. sales for the analgesic non-narcotic and anti-arthritic markets were $13.7 billion with a compound annual growth rate of 5% since 2006.

Opioid analgesic products are used primarily for the treatment of pain associated with orthopedic fractures and sprains, post herpetic-neuralgia, back injuries, migraines, joint diseases, cancer and various surgical procedures.

The growth in this segment has been primarily attributable to:

• increasing physician recognition of the need and patient demand for effective treatment of pain;

• aging population (according to the U.S. Census Bureau, from 2000 to 2010 the population aged 65 and older was projected to reach 40 million people, representing 15% growth over this period.);

• introduction of new and reformulated branded products; and

• increasing incidence of chronic pain conditions, such as cancer, arthritis and low back pain.

Urology, Endocrinology and Oncology Markets

Through our acquisition of Indevus as well as other business development activities in 2009, Endo entered the urology, endocrinology and oncology markets, specifically the prostate cancer therapeutic area with Vantas^®, the bladder oncology space with Valstar^® and Urocidin^TM, and the central precocious puberty therapeutic area with Supprelin^® LA. With our early 2011 launch of Fortesta^TM Gel, which was approved by the FDA in December 2010 for the treatment of hypogonadism, we entered the testosterone replacement therapy (TRT) market. We anticipate increasing our presence in this market through our development product Aveed^TM. As a

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result of our acquisition of HealthTronics, we now offer a full suite of urology products and services with the addition of lithotripsy, benign prostate hyperplasia and prostate cancer therapies, as well as anatomical pathology services for the detection and diagnosis of cancer and other conditions.

Central Precocious Puberty (CPP)

In a recent study, the incidence of CPP reported from national registries in the European Union subdivided by gender and age at diagnosis was approximately 1 per 10,000 in girls who were younger than 4 years, thereafter gradually rising to 8 per 10,000 for girls aged 5 to 9 years. The incidence in boys younger than 8 years was approximately 1 per 10,000. Recent market research indicates that girls in the United States are physically maturing at an earlier age than they did 30 years ago, and the number of girls diagnosed with precocious puberty is on the rise. In the United States, 7,000 patients are estimated to have CPP with approximately 2,000 diagnosed annually. CPP is treated by pediatric endocrinologists in the United States where there are approximately 600 practicing pediatric endocrinologists. In 2010, the market for drugs to treat CPP, reported by IMS Health NSP, was approximately $125 million in the United States.

Prostate cancer

Prostate cancer is the most common cancer for men and the second leading cause of cancer deaths in men. According to the American Cancer Society, every year approximately 200,000 men in the United States are diagnosed with prostate cancer and 30,000 die from this disease.

Bladder cancer overview

There are more than 500,000 people in the United States alive with a history of bladder cancer, which is the fourth most common cancer among men and the eleventh most common among women in the United States. The American Cancer Society estimated approximately 70,530 new cases of bladder cancer and 14,680 deaths from this disease in the United States in 2010. The 2011 estimate is expected to be similar. Rates of bladder cancer are expected to increase due to the aging population; nearly 90% of cases of bladder cancer are diagnosed in people age 55 or older. The number of patients in the total non-invasive bladder cancer population will thus increase due to the rising incidence as well as high recurrence rates, leading to a substantial prevalent population.

BCG-refractory CIS bladder cancer

CIS of the urinary bladder is a rare form of bladder cancer, affecting about seven of every 100 patients diagnosed with bladder cancer. Standard treatment of CIS of the urinary bladder is transurethral resection of the bladder tumor, followed by one or two courses of immunotherapy with the vaccine BCG. About 50 percent of patients will become refractory to BCG therapy. Valstar^® intravesical therapy is the only FDA-approved treatment of carcinoma in situ of the urinary bladder in patients who are refractory to BCG immunotherapy when cystectomy – or bladder removal – is not an option.

Testosterone replacement overview

In the United States alone, it is estimated that 13.8 million men have low testosterone levels; however, only about 9% are currently being treated. Hypogonadism, or low testosterone, is under diagnosed and under treated. Factors contributing to this include a lack of screening for low testosterone and the perceived risk of prostate cancer associated with current treatment strategies. In the United States, TRT sales have dramatically increased, from approximately $484 million in 2005 to over $1.3 billion in 2010, representing a compounded annual growth rate of 18% since 2005.

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Products and Services Overview

The following table summarizes select products in our branded and generic portfolios as well as select products in development:

Branded Pharmaceuticals	Active Ingredient(s)	Status
Lidoderm®	lidocaine 5%	Marketed
Opana® ER	oxymorphone hydrochloride	Marketed
Opana®	oxymorphone hydrochloride	Marketed
Percocet®	oxycodone hydrochloride and acetaminophen	Marketed
Voltaren® Gel(1)	diclofenac sodium topical gel 1%	Marketed
Frova®(2)	frovatriptan succinate	Marketed
Supprelin® LA	histrelin acetate	Marketed
Vantas®	histrelin acetate	Marketed
Sanctura XR®(3)	trospium chloride	Marketed
Sanctura®(4)	trospium chloride	Marketed
Valstar®	valrubicin	Marketed
Percodan®	oxycodone hydrochloride and aspirin	Marketed
FortestaTM Gel(5)	2% testosterone	Marketed
Generics	Active Ingredient(s)	Status
Endocet®	oxycodone hydrochloride and acetaminophen	Marketed
Morphine Sulfate ER	morphine sulfate	Marketed
Hydrocodone and acetaminophen	hydrocodone and acetaminophen	Marketed
Oxycodone and acetaminophen	oxycodone and acetaminophen	Marketed
Carisoprodol	carisoprodol	Marketed
Hydrocortisone	hydrocortisone	Marketed
Promethazine	promethazine	Marketed
Multi Vitamins	multi vitamins	Marketed
Acetaminophen and codeine	acetaminophen and codeine	Marketed
Spironolactone	spironolactone	Marketed
Butalbital, acetaminophen, and caffeine	butalbital, acetaminophen, and caffeine	Marketed
Methocarbamol	methocarbamol	Marketed
Allopurinol	allopurinol	Marketed
Lactulose	lactulose	Marketed
Hydrochlorothiazide	hydrochlorothiazide	Marketed
Prednisone	prednisone	Marketed
Nystatin	nystatin	Marketed
Products in Development	Active Ingredient(s)	Status
Oxymorphone(6)	oxymorphone hydrochloride	NDA Filed
AveedTM(7)	testosterone undecanoate	NDA Filed
Octreotide implant – acromegaly*	octreotide acetate	Phase III
UrocidinTM(8)	mycobacterial cell wall-DNA complex	Phase III
Axomadol(6)	axomadol phosphate	Phase II
Pagoclone(9)	pagoclone	Phase II

* Granted orphan drug designation.

(1) Licensed marketing rights from Novartis Consumer Health, Inc.

(2) Licensed marketing rights from Vernalis Development Limited.

(3) Licensed marketing and development rights from Supernus Pharmaceuticals Inc.

(4) Licensed marketing and development rights from Madaus GmbH.

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(5) Licensed marketing and development rights from Strakan International Limited.

(6) Licensed marketing and development rights from Grünenthal GMBH.

(7) Licensed marketing and development rights from BayerSchering Pharma AG.

(8) Licensed marketing and development rights from Bioniche Life Sciences.

(9) Licensed marketing and development rights from Aventis Pharma S.A.

Branded Pharmaceuticals

Lidoderm^®. Lidoderm^® was launched in September 1999. A topical patch product containing lidocaine, Lidoderm^® was the first FDA-approved product for the relief of the pain associated with post-herpetic neuralgia, a condition thought to result after nerve fibers are damaged during a case of Herpes Zoster (commonly known as shingles). Lidoderm^® is also currently protected by Orange Book-listed patents for, among other things, a method of treating post-herpetic neuralgia and the composition of the lidocaine-containing patch. The last of these patents is set to expire in 2015. In 2010, 2009, and 2008, Lidoderm^® net sales were $782.6 million, $763.7 million, and $765.1 million, respectively. Lidoderm^® accounted for approximately 46% of our 2010 total revenues.

Opana^® and Opana^® ER. Opana^® ER and Opana^® were launched during the second half of 2006 and have shown steady prescription growth trends since their launch. Opana^® ER is indicated for the relief of moderate-to-severe pain in patients requiring continuous, around-the-clock opioid treatment for an extended period of time. Opana^® ER represents the first drug in which oxymorphone is available in an oral, extended-release formulation and is available in 5 mg, 7.5 mg, 10 mg, 15 mg, 20 mg, 30 mg and 40 mg tablets. Opana^® (the immediate-release version) is indicated for the relief of moderate-to-severe acute pain where the use of an opioid is appropriate and is available in 5mg and 10mg tablets. Opana^® ER and Opana^® net sales were $299.1 million, $230.6 million, and $180.4 million in 2010, 2009, and 2008, respectively. Opana^® ER and Opana^® accounted for approximately 17% of our 2010 total revenues.

Percocet^®. Launched in 1976, Percocet^® is approved for the treatment of moderate-to-moderately severe pain. The Percocet^® family of products had net sales of $121.3 million, $127.1 million, and $130.0 million in the years 2010, 2009, and 2008, respectively. The Percocet^® franchise accounted for approximately 7% of our 2010 total revenues.

Voltaren^® Gel. We launched Voltaren^® Gel in March 2008 upon closing of the license and supply agreement with Novartis AG and Novartis Consumer Health, Inc. Voltaren^® Gel (diclofenac sodium topical gel) 1% received regulatory approval in October 2007 from the FDA, becoming the first topical prescription treatment for use in treating pain associated with osteoarthritis and the first new product approved in the United States for osteoarthritis since 2001. Voltaren^® Gel was granted marketing exclusivity in the United States as a prescription medicine until October 2010. It is the first prescription topical osteoarthritis treatment to have proven its effectiveness in both the knees and joints of the hands through clinical trials. Voltaren^® Gel delivers effective pain relief with a favorable safety profile as its systemic absorption is 94% less than the comparable oral diclofenac treatment. In 2010, 2009, and 2008, net sales of Voltaren^® Gel were $104.9 million, $78.9 million, and $23.8 million, respectively.

Frova^®. We began shipping Frova^® upon closing of the license agreement with Vernalis in mid-August 2004, and we initiated our promotional efforts in September 2004. Frova^® is indicated for the acute treatment of migraine headaches in adults. We believe that Frova^® has differentiating features from other migraine products, including the longest half-life in the triptan class and a very low reported migraine recurrence rate in its clinical program. In 2010, 2009, and 2008, Frova^® net sales were $59.3 million, $57.9 million, and $58.0 million, respectively.

Supprelin^® LA. Supprelin^® LA was launched in the United States in June 2007. Supprelin^® LA is a soft, flexible 12-month hydrogel implant based on our patented Hydron Polymer Technology that delivers histrelin

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acetate, a gonadotropin releasing hormone (GnRH) agonist and is indicated for the treatment of central precocious puberty (CPP) in children. CPP is the early onset of puberty in young children resulting in the development of secondary sex characteristics and, if left untreated, can result in diminished adult height attainment. The development of these secondary sex characteristics is due to an increase in the secretion of sex hormones, the cause of which is unknown. We market Supprelin^® LA in the United States through a specialty sales force primarily to pediatric endocrinologists. Net sales of Supprelin^® LA were $46.9 million in 2010 and $27.8 million in 2009.

Vantas^®. Vantas^® was launched in the United States in November 2004. Vantas^® is a soft, flexible 12-month hydrogel implant based on our patented Hydron^® Polymer Technology that delivers histrelin acetate, a GnRH agonist and is indicated for the palliative treatment of advanced prostate cancer. We are party to a License, Supply and Distribution Agreement with Orion Corporation (Orion) granting them the rights to market Vantas^® throughout Europe as well as certain other countries. Vantas^® is also approved in Thailand, Singapore, Malaysia, and Argentina. Net sales of Vantas^® were $17.0 million in 2010 and $20.0 million in 2009, primarily in the United States.

Valstar^®. Valstar^® is a sterile solution for intravesical instillation of valrubicin, a chemotherapeutic anthracycline derivative, and is the only product currently approved by the FDA for therapy of bacillus Calmette-Guerin (BCG)-refractory carcinoma in situ (CIS) of the urinary bladder. Valstar^®, originally approved by the FDA in 1998, was withdrawn from the market in 2002 due to a manufacturing problem involving impurity issues in the original formulation and was placed on the FDA Drug Shortages List. In April 2007, the Company submitted a supplemental new drug application (sNDA) to the FDA seeking approval to reintroduce Valstar^® and in February 2009, the FDA approved this sNDA. In September 2009, we launched Valstar^® for the treatment of patients with BCG-refractory CIS of the bladder. We continue to work closely with the manufacturer to build quantities of the product to support the increasing demand for Valstar^®. Net sales of Valstar^® were $14.1 million in 2010 and $3.4 million in 2009.

Hydron^® Implant. The Hydron^® Implant is a subcutaneous, retrievable, non-biodegradable, hydrogel reservoir drug delivery device designed to provide sustained release of a broad spectrum of drugs continuously, at constant, predetermined rates. This technology serves as the basis for two of our currently marketed products: Vantas^® and Supprelin^® LA.

The Hydron^® Implant is the only soft, flexible, reservoir-based drug delivery system available for parenteral administration. Our implant is designed for easy, in-office physician insertion under local anesthesia. The hydrogel polymer compositions possess flexible, tissue-like characteristics providing excellent biocompatibility and patient comfort. The Hydron^® Implant delivers drugs at zero-order kinetics and the duration of delivery can be predetermined over a range of times. While we will continue using this technology, we have decided to stop using the “Hydron^®” name and plan to use “MedLaunch^TM” to describe this technology.

Sanctura^®. Sanctura^®, a muscarinic receptor antagonist for the treatment of OAB, was launched in August 2004. Sanctura^® is indicated for the treatment of OAB with symptoms of urinary incontinence, urgency and urinary frequency. Sanctura^® belongs to the anticholinergic class of compounds and binds specifically to muscarinic receptors. These compounds relax smooth muscles, such as the detrusor muscle in the bladder, thus decreasing bladder contractions. Overactive or unstable detrusor muscle function is believed to be one of the principal causes of OAB symptoms. Current treatments in the United States for OAB include compounds in the same therapeutic class as Sanctura^®. In November 1999, we licensed the exclusive rights to develop and market Sanctura^® in the United States from Madaus GmbH (Madaus). In September 2007, we sublicensed these rights to Allergan, Inc (Allergan). We receive royalties from Allergan on net sales of Sanctura^® in the United States. We had co-promoted Sanctura^® in the United States with our marketing partner, Allergan, however, our right to co-promote expired in September 2009.

Sanctura XR^®. Sanctura XR^® is a once-daily formulation of Sanctura^®, our currently marketed product for the treatment of OAB. Sanctura XR^® belongs to a class of anticholinergic compounds known as muscarinic

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receptor antagonists. Current treatments in the United States for OAB include compounds in the same therapeutic class as Sanctura XR^®. Sanctura XR^® is a quaternary ammonium compound, which we believe provides significant differentiation to the tertiary ammonium compounds currently being marketed for the treatment of OAB. Quaternary ammonium compounds are highly charged and hydrophilic with a limited ability to cross lipid membranes. The formulation of Sanctura XR^® was developed under a development and license agreement with Supernus Pharmaceuticals, Inc. (Supernus), formerly Shire Laboratories, Inc. and we received exclusive, worldwide rights. In November 2006, we licensed to Madaus the exclusive rights to sell Sanctura XR^® in all countries outside of the United States, except for Canada, Japan, Korea and China. We receive royalties from Madaus on the net sales of Sanctura XR^® in these countries. In September 2007, we sublicensed to Allergan the United States rights to Sanctura XR^®. We receive royalties from Allergan on the net sales of Sanctura XR^® in the United States. In May 2008, we sublicensed to Allergan the rights to the Sanctura^® franchise in Canada and Allergan could be required to pay future commercialization milestone payments to us. We had co-promoted Sanctura XR^® in the United States with our marketing partner, Allergan, however, our right to co-promote expired in September 2009.

Fortesta^TM Gel. Fortesta^TM Gel is a patented two percent (2%) testosterone transdermal gel for testosterone replacement therapy in male hypogonadism. A metered dose delivery system permits accurate dose adjustments to increase the ability to individualize patient treatment. In August 2009, we entered into a License and Supply Agreement (the ProStrakan Agreement) with Strakan International Limited, a subsidiary of ProStrakan Group plc (ProStrakan), for the exclusive right to commercialize Fortesta^TM Gel in the United States. On July 1, 2010, we submitted a complete response to the FDA following our receipt of a complete response letter in October 2009 from the FDA regarding the NDA for Fortesta^TM Gel. Fortesta^TM Gel was approved by the FDA in December of 2010 as a treatment for men suffering from low testosterone (Low T), also known as hypogonadism, and was launched in the first quarter of 2011.

Other. The balance of our other branded portfolio consists of a number of products, none of which accounted for more than 1% of our total net sales in the 2010 fiscal year.

Generics

When a branded pharmaceutical product is no longer protected by any relevant patents, normally as a result of a patent’s expiration, or by other, non-patent “market exclusivity,” third parties have an opportunity to introduce generic counterparts to such branded product. Generic pharmaceutical products are therapeutically equivalent to their brand-name counterparts and are generally sold at prices significantly less than the branded product. Accordingly, generic pharmaceuticals may provide a safe, effective and cost-effective alternative to users of branded products.

One of our generic products is an oxycodone hydrochloride and acetaminophen product, Endocet^®, which accounted for approximately 5% of our total revenues in 2010. Another of our generic products is morphine sulfate extended-release tablets, which accounted for 1% of our total revenues in 2010. Prior to our acquisition of Qualitest in November 2010, the balance of our generic portfolio consisted of a few other products, none of which accounted for more than 1% of our total revenues in 2010. The Qualitest acquisition resulted in an additional $30.3 million in total revenues for our generics business during 2010, which was included in our consolidated results from November 30, 2010.

With the acquisition of Qualitest, we are expanding and diversifying our generic product pipeline. We principally pursue the development and marketing of generic pharmaceuticals that either have one or more barriers to entry or can leverage our low-cost manufacturing network in the United States and abroad. The characteristics of the products that we may target for generic development or sourcing may include:

• complex formulation or development characteristics;

• regulatory or legal challenges;

• difficulty in raw material sourcing; or

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• products sourced primarily in the United States where our lower cost United States manufacturing gives us an advantage.

We believe products with these characteristics will face a lesser degree of competition, therefore providing longer product life cycles and/or higher profitability than other commodity generic products. As of December 31, 2010, the combined generics business has 46 abbreviated new drug applications (ANDAs) under active FDA review in multiple therapeutic areas, including pain management, urology, central nervous system (CNS) disorders, immunosuppression, oncology and hypertension. We anticipate that 24 ANDAs will be filed in 2011 and 2012 combined.

Products in Development

Our pipeline portfolio contains products and product candidates that have differentiating features for multiple therapeutic areas, including pain, oncology, urology and endocrinology. The Company’s most promising pipeline products, including those obtained through our acquisition of Indevus are as follows:

Aveed^TM. Aveed^TM is a novel, long-acting injectable testosterone preparation for the treatment of male hypogonadism. If approved, Aveed^TM would be the first long-acting injectable testosterone preparation available in the United States in the growing market for testosterone replacement therapies. The U.S. rights to Aveed^TM were acquired from Schering AG, Germany, in July 2005. Although not yet approved in the United States, Aveed^TM is approved in and currently marketed in Europe and a number of other countries. In May 2010, a new patent covering Aveed^TM was issued by the U.S. Patent and Trademark Office. The patent’s expiration date is March 14, 2027.

Male hypogonadism is an increasingly recognized medical condition characterized by a reduced or absent secretion of testosterone from the testes. Reduced testosterone levels can lead to health problems and significantly impair quality of life. Common effects of hypogonadism include decreased sexual desire, erectile dysfunction, muscle loss and weakness, depression, and an increased risk of osteoporosis. In the United States alone, it is currently estimated that 14 million men have low testosterone levels; however, only about 9% are currently being treated.

In June 2008, an approvable letter was received from the FDA indicating that the Aveed^TM NDA may be approved if the Company is able to adequately respond to certain clinical deficiencies related to the product. In September 2008, an agreement was reached with the FDA with regard to the additional data and risk management strategy. In March 2009, the FDA accepted for review the complete response submission to the new drug application for Aveed^TM.

On December 2, 2009, we received a complete response letter from the FDA regarding Aveed^TM. In the complete response letter, the FDA has requested information from Endo to address the agency’s concerns regarding rare but serious adverse events, including post-injection anaphylactic reaction and pulmonary oily microembolism. The letter also specified that the proposed risk evaluation mitigation strategy (REMS) is not sufficient. In 2010, the Company met with the FDA to discuss the existing clinical data provided to the FDA as well as the potential path-forward. The Company is evaluating how best to address the concerns of the FDA and intends to have future dialogue with the agency regarding a possible regulatory pathway. The outcome of future communications with the FDA could have a material impact on (1) management’s assessment of the overall probability of approval, (2) the timing of such approval, (3) the targeted indication or patient population and (4) the likelihood of additional clinical trials.

Oxymorphone. Oxymorphone is an opioid analgesic product that serves as the basis for two of our currently marketed products: Opana^® ER and Opana^®. In December 2007, we entered into a license, development and supply agreement with Grünenthal GMBH for the exclusive clinical development and commercialization rights in Canada and the United States for a new oral formulation of long-acting oxymorphone, which is designed to be crush resistant. Under the terms of this agreement Grünenthal is responsible for development efforts to conduct pharmaceutical formulation development and will manufacture any such product or products which obtain FDA

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approval. Endo is responsible for conducting clinical development activities and for all development costs incurred to obtain regulatory approval. Under the terms of the agreement, Endo has paid and could become obligated to pay additional amounts upon the achievement of predetermined regulatory and commercial milestones. Endo will also make payments to Grünenthal based on net sales of any such product or products commercialized under this agreement.

In July 2010, we filed an NDA with the FDA for a new extended-release formulation of oxymorphone, which is a semi-synthetic opioid analgesic intended for the treatment of moderate to severe chronic pain in patients requiring continuous, around-the-clock opioid treatment for an extended period of time. The NDA submission is based on a non-clinical and clinical development program designed to demonstrate the crush-resistant properties of this formulation of oxymorphone. In September 2010, we received notification from the FDA that this NDA has been granted priority review status. In January 2011, we received a complete response letter from the FDA. The letter did not require that additional clinical studies be conducted for approval of the NDA. We have begun to address the issue described in the complete response letter and will work closely with the FDA to finalize our response. We are confident that we can address the issue set forth, currently anticipate responding to the FDA by mid 2011 and would expect a six month review cycle once our response is filed.

Octreotide implant. The octreotide implant utilizes our patented Hydron^® Polymer Technology to deliver six months of octreotide, a long-acting octapeptide that mimics the natural hormone somatostatin to block production of growth hormone (GH), for the treatment of acromegaly.

Acromegaly is a chronic hormonal disorder that occurs when a tumor of the pituitary gland causes the excess production of GH. It usually affects middle-aged adults and, if untreated, causes enlargement of certain bones, cartilage, muscles, organs and other tissue, leading to serious illness and potential premature death. There are approximately 1,000 new acromegalic patients diagnosed per year and 18,000 total patients in the United States.

In November 2007, positive results from the Phase II trial in patients with acromegaly showed that the octreotide implant effectively suppressed levels of GH and IGF-1 (insulin-like growth factor-1, the mediator of growth hormone’s effects) at rates similar to those seen with current FDA approved injectable formulations of octreotide. In addition, the drug was well tolerated. In September 2008, a Phase III clinical trial was initiated. The trial is designed to test the efficacy, safety and tolerability of the octreotide implant in patients with acromegaly.

The octreotide implant is also currently in Phase II clinical trials for the treatment of carcinoid syndrome. Carcinoid syndrome is a group of symptoms associated with carcinoid tumors, which are tumors of the small intestine, colon, appendix, and bronchial tubes in the lungs that originate from cells of the neuroendocrine system. Carcinoid syndrome occurs in approximately 10% of the patients with carcinoid tumors, usually after the tumor has spread to the liver or lung.

In February 2011, the FDA requested that additional pre-clinical studies, including a carcinogenicity study, be completed prior to the submission of the NDA for the octreotide implant for the treatment of acromegaly. Although this development causes a delay of up to four years in the timing associated with regulatory approval, the Company intends to continue the development of this product and is encouraged by recent preliminary results from its Phase III study.

In addition, the Company recently assessed all of its in-process research and development assets and concluded, separately, to discontinue development of its octreotide implant for the treatment of carcinoid syndrome due to recent market research that indicates certain commercial challenges, including the expected rate of physician acceptance and the expected rate of existing patients willing to switch therapies.

Urocidin^TM. Urocidin^TM is a patented formulation of Mycobacterial Cell Wall-DNA Complex (MCC) developed by Bioniche Life Sciences Inc. (Bioniche) for the treatment of non-muscle-invasive bladder cancer that is currently undergoing Phase III clinical testing.

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In July 2009, the Company entered into a License, Development and Supply Agreement with Bioniche, whereby the Company licensed from Bioniche the exclusive rights to develop and market Urocidin^TM in the United States with an option for global rights. We exercised our option for global rights in the first quarter of 2010.

Axomadol. Axomadol is a patented new chemical entity discovered by Grünenthal GMBH and currently in Phase II development for the treatment of moderate to moderately severe chronic pain. In February 2009, we entered into a Development, License and Supply Agreement with Grünenthal, granting us the exclusive right in North America to develop and market axomadol.

Pagoclone. Pagoclone is a novel, non-benzodiazepine, GSBA-A receptor modulator and is under development as a treatment for stuttering. Stuttering is a disease of uncertain etiology that affects approximately three million adults and children in the United States. The treatment for stuttering consists mainly of behavioral modification and speech therapy as there are currently no drugs approved in the U.S. for the treatment of stuttering.

Anti-androgen program. In January 2011, the Company entered into a Discovery, Development and Commercialization Agreement (the 2011 Orion Agreement) with Orion Corporation (Orion) to exclusively co-develop products for the treatment of certain cancers and solid tumors, focused primarily on castration-resistant prostate cancer.

Other. We also have other products, including certain undisclosed products in our therapeutic areas of interest in early stages of development.

We cannot predict when or if any of these products will be approved by the FDA.

Devices and Services

Through our HealthTronics subsidiary, we provide healthcare services and manufacture medical devices, primarily for the urology community, including:

Lithotripsy services. Through HealthTronics, we provide lithotripsy services, which is a medical procedure where a device called a lithotripter transmits high energy shockwaves through the body to break up kidney stones. Our lithotripsy services are provided principally through limited partnerships and other entities that we manage, which use lithotripters. In 2010, physician partners used our lithotripters to perform approximately 50,000 procedures in the United States. We do not render any medical services; rather, the physicians do.

Our HealthTronics subsidiary provides our lithotripsy services through two types of contracts, retail and wholesale. Retail contracts are contracts where we contract with the hospital and private insurance payers. Wholesale contracts are contracts where we contract only with the hospital. The two approaches functionally differ in that, under a retail contract, we generally bill for the entire non-physician fee for all patients other than governmental pay patients, for which the hospital bills the non-physician fee. Under a wholesale contract, the hospital generally bills for the entire non-physician fee for all patients. In both cases, the billing party contractually bears the costs associated with the billing service, including pre-certification, as well as non-collection. The non-billing party is generally entitled to its fees regardless of whether the billing party actually collects the non-physician fee. Accordingly, under the wholesale contracts where we are the non-billing party, the hospital generally receives a greater proportion of the total non-physician fee to compensate for its billing costs and collection risk. Conversely, under the retail contracts where we generally provide the billing services and bear the collection risk, we receive a greater portion of the total non-physician fee. As the general partner of limited partnerships or the manager of other types of entities, we also provide services relating to operating our lithotripters, including scheduling, staffing, training, quality assurance, regulatory compliance and contracting with payers, hospitals and surgery centers.

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Prostate treatment services. Through HealthTronics, we also provide treatments for benign and cancerous conditions of the prostate. In treating benign prostate disease, we deploy three technologies: (1) photo-selective vaporization of the prostate, (2) trans-urethral needle ablation, and (3) trans-urethral microwave therapy in certain partnerships. All three technologies apply an energy source which reduces the size of the prostate gland. For treating prostate and other cancers, we use a procedure called cryosurgery, a process which uses lethal ice to destroy tissue such as tumors for therapeutic purposes. In April 2008, HealthTronics acquired Advanced Medical Partners, Inc., which significantly expanded our cryosurgery partnership base. In July 2009, HealthTronics acquired Endocare Inc., which manufactures both the medical devices and the related consumables used by our cryosurgery operations and also provides cryosurgery treatments. Our prostate treatment services are provided principally by us using equipment that we lease from limited partnerships and other entities that we manage. Benign prostate disease and cryosurgery cancer treatment services are billed in the same manner as our lithotripsy services, under either retail or wholesale contracts. We also provide services relating to operating the equipment, including scheduling, staffing, training, quality assurance, regulatory compliance and contracting.

Radiation therapy services. Through HealthTronics, we also provide IGRT technical services for cancer treatment centers. Our IGRT technical services may relate to providing the technical (non-physician) personnel to operate a physician practice group’s IGRT equipment, leasing IGRT equipment to a physician practice group, providing services related to helping a physician practice group establish an IGRT treatment center or managing an IGRT treatment center. Since July 2, 2010 (the HealthTronics Acquisition Date), this business has contributed approximately $2.6 million to our total revenues for the year ended December 31, 2010.

Anatomical pathology services. Through HealthTronics, we also provide anatomical pathology services primarily to the urology community. We have one pathology lab located in Georgia, HealthTronics Laboratory Solutions, Laboratories, that provides laboratory detection and diagnosis services to urologists throughout the United States. In addition, in July 2008, HealthTronics acquired Uropath LLC, now referred to as HealthTronics Laboratory Solutions, which managed pathology laboratories located at Uropath sites for physician practice groups located in Texas, Florida and Pennsylvania. Through HealthTronics Laboratory Solutions, we continue to provide administrative services to in-office pathology labs for practice groups and provide pathology services to physicians and practice groups with our lab equipment and personnel at our HealthTronics Laboratory Solutions laboratory sites.

Medical products manufacturing, sales and maintenance. HealthTronics, through its Endocare acquisition, manufactures and sells medical devices focused on minimally invasive technologies for tissue and tumor ablation through cryoablation, which is the use of lethal ice to destroy tissue, such as tumors, for therapeutic purposes. We develop and manufacture these devices for the treatment of prostate and renal cancers, and we believe that our proprietary technologies may have broad applications across a number of markets, including the ablation of tumors in the lung and liver and palliative intervention (treatment of pain associated with metastases). We also manufacture the related spare parts and consumables for these devices. We also sell and maintain lithotripters and related spare parts and consumables.

Competition

Branded Pharmaceuticals. The pharmaceutical industry is highly competitive. Our products compete with products manufactured by many other companies in highly competitive markets throughout the United States. Our competitors vary depending upon therapeutic and product categories. Competitors include many of the major brand name and generic manufacturers of pharmaceuticals, especially those doing business in the United States. In the market for branded pharmaceuticals, our competitors, including Abbott Laboratories, Johnson & Johnson, Cephalon, Inc., Pfizer, Inc., Purdue Pharma, L.P., Allergan, Inc. and Watson Pharmaceuticals Inc., vary depending on product category, dosage strength and drug-delivery systems.

We compete principally through our targeted product development and acquisition and in-licensing strategies. The competitive landscape in the acquisition and in-licensing of pharmaceutical products has

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intensified in recent years as there has been a reduction in the number of compounds available and an increase in the number of companies and the collective resources bidding on available assets. In addition to product development and acquisitions, other competitive factors in the pharmaceutical industry include product efficacy, safety, ease of use, price, demonstrated cost-effectiveness, marketing effectiveness, service, reputation and access to technical information.

The competitive environment of the branded product business requires us continually to seek out technological innovations and to market our products effectively. However, some of our current branded products not only face competition from other brands, but also from generic versions. Generic versions are generally significantly less expensive than branded versions, and, where available, may be required in preference to the branded version under third-party reimbursement programs, or substituted by pharmacies. If competitors introduce new products, delivery systems or processes with therapeutic or cost advantages, our products can be subject to progressive price reductions or decreased volume of sales, or both. Most new products that we introduce must compete with other products already on the market or products that are later developed by competitors. Manufacturers of generic pharmaceuticals typically invest far less in research and development than research-based pharmaceutical companies and therefore can price their products significantly lower than branded products. Accordingly, when a branded product loses its market exclusivity, it normally faces intense price competition from generic forms of the product. To successfully compete for business with managed care and pharmacy benefits management organizations, we must often demonstrate that our products offer not only medical benefits but also cost advantages as compared with other forms of care.

On October 17, 2006, we became aware that, in response to an independent inquiry, the FDA’s Office of Generic Drugs (OGD) had proposed that a study of blood levels of lidocaine should be used as the key measure in proving bioequivalence of a generic version of Lidoderm^®. On December 19, 2006, we submitted a Citizen Petition with the U.S. Food and Drug Administration requesting that the FDA apply existing bioequivalence regulations to any ANDA seeking regulatory approval of a generic drug product that references Lidoderm^®. The petition emphasizes that the proposed new standard deviates from applicable regulations and OGD’s past practices, both of which contemplate demonstration of bioequivalence for a topically acting product like Lidoderm^® through a comparative clinical efficacy study. We believe blood levels of the active ingredient, lidocaine, cannot be used as the key measure in proving bioequivalence. To appropriately assess the efficacy and safety of any generic version of Lidoderm^®, we believe that it is critical that the FDA require any ANDA satisfy the regulations by following these additional criteria to those that FDA has proposed by (1) conducting comparative clinical studies demonstrating identical safety and efficacy between the generic version and Lidoderm^®, and (2) for an applicant relying on Lidoderm^® as its Reference Listed Drug, to show that its product produces the same local analgesic effect as Lidoderm^® without producing a complete sensory block, in order to assure that the generic product has the same labeling, efficacy and safety profile as Lidoderm^®. On August 30, 2007, we submitted an amended Citizen Petition to the FDA requesting that the agency withdraw the bioequivalence recommendations, convene a joint meeting of the Dermatologic and Ophthalmic Drugs Advisory Committee (DODAC) and Advisory Committee for Pharmaceutical Science (ACPS) to discuss development of the appropriate method(s) for demonstrating bioequivalence for patch dosage forms with local routes of administration, decline to approve or stay the approval of any ANDA or 505(b)(2) application referencing Lidoderm^® that does not contain studies with clinical safety and efficacy endpoints that demonstrate bioequivalence to Lidoderm^® and if the FDA contemplates an alternative to bioequivalence studies with clinical endpoints for Lidoderm^®, only develop such method through a valid public process, with input from FDA advisory committees, including DODAC and ACPS. Other than an acknowledgement of receipt, we have received no response from FDA to either the initial Citizen Petition or the amended Citizen Petition.

The Company is aware of certain competitive activities involving Lidoderm^®, Opana^® ER, and Sanctura XR^®. For a full description of these competitive activities, including the litigation related to Paragraph IV filings, see Note 14 of the Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

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Generics. In the generic pharmaceutical market, we face intense competition from other generic drug manufacturers, brand name pharmaceutical companies through authorized generics, existing brand equivalents and manufacturers of therapeutically similar drugs. With the acquisition of Qualitest, we believe that our competitive advantages include our ability to continually introduce new generic equivalents for brand-name drug products, our quality and cost-effective production, our customer service and the breadth of our generic product line.

As a result of consolidation among wholesale distributors as well as rapid growth of large retail drug store chains, a small number of large wholesale distributors control a significant share of the market, and the number of independent drug stores and small drug store chains has decreased. This has resulted in customers gaining more purchasing power. Consequently, there is heightened competition among generic drug producers for the business of this smaller and more selective customer base.

Newly introduced generic products with limited or no other generic competition are typically sold at higher selling prices. As competition from other generic products increases, selling prices for all participants typically decline. Consequently, the maintenance of profitable operations in generic pharmaceuticals depends, in part, on our ability to select, develop and launch new generic products in a timely and cost efficient manner and to maintain efficient, high quality manufacturing relationships. New drugs and future developments in improved and/or advanced drug delivery technologies or other therapeutic techniques may provide therapeutic or cost advantages to competing products.

Devices and Services. The lithotripsy services market is highly fragmented and competitive. We compete with other companies, private facilities and medical centers that offer lithotripsy machines and services, including smaller regional and local lithotripsy service providers. Additionally, while we believe that lithotripsy has emerged as the superior treatment for kidney stone disease, we also compete with hospitals, clinics and individual medical practitioners that offer alternative treatments for kidney stones.

The prostate treatment services market is also highly fragmented and competitive. We compete with other companies, private facilities and medical centers that offer prostate treatment equipment and services, including smaller regional and local service providers.

In our device manufacturing operations, we compete with other manufacturers of minimally invasive medical devices in our markets. The primary competitors include Dornier MedTech GmbH, Siemens AG, Storz Medical, Richard Wolf GmbH, Direx and Galil Medical, Ltd.

Competition in our lab business is also intense. We compete with national, regional and local anatomical pathology labs. Certain of our lab competitors have significantly greater resources than us and some have nationally-recognized reputations. In addition, regional and local labs may have regionally-recognized reputations, pre-established long-term relationships with physicians and practice groups whereby the physicians and practice groups are comfortable with the level of expertise of the labs and therefore place a high value on the relationships.

Seasonality

Although our business is affected by the purchasing patterns and concentration of our customers, our business is not materially impacted by seasonality.

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Major Customers

We primarily sell our products directly to a limited number of large pharmacy chains and through a limited number of wholesale drug distributors who, in turn, supply products to pharmacies, hospitals, governmental agencies and physicians. Total revenues from customers who accounted for 10% or more of our total revenues during the years ended December 31 are as follows:

	2010			2009			2008
Cardinal Health, Inc.		33	%		35	%		36	%
McKesson Corporation		28	%		29	%		31	%
AmerisourceBergen Corporation		15	%		16	%		15	%

Revenues from these customers are included within our Branded Pharmaceuticals and Generics segments.

As a result of consolidation among wholesale distributors as well as rapid growth of large retail drug store chains, a small number of large wholesale distributors control a significant share of the market, and the number of independent drug stores and small drug store chains has decreased. Some wholesale distributors have demanded that pharmaceutical manufacturers, including us, enter into what are referred to as distribution service agreements pursuant to which the wholesale distributors provide the pharmaceutical manufacturers with specific services, including the provision of periodic retail demand information and current inventory levels and other information. To date we have entered into five such agreements.

Patents, Trademarks, Licenses and Proprietary Property

As of February 18, 2011, we held approximately: 155 U.S. issued patents, 70 U.S. patent applications pending, 483 foreign issued patents, and 223 foreign patent applications pending. In addition, as of February 18, 2011, we have licenses for approximately 69 U.S. issued patents, 12 U.S. patent applications pending, 165 foreign issued patents and 124 foreign patent applications pending. The following table sets forth information as of February 18, 2011 regarding each of our currently held material patents:

Patent No.	Patent Expiration*	Relevant Product	Ownership	Jurisdiction Where Granted
5,464,864	November 7, 2015	Frova®	Exclusive License	USA
5,616,603	April 1, 2014	Frova®	Exclusive License	USA
5,637,611	June 10, 2014	Frova®	Exclusive License	USA
5,827,871	October 27, 2015	Frova®	Exclusive License	USA
5,962,501	December 16, 2013	Frova®	Exclusive License	USA
5,411,738	May 2, 2012	Lidoderm®	Exclusive License	USA
5,601,838	May 2, 2012	Lidoderm®	Exclusive License	USA
5,827,529	October 27, 2015	Lidoderm®	Exclusive License	USA
5,741,510	March 30, 2014	Lidoderm®	Exclusive License	USA
7,410,978	February 1, 2025	Sanctura XR®	Exclusive License	USA
7,759,359	November 4, 2024	Sanctura XR®	Exclusive License	USA
7,763,635	November 4, 2024	Sanctura XR®	Exclusive License	USA
7,781,448	November 4, 2024	Sanctura XR®	Exclusive License	USA
7,781,449	November 4, 2024	Sanctura XR®	Exclusive License	USA
5,292,515	March 8, 2011	Supprelin® LA and Vantas®	Owned	USA
5,662,933	September 9, 2013	Opana® ER	Owned	USA
5,958,456	September 9, 2013	Opana® ER	Owned	USA
7,276,250	February 4, 2023	Opana® ER	Owned	USA
2131647	September 8, 2014	Opana® ER	Owned	Canada
2208230	November 4, 2016	Opana® ER	Owned	Canada
2251816	April 18, 2017	Opana® ER	Owned	Canada

Our exclusive license agreements extend to or beyond the patent expiration dates.

The effect of these issued patents is that they provide us with patent protection for the claims covered by the patents. The coverage claimed in a patent application can be significantly reduced before the patent is issued. Accordingly, we do not know whether any of the applications we acquire or license will result in the issuance of

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patents, or, if any patents are issued, whether they will provide significant proprietary protection or will be challenged, circumvented or invalidated. Because unissued U.S. patent applications are maintained in secrecy for a period of eighteen months and U.S. patent applications filed prior to November 29, 2000 are not disclosed until such patents are issued, and since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain of the priority of inventions covered by pending patent applications. Moreover, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office to determine priority of invention, or in opposition proceedings in a foreign patent office, either of which could result in substantial cost to us, even if the eventual outcome is favorable to us. There can be no assurance that the patents, if issued, would be held valid by a court of competent jurisdiction. An adverse outcome could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties or require us to cease using such technology.

We believe that our patents, the protection of discoveries in connection with our development activities, our proprietary products, technologies, processes and know-how and all of our intellectual property are important to our business. All of our brand products and certain generic products, such as Endocet^® and Endodan^®, are sold under trademarks. To achieve a competitive position, we rely on trade secrets, non-patented proprietary know-how and continuing technological innovation, where patent protection is not believed to be appropriate or attainable. In addition, as outlined above, we have a number of patent licenses from third parties, some of which may be important to our business. See Note 7 in Part IV Item 15 of this Annual Report on Form 10-K. There can be no assurance that any of our patents, licenses or other intellectual property rights will afford us any protection from competition.

We rely on confidentiality agreements with our employees, consultants and other parties to protect, among other things, trade secrets and other proprietary technology. There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach, that others will not independently develop equivalent proprietary information or that other third parties will not otherwise gain access to our trade secrets and other intellectual property.

We may find it necessary to initiate litigation to enforce our patent rights, to protect our intellectual property or to determine the scope and validity of the proprietary rights of others. Litigation is costly and time-consuming, and there can be no assurance that our litigation expenses will not be significant in the future or that we will prevail in any such litigation. See Note 14. Commitments and Contingencies-Legal Proceedings, included in the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K.

Governmental Regulation

The development, testing, manufacture, holding, packaging, labeling, distribution, marketing, and sales of our products and our ongoing product development activities are subject to extensive and rigorous government regulation. The Federal Food, Drug and Cosmetic Act (FFDCA), the Controlled Substances Act and other federal and state statutes and regulations govern or influence the testing, manufacture, packaging, labeling, storage, record keeping, approval, advertising, promotion, sale and distribution of pharmaceutical products. Noncompliance with applicable requirements can result in fines, recall or seizure of products, total or partial suspension of production and/or distribution, refusal of the government to enter into supply contracts or to approve NDAs and ANDAs, civil penalties and criminal prosecution.

FDA approval is typically required before each dosage form or strength of any new drug can be marketed. Applications for FDA approval to market a drug must contain information relating to efficacy, safety, toxicity, pharmacokinetics, product formulation, raw material suppliers, stability, manufacturing processes, packaging, labeling, and quality control. The FDA also has the authority to require post-approval testing after marketing has begun and to suspend or revoke previously granted drug approvals. Product development and approval within this regulatory framework requires many years and involves the expenditure of substantial resources.

Based on scientific developments, post-market experience, or other legislative or regulatory changes, the current FDA standards of review for approving new pharmaceutical products are sometimes more stringent than

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those that were applied in the past. Some new or evolving review standards or conditions for approval were not applied to many established products currently on the market, including certain opioid products. As a result, the FDA does not have as extensive safety databases on these products as on some products developed more recently. Accordingly, we believe the FDA has recently expressed an intention to develop such databases for certain of these products, including many opioids.

In particular, the FDA has expressed interest in specific chemical structures that may be present as impurities in a number of opioid narcotic active pharmaceutical ingredients, such as oxycodone, which based on certain structural characteristics and laboratory tests may indicate the potential for having mutagenic effects. More stringent controls of the levels of these impurities have been required and may continue to be required for FDA approval of products containing these impurities. Also, labeling revisions, formulation or manufacturing changes and/or product modifications may be necessary for new or existing products containing such impurities. The FDA’s more stringent requirements together with any additional testing or remedial measures that may be necessary could result in increased costs for, or delays in, obtaining approval for certain of our products in development. Although we do not believe that the FDA would seek to remove a currently marketed product from the market unless such mutagenic effects are believed to indicate a significant risk to patient health, we cannot make any such assurance.

We cannot determine what effect changes in the FDA’s laws or regulations, when and if promulgated, or changes in the FDA’s legal or regulatory interpretations, may have on our business in the future. Changes could, among other things, require expanded or different labeling, additional testing, the recall or discontinuance of certain products, additional record keeping and expanded documentation of the properties of certain products and scientific substantiation. Such changes, or new legislation, could have a material adverse effect on our business, financial condition, results of operations and cash flows. In December 2003, Congress passed measures intended to speed the process by which generic versions of brand name drugs are introduced to the market. Among other things, these measures are intended to limit regulatory delays of generic drug applications and penalize companies that reach agreements with makers of brand name drugs to delay the introduction of generic versions. These changes could result in increased generic competition for our branded and generic products and could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, on September 27, 2007, Congress enacted the Food and Drug Administration Amendments Act of 2007 (FDAAA) that re-authorized requirements for testing drug products in children, where appropriate, and included new requirements for post-approval studies or clinical trials of drugs that are known to or that signal the potential to pose serious safety risks, and authority to require REMS to ensure that the benefits of a drug outweigh the risks of the drug, all of which may increase the time and cost necessary for new drug development as well as the cost of maintaining regulatory compliance for a marketed product.

The evolving and complex nature of regulatory requirements, the broad authority and discretion of the FDA and the generally high level of regulatory oversight results in a continuing possibility that from time to time, we will be adversely affected by regulatory actions despite ongoing efforts and commitment to achieve and maintain full compliance with all regulatory requirements.

NDA / BLA Process

FDA approval is typically required before any new drug can be marketed. A New Drug Application (NDA) or Biologics License Application (BLA) is a filing submitted to the FDA to obtain approval of new chemical entities and other innovations for which thorough applied research is required to demonstrate safety and effectiveness in use. The process generally involves:

• Completion of preclinical laboratory and animal testing and formulation studies in compliance with the FDA’s Good Laboratory Practice, or GLP, regulations;

• Submission to the FDA of an Investigational New Drug (IND) application for human clinical testing, which must become effective before human clinical trials may begin in the United States;

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• Approval by an independent institutional review board, or IRB, before each trial may be initiated, and continuing review during the trial;

• Performance of human clinical trials, including adequate and well-controlled clinical trials in accordance with good clinical practices, or GCP, to establish the safety and efficacy of the proposed drug product for each intended use;

• Submission of an NDA or BLA to the FDA;

• Satisfactory completion of an FDA pre-approval inspection of the product’s manufacturing facility or facilities to assess compliance with the FDA’s current Good Manufacturing Practice (cGMP) regulations, and to ensure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity;

• Satisfactory completion of an FDA advisory committee review, if applicable; and

• Approval by the FDA of the NDA or BLA.

Clinical trials are typically conducted in three sequential phases, although the phases may overlap.

• Phase I, which frequently begins with the initial introduction of the compound into healthy human subjects prior to introduction into patients, involves testing the product for safety, adverse effects, dosage, tolerance, absorption, metabolism, excretion and other elements of clinical pharmacology.

• Phase II typically involves studies in a small sample of the intended patient population to assess the efficacy of the compound for a specific indication, to determine dose tolerance and the optimal dose range as well as to gather additional information relating to safety and potential adverse effects.

• Phase III trials are undertaken to further evaluate clinical safety and efficacy in an expanded patient population at typically dispersed study sites, in order to determine the overall risk-benefit ratio of the compound and to provide an adequate basis for product labeling.

Each trial is conducted in accordance with certain standards under protocols that detail the objectives of the study, the parameters to be used to monitor safety, and efficacy criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND. In some cases, the FDA allows a company to rely on data developed in foreign countries or previously published data, which eliminates the need to independently repeat some or all of the studies.

On January 25, 2010, the FDA published a final rule to amend its regulations that govern the informed consent process for clinical trials of products regulated by the FDA. The final rule requires that all informed consent documents for applicable drug and medical device clinical trials initiated on or after March 7, 2012, inform individual clinical trial subjects that a description of the clinical trial in which they are participating will be published in the National Institutes of Health/National Library of Medicine clinicaltrials.gov website. The rule becomes effective March 7, 2011; however the FDA has stated that it will not enforce the rule’s requirements until March 7, 2012. We anticipate that we will incur increased costs associated with the transition to and compliance with these new requirements in our clinical trial programs.

Data from preclinical testing and clinical trials are submitted to the FDA in an NDA or BLA for marketing approval, and to foreign government health authorities as a marketing authorization application. The process of completing clinical trials for a new drug may take many years and require the expenditures of substantial resources. Preparing an NDA, BLA or marketing authorization application involves considerable data collection, verification, analysis and expense, and there can be no assurance that approval from the FDA or any other health authority will be granted on a timely basis, if at all. The approval process is affected by a number of factors, primarily the risks and benefits demonstrated in clinical trials as well as the severity of the disease and the availability of alternative treatments. The FDA may deny an NDA or BLA, or foreign government health authorities may deny a marketing authorization application, if the applicable regulatory criteria are not satisfied, or such authorities may require additional testing or information.

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As a condition of approval, the FDA or foreign regulatory authorities may require further studies, including Phase IV post-marketing studies to provide additional data. For some drugs, the FDA may require risk evaluation and mitigation strategies, or REMS, which could include medication guides, physician communication plans, or restrictions on distribution and use, such as limitations on who may prescribe the drug or where it may be dispensed or administered. In September 2007, Congress passed legislation authorizing FDA to require companies to undertake such studies to assess the risks of drugs known or signaling potential to have serious safety issues. Other post-marketing studies could be used to gain approval for the use of a product as a treatment for clinical indications other than those for which the product was initially tested. Also, the FDA or foreign government regulatory authorities require post-marketing reporting to monitor the adverse effects of drugs. Results of post-marketing programs may limit or expand the further marketing of the products.

On January 30, 2007, the FDA announced a drug safety initiative to implement a number of proposals made by the Institute of Medicine in a September 2006 report. As part of this program, the FDA has begun publishing a newsletter that contains non-confidential, non-proprietary information regarding post-marketing review of new drug products. Additionally, in 2005, the FDA created a Drug Safety Oversight Board to provide oversight and advice to the Center for Drug Evaluation and Research Director on the management of important drug safety issues and to manage the dissemination of certain safety information through FDA’s Web site to healthcare professionals and patients.

On February 6, 2009, the FDA sent letters to manufacturers of certain opioid drug products, indicating that these drugs will be required to have a REMS to address whether the benefits of these products continue to outweigh the risks. The FDA has authority to require a REMS under the FDAAA when necessary to ensure that the benefits of a drug outweigh the risks. The affected opioid drugs include brand name and generic products. Two products sold by Endo were included in the list of affected opioid drugs: Opana^® ER and morphine sulfate ER. We cannot determine what may be required by the FDA in connection with a REMS for these products, but intend to comply with any enacted requirements. Changes could, among other things, require different labeling, monitoring of patients or physicians, education programs for patients or physicians, or curtailment of supplies or limitations on distribution. These changes, or others required by the FDA, could have an adverse effect on the sales, gross margins and marketing costs of these products.

On January 14, 2011, the FDA announced in the Federal Register that it was taking steps to reduce the maximum amount of acetaminophen in prescription drug products, to help reduce or prevent the risk of liver injury from an unintentional overdose of acetaminophen. A variety of combination drug products include acetaminophen, such as those that contain the opioids oxycodone hydrochloride or hydrocodone bitartrate and acetaminophen, among others. Under additional authority granted to the FDA by the FDAAA, the FDA notified holders of approved NDA’s and ANDAs that they would be required to modify the labeling of prescription acetaminophen drug products to reflect new safety information about acetaminophen and liver toxicity. The FDA also announced that it was asking product sponsors to limit the maximum strength of acetaminophen per unit of the combination drug products to 325 mg over a three-year phase-out period. At the end of that period, the FDA could seek to withdraw those products that contain more than 325 mg of acetaminophen from the market. Among the products impacted by the FDA’s action are three Endo combination drug pain relief products: Percocet, Endocet and Zydone. These regulatory changes, or others required by the FDA, could have an adverse effect on our business, financial condition, results of operations, and cash flows.

Finally, the FDA is developing guidance for the industry on how to test, detect and prevent safety problems during drug development, including tests that would identify preclinical biomarkers of toxicity. Because these initiatives and other similar initiatives are still being developed, it is unclear what impact, if any, they may have on our ability to obtain approval of new drugs or on our sales of existing products.

In addition to these initiatives, the Prescription Drug User Fee Act (PDUFA) was reauthorized on September 27, 2007 through passage of the FDAAA. In connection with that reauthorization legislation, Congress enacted new measures authorizing FDA to require companies to undertake post-approval testing of products to assess known or signaled potential serious safety risks and to make labeling changes to address safety

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risks. The legislation also re-authorized FDA to require testing of drug products in children where appropriate, and provided additional incentives to companies that agree to undertake such testing in connection with a new NDA as part of the Best Pharmaceuticals for Children Act (BPCA). The legislation also contained provisions to expedite new drug development, and collect data and results from clinical trials of drug products more readily available via a registry managed by the National Institutes of Health. These provisions, depending on how they are implemented by the FDA, could impact our ability to market existing and new products.

Section 505(b)(2) of the Federal Food Drug and Cosmetic Act provides a procedure for an applicant to seek approval of a drug product for which safety and/or efficacy has been established through preclinical and clinical data that the applicant does not have proprietary rights to use. Under that section, despite not having a right of reference, an applicant can cite to studies containing such clinical data to prove safety or efficacy, along with any additional clinical data necessary to support the application. Section 505(b)(2) NDAs are subject to patent certification and notification requirements that are similar to those that are required for ANDAs (refer to next section). Approval of Section 505(b)(2) NDAs, like ANDAs, also may be delayed by market exclusivity that covers the reference product. However, despite the similarities, Section 505(b)(2) applications are not permitted when an applicant could submit and obtain approval of an ANDA.

ANDA Process

FDA approval of an ANDA is required before a generic equivalent of an existing or reference-listed drug can be marketed. The ANDA process is abbreviated in that the FDA waives the requirement of conducting complete preclinical and clinical studies and instead relies principally on bioequivalence studies. “Bioequivalence” generally involves a comparison of the rate of absorption and levels of concentration of a generic drug in the body with those of the previously approved drug. When the rate and extent of absorption of systemically acting test and reference drugs are the same, the two drugs are considered bioequivalent and regarded as therapeutically equivalent, meaning that a pharmacist can substitute the product for the reference-listed drug. There are other or additional measures the FDA may rely upon to determine bioequivalence in locally acting products, which could include comparative clinical efficacy trials. In May 2007, the FDA began posting to its website, bioequivalence recommendations for individual products in order to provide guidance to generic manufacturers on the specific method of demonstrating bioequivalence.

An ANDA also may be submitted for a product authorized by approval of an ANDA suitability petition. Such petitions may be submitted to secure authorization to file an ANDA for a product that differs from a previously approved drug in active ingredient, route of administration, dosage form or strength. For example, the FDA has authorized the substitution of acetaminophen for aspirin in certain combination drug products and switching the drug from a capsule to tablet form. Bioequivalence data may be required, if applicable, as in the case of a tablet in place of a capsule, although the two products would not be rated as therapeutically equivalent, meaning that a pharmacist cannot automatically substitute the product for the reference-listed drug. Congress re-authorized pediatric testing legislation in September 2007 which may continue to affect pharmaceutical firms’ ability to file ANDAs via the suitability petition route. In addition, under that same legislation, ANDA applicants are required to implement a REMS in connection with obtaining approval of their products, when the reference-listed drug has an approved REMS.

The timing of final FDA approval of ANDA applications depends on a variety of factors, including whether the applicant challenges any listed patents for the drug and whether the manufacturer of the reference listed drug is entitled to one or more statutory exclusivity periods, during which the FDA is prohibited from approving generic products. In certain circumstances, a regulatory exclusivity period can extend beyond the life of a patent, and thus block ANDAs from being approved on the patent expiration date. For example, under the Best Pharmaceuticals for Children Act, if a manufacturer receives and accepts a written request from the FDA to conduct studies on the safety and efficacy of its product in children, the exclusivity of a product is extended by six months past the patent or regulatory expiration date if the manufacturer completes and submits the results of the studies, a so-called pediatric extension.

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The Generic Drug Enforcement Act of 1992, or Generic Act, allows the FDA to impose permissive or mandatory debarment and other penalties on individuals and companies that commit certain illegal acts relating to the drug approval process. In some situations, the Generic Act authorizes the FDA to not accept or review applications for a period of time from a company or an individual that has committed certain violations. It also authorizes the temporary denial of approval of applications during the investigation of certain violations that could lead to debarment and also, in more limited circumstances, authorizes the suspension of the distribution of approved drugs by the affected company. Lastly, the Generic Act allows for civil penalties and withdrawal of previously approved applications. We believe neither we nor any of our employees have ever been subject to debarment.

Patent and Non-Patent Exclusivity Periods

A sponsor of an NDA is required to identify in its application any patent that claims the drug or a use of the drug subject to the application. Upon NDA approval, the FDA lists these patents in a publication referred to as the Orange Book. Any person that files a Section 505(b)(2) NDA, the type of NDA that relies upon the data in the application for which the patents are listed, or an ANDA to secure approval of a generic version of this first, or listed drug, must make a certification in respect to listed patents. The FDA may not approve such an application for the drug until expiration of the listed patents unless (1) the generic applicant certifies that the listed patents are invalid, unenforceable or not infringed by the proposed generic drug and gives notice to the holder of the NDA for the listed drug of the bases upon which the patents are challenged, and (2) the holder of the listed drug does not sue the later applicant for patent infringement within 45 days of receipt of notice. Under the current law, if an infringement suit is filed, the FDA may not approve the later application until the earliest of: 30 months after submission; entry of an appellate court judgment holding the patent invalid, unenforceable or not infringed; such time as the court may order; or the patent expires.

One of the key motivators for challenging patents is the 180-day market exclusivity period vis a vis other generic applicants granted to the developer of a generic version of a product that is the first to have its application accepted for filing by the FDA and whose filing includes a certification that the applicable patent(s) are invalid, unenforceable and/or not infringed (a Paragraph IV certification) and that prevails in litigation with the manufacturer of the branded product over the applicable patent(s). Under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the 2003 Medicare Act, with accompanying amendments to the Hatch Waxman Act (The Drug Price Competition and Patent Term Restoration Act), this marketing exclusivity would begin to run upon the earlier of the commercial launch of the generic product or upon an appellate court decision in the generic company’s favor.

In addition, the holder of the NDA for the listed drug may be entitled to certain non-patent exclusivity during which the FDA cannot approve an application for a competing generic product or 505(b)(2) NDA product. If the listed drug is a new chemical entity, in certain circumstances, the FDA may not approve any application for five years; if it is not a new chemical entity, the FDA may not approve a competitive application for three years. Certain other periods of exclusivity may be available if the listed drug is indicated for use in a rare disease or is studied for pediatric indications.

Medical Device Regulation

Under the FFDCA, medical devices, such as those manufactured and marketed by HealthTronics, are classified into one of three classes—Class I, Class II or Class III—depending on the degree of risk associated with each medical device and the extent of control needed to ensure safety and effectiveness. Class I medical devices are subject to the FDA’s general controls, which include compliance with the applicable portions of the FDA’s Quality System Regulation, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and non-misleading labeling, advertising, and promotional materials. Class II devices are subject to the FDA’s general controls and may also be subject to other special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device. Class III medical devices are subject to the FDA’s general controls, special controls, and pre-market approval prior to marketing.

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HealthTronics currently markets Class I and Class II medical devices. Most Class II devices require pre-market clearance by the FDA through the 510(k) pre-market notification process. When a 510(k) is required, the manufacturer must submit to the FDA a pre-market notification demonstrating that the device is “substantially equivalent” to either a device that was legally marketed prior to May 28, 1976, the date upon which the Medical Device Amendments of 1976 were enacted, or to another commercially available, similar device which was subsequently cleared through the 510(k) process. By regulation, the FDA is required to clear a 510(k) within 90 days of submission of the application. As a practical matter, clearance often takes longer. All of our marketed devices have been cleared for marketing pursuant to the 510(k) process.

The FDA has broad post-market regulatory and enforcement powers with respect to medical devices, similar to those for pharmaceutical products. Failure to comply with the applicable U.S. medical device regulatory requirements could result in, among other things, warning letters, fines, injunctions, consent decrees, civil penalties, repairs, replacements, refunds, recalls or seizures of products, total or partial suspension of production, the FDA’s refusal to grant future pre-market clearances or approvals, withdrawals or suspensions of current product applications, and criminal prosecution.

On January 19, 2011, the FDA’s Center for Devices and Radiological Health (CDRH) unveiled a plan of 25 action items it intends to implement during 2011 relating to the 510(k) premarket notification process for bringing medical devices to market. Among the actions the FDA plans to take are to issue guidance documents to clarify when clinical data should be submitted in support of a premarket notification submission, to clarify the review of submissions that use “multiple predicates” in a premarket notification submission, to clarify when modifications to a device require a new 510(k), and other guidance documents. The plan includes other intended measures such as streamlining the review of innovative lower-risk products though the de novo review process, and establishing a Center Science Council of senior FDA experts to enhance science-based decision-making in 510(k) reviews. The FDA announced that it intends to refer to the Institute of Medicine (IOM) for further review and consideration other significant actions, such as whether or not to define the scope and grounds for the exercise of authority to partially or fully rescind a 510(k) marketing clearance, to clarify and consolidate the concepts of “indications for use” and “intended use,” to clarify when a device should no longer be available as a “predicate” to support a showing of substantial equivalence, whether to develop guidance on a new class of devices, called “class IIb,” for which additional data would be necessary to support a 510(k) determination. The extent to which the FDA will implement some or all of its planned action items is unknown at this time. If implemented, these actions could have a significant effect on the cost of applying for and maintaining applications under the 510(k) clearance mechanism, and on the criteria required for achieving clearance for additional uses of existing devices or new 510(k) devices.

Quality Assurance Requirements

The FDA enforces regulations to ensure that the methods used in, and the facilities and controls used for, the manufacture, processing, packing and holding of drugs and medical devices conform with current good manufacturing practices, or cGMP. The cGMP regulations the FDA enforces are comprehensive and cover all aspects of manufacturing operations, from receipt of raw materials to finished product distribution, insofar as they bear upon whether drugs meet all the identity, strength, quality and purity characteristics required of them. The cGMP regulations for devices, called the Quality System Regulation, are also comprehensive and cover all aspects of device manufacture, from pre-production design validation to installation and servicing, insofar as they bear upon the safe and effective use of the device and whether the device otherwise meets the requirements of the FFDCA. To assure compliance requires a continuous commitment of time, money and effort in all operational areas.

The FDA conducts pre-approval inspections of facilities engaged in the development, manufacture, processing, packing, testing and holding of the drugs subject to NDAs and ANDAs. If the FDA concludes that the facilities to be used do not or did not meet cGMP, good laboratory practices or GLP or good clinical practices or GCP requirements, it will not approve the application. Corrective actions to remedy the deficiencies must be performed and are usually verified in a subsequent inspection. In addition, manufacturers of both pharmaceutical products and active pharmaceutical ingredients, or APIs, used to formulate the drug also ordinarily undergo a

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pre-approval inspection, although the inspection can be waived when the manufacturer has had a passing cGMP inspection in the immediate past. Failure of any facility to pass a pre-approval inspection will result in delayed approval and would have a material adverse effect on our business, results of operations, financial condition and cash flows.

The FDA also conducts periodic inspections of drug and device facilities to assess their cGMP status. If the FDA were to find serious cGMP non-compliance during such an inspection, it could take regulatory actions that could adversely affect our business, results of operations, financial condition and cash flows. Imported API and other components needed to manufacture our products could be rejected by U.S. Customs, usually after conferring with the FDA. In respect to domestic establishments, the FDA could initiate product seizures or request or in some instances require product recalls and seek to enjoin a product’s manufacture and distribution. In certain circumstances, violations could support civil penalties and criminal prosecutions. In addition, if the FDA concludes that a company is not in compliance with cGMP requirements, sanctions may be imposed that include preventing that company from receiving the necessary licenses to export its products and classifying that company as an “unacceptable supplier”, thereby disqualifying that company from selling products to federal agencies.

We believe that we and our suppliers and outside manufacturers are currently in compliance with cGMP requirements.

Following a routine FDA inspection in September 2007 primarily in the area of drug safety, an FDA Form 483 Notice of Inspectional Observations was issued to us detailing two observations that were made by the inspector. The observations focused on procedures for handling product complaints and recordkeeping regarding adverse drug experiences for the required period of time. We provided to the FDA a comprehensive remediation plan which addressed the issues outlined in the observations, along with the timeline for completing the corrective actions. Implementation of the remediation plans was completed in January 2009. The FDA performed a follow up audit in June 2009 to verify the corrective actions outlined in the remediation plan. The inspection was concluded with no additional issues found.

Other FDA Matters

If there are any modifications to an approved drug, including changes in indication, manufacturing process or labeling or a change in a manufacturing facility, an applicant must notify FDA, and in many cases, approval for such changes must be submitted to the FDA. Additionally, the FDA regulates post-approval promotional labeling and advertising activities to assure that such activities are being conducted in conformity with statutory and regulatory requirements. These regulations include standards or restrictions for direct-to-consumer advertising, industry-sponsored scientific and educational activities, promotional activities and off-label promotion. While physicians may prescribe for off-label uses, manufacturers may only promote for the approved indications and in accordance with the provisions of the approved label. The FDA has very broad enforcement authority under the FFDCA, and failure to abide by these regulations can result in enforcement action, including the issuance of warning letters directing entities to correct deviations from FDA regulations and civil and criminal investigations and prosecutions. These activities could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Drug Enforcement Administration

We sell products that are “controlled substances” as defined in the Controlled Substances Act of 1970 (CSA), which establishes certain security and record keeping requirements administered by the U.S. Drug Enforcement Administration (DEA). The DEA is concerned with the control of registered handlers of controlled substances, and with the equipment and raw materials used in their manufacture and packaging, in order to prevent loss and diversion into illicit channels of commerce.

The DEA regulates controlled substances as Schedule I, II, III, IV or V substances, with Schedule I and II substances considered to present the highest risk of substance abuse and Schedule V substances the lowest risk.

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The active ingredients in some of our current products and products in development, including oxycodone, oxymorphone, morphine, sufentanil, fentanyl and hydrocodone, are listed by the DEA as Schedule II or III substances under the CSA. Consequently, their manufacture, shipment, storage, sale and use are subject to a high degree of regulation. For example, generally, all Schedule II drug prescriptions must be signed by a physician, physically presented to a pharmacist and may not be refilled without a new prescription.

The DEA limits the availability of the active ingredients used in many of our current products and products in development, as well as the production of these products, and we must annually apply to the DEA for procurement and production quotas in order to obtain and produce these substances. As a result, our quotas may not be sufficient to meet commercial demand or complete clinical trials. Moreover, the DEA may adjust these quotas from time to time during the year, although the DEA has substantial discretion in whether or not to make such adjustments. Any delay or refusal by the DEA in establishing our quotas, or modification of our quotas, for controlled substances could delay or stop our clinical trials or product launches, or could cause trade inventory disruptions for those products that have already been launched, which could have a material adverse effect on our business, financial position, results of operations and cash flows.

To meet its responsibilities, the DEA conducts periodic inspections of registered establishments that handle controlled substances. Annual registration is required for any facility that manufactures, tests, distributes, dispenses, imports or exports any controlled substance. The facilities must have the security, control and accounting mechanisms required by the DEA to prevent loss and diversion. Failure to maintain compliance, particularly as manifested in loss or diversion, can result in regulatory action that could have a material adverse effect on our business, results of operations, financial condition and cash flows. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate proceedings to revoke those registrations. In certain circumstances, violations could eventuate in criminal proceedings.

Individual states also regulate controlled substances, and we, as well as our third-party API suppliers and manufacturers, are subject to such regulation by several states with respect to the manufacture and distribution of these products.

We, and to our knowledge, our third-party API suppliers, dosage form manufacturers, distributors and researchers have necessary registrations, and we believe all registrants operate in conformity with applicable requirements.

Clinical Laboratory Improvement Amendments of 1988 and State Regulation

Since we operate clinical laboratory services as part of our HealthTronics business, we are required to hold certain federal, state and local licenses, certifications and permits to conduct our business. Under the Clinical Laboratory Improvement Amendments of 1988 (CLIA), we are required to hold a certificate applicable to the type of work we perform and to comply with certain CLIA-imposed standards. CLIA regulates virtually all clinical laboratories by requiring that they be certified by the federal government and comply with various operational, personnel, facilities administration, quality and proficiency requirements intended to ensure that their clinical laboratory testing services are accurate, reliable and timely. CLIA does not preempt state laws that are more stringent than federal law.

To renew our CLIA certificate, we are subject to survey and inspection every two years to assess compliance with program standards, and may be subject to additional random inspections. Standards for testing under CLIA are based on the level of complexity of the tests performed by the laboratory. Laboratories performing high complexity testing are required to meet more stringent requirements than laboratories performing less complex tests. CLIA compliance and certification is also a prerequisite to be eligible to bill for services provided to governmental payor program beneficiaries.

In addition to CLIA requirements, we are subject to various state laws. CLIA provides that a state may adopt laboratory regulations that are more stringent than those under federal law, and a number of states,

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including California, have implemented their own more stringent laboratory schemes. State laws may require that laboratory personnel meet certain qualifications, specify certain quality controls, or prescribe record maintenance requirements.

Government Benefit Programs

Statutory and regulatory requirements for Medicaid, Medicare, Tricare and other government healthcare programs govern provider reimbursement levels, including requiring that all pharmaceutical companies pay rebates to individual states based on a percentage of their net sales arising from Medicaid program-reimbursed products. In addition, under a final rule promulgated by the U.S. Department of Defense on March 17, 2009, and reissued on October 15, 2010 with an effective date of December 27, 2010, payments made to retail pharmacies under the Tricare Retail Pharmacy Program for prescriptions filled on or after January 28, 2008 are subject to certain price ceilings. Under the final rule and as a condition for placement on the Uniform Formulary, manufacturers are required, among other things, to make refunds for prescriptions filled beginning on January 28, 2008 and extending to future periods based on the newly applicable price limits. Though we have requested a waiver to be exempt from such refunds for the period January 28, 2008 through May 25, 2009, based upon our belief that the Department of Defense is not likely to prevail in court with its interpretation that such refunds are owed, it remains uncertain whether the amounts would be payable. The federal and/or state governments may continue to enact measures in the future aimed at containing or reducing payment levels for prescription pharmaceuticals paid for in whole or in part with government funds. We cannot predict the nature of such measures or their impact on our profitability and cash flows. These efforts could, however, have material consequences for the pharmaceutical industry as a whole and consequently, also for the Company.

From time to time, legislative changes are made to government healthcare programs that impact our business. For example, the Medicare Prescription Drug Improvement and Modernization Act of 2003 created a new prescription drug coverage program for people with Medicare through a new system of private market drug benefit plans. This law provides a prescription drug benefit to seniors and individuals with disabilities in the Medicare program (Medicare Part D). Congress continues to examine various Medicare policy proposals that may result in a downward pressure on the prices of prescription drugs in the Medicare program.

In addition, in March 2010, President Obama signed into law the U.S. Health Reform Law, which makes major changes to the U.S. healthcare system.

While some provisions of the U.S. Health Reform Law go into effect this year, most of the provisions will not begin to be implemented until 2014 and beyond. Since implementation will be incremental to the enactment date of the law, there are still many challenges and uncertainties ahead. Such a comprehensive reform measure may require expanded implementation efforts on the part of federal and state agencies embark on rule-making to develop the specific components of their new authority. The Company is monitoring closely the implementation of the new law. In addition, the Company will continue to monitor attempts by Republicans to repeal, replace, or defund the U.S. Health Reform Law. This effort will primarily take place on two fronts: 1) in Congress through attempts to pass legislation to overturn all or specific sections of the law and 2) in the Courts through attempts to have the law declared unconstitutional.

The passage of the U.S. Health Reform Law is expected to result in a transformation of the delivery and payment for health care services in the United States. The combination of these measures will expand health insurance coverage to include an estimated 32 million Americans who have not been insured. In addition, there are significant health insurance reforms that are expected to improve patients’ ability to obtain and maintain health insurance. Such measures include: the elimination of lifetime caps, no rescission of policies, and no denial of coverage due to preexisting conditions. The expansion of healthcare insurance and these additional market reforms should result in greater access to our products.

The overall impact of the U.S. Health Reform Law is uncertain. Changes to the Medicaid fee for service and Medicaid Managed Care plans drove the bulk of the impact on our business in 2010. There are a number of other

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provisions in the legislation that, collectively, are expected to have a small impact, including an additional rebate for new formulations of oral solid dosage forms of innovator drugs, the expansion of 340B pricing and the revision of the definition of AMP by removing “retail pharmacy class of trade.” These various elements of healthcare reform adversely impacted our total revenues by approximately $20 million for the year ending December 31, 2010. Other elements will begin to have an effect in 2011. In particular, reducing the size of the Medicare Part D coverage gap (donut hole), and the payment of an annual fee based on branded prescription drug sales to specified government programs will both have an incremental effect next year. As a result, the overall impact of Healthcare reform in 2011 is expected to increase compared to 2010.

Healthcare Fraud and Abuse Laws

We are subject to various federal, state and local laws targeting fraud and abuse in the healthcare industry. For example, in the United States, there are federal and state anti-kickback laws that prohibit the payment or receipt of kickbacks, bribes or other remuneration intended to induce the purchase or recommendation of healthcare products and services or reward past purchases or recommendations. Violations of these laws can lead to civil and criminal penalties, including fines, imprisonment and exclusion from participation in federal healthcare programs. These laws are potentially applicable to us as both a manufacturer and a supplier of products reimbursed by federal health care programs. These laws also apply to hospitals, physicians and other potential purchasers of our such products.

In particular, the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) prohibits persons from knowingly and willfully soliciting, receiving, offering or providing remuneration, directly or indirectly, to induce either the referral of an individual, or the furnishing, recommending, or arranging for a good or service, for which payment may be made under a federal healthcare program such as the Medicare and Medicaid programs. The term “remuneration” is not defined in the federal Anti- Kickback Statute and has been broadly interpreted to include anything of value, including for example, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of payments, ownership interests and providing anything at less than its fair market value. In addition, the recently enacted U.S. Health Reform Law, among other things, amends the intent requirement of the federal Anti-Kickback Statute and the applicable criminal healthcare fraud statutes contained within 42 U.S.C. § 1320a-7b effective March 23, 2010. Pursuant to the statutory amendment, a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, the U.S. Health Reform Law provides that the government may assert that a claim including items or services resulting from a violation of 42 U.S.C. § 1320a-7b constitutes a false or fraudulent claim for purposes of the civil False Claims Act (discussed below) or the civil monetary penalties statute, which imposes fines against any person who is determined to have presented or caused to be presented claims to a federal healthcare program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent. Moreover, the lack of uniform court interpretation of the Anti-Kickback Statute makes compliance with the law difficult , as virtually any relationship with entities that purchase or refer for our services could implicate the Anti-Kickback Statute.

Recognizing that the Anti-Kickback Statute is broad and may technically prohibit many innocuous or beneficial arrangements within the healthcare industry, the OIG issued regulations in July 1991, and periodically since that time, which the OIG refers to as “safe harbors.” These safe harbor regulations set forth certain provisions which, if met in form and substance, will assure pharmaceutical and medical device companies, healthcare providers and other parties that they will not be prosecuted under the federal Anti-Kickback Statute. Additional safe harbor provisions providing similar protections have been published intermittently since 1991. Although full compliance with these provisions ensures against prosecution under the federal Anti- Kickback Statute, the failure of a transaction of arrangement to fit within a specific safe harbor does not necessarily mean that the transaction or arrangement is illegal or that prosecution under the federal Anti-Kickback Statute will be pursued. However, conduct and business arrangements that do not fully satisfy each applicable safe harbor may result in increased scrutiny by government enforcement authorities, such as the OIG or federal prosecutors. Additionally, there are certain statutory exceptions to the federal Anti-Kickback Statute, one or more of which

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could be used to protect a business arrangement, although we understand that the OIG is of the view that an arrangement that does not meet the requirements of a safe harbor cannot satisfy the corresponding statutory exception, if any, under the federal Anti-Kickback Statute.

Additionally, many states have adopted laws similar to the federal Anti-Kickback Statute. Some of these state prohibitions apply to referral of patients for healthcare items or services reimbursed by any third-party payer, not only the Medicare and Medicaid programs, and do not contain identical safe harbors.

Government officials have focused their Anti-Kickback Statute enforcement efforts relating to drug and device manufacturers, including False Claims Act (described below) actions on marketing of healthcare services and products, among other activities, and have brought cases against numerous pharmaceutical and medical device companies, and certain sales and marketing personnel for allegedly offering unlawful inducements to potential or existing customers in an attempt to procure their business or reward past purchases or recommendations.

Another development affecting the healthcare industry is the increased use of the federal civil False Claims Act and, in particular, actions brought pursuant to the False Claims Act’s “whistleblower” or “qui tam” provisions. The civil False Claims Act imposes liability on any person or entity who, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal healthcare program. The qui tam provisions of the False Claims Act allow a private individual to bring civil actions on behalf of the federal government alleging that the defendant has submitted a false claim to the federal government, and to share in any monetary recovery. In recent years, the number or suits brought by private individuals has increased dramatically. In addition, various states have enacted false claim laws analogous to the False Claims Act. Many of these state laws apply where a claim is submitted to any third-party payer and not merely a federal healthcare program.

When an entity is determined to have violated the federal False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties of $5,500 to $11,000 for each separate false claim. There are many potential bases for liability under the False Claims Act. Liability arises, primarily, when an entity knowingly submits, or causes another to submit, a false claim for reimbursement to the federal government. The False Claims Act also has been used to assert liability of the basis of inadequate care, kickbacks and other improper referrals, improperly reported government pricing metrics such as Best Price or Average Manufacturer Price, improper use of Medicare reimbursement information when detailing the provider of services, improper promotion of off-label uses (i.e., uses not expressly approved by FDA in a drug’s or device’s label), and misrepresentations with respect to the services rendered. Our activities relating to the reporting of discount and rebate information and other information affecting federal, state and third-party reimbursement of our products, the sale and marketing of our products and our service arrangements or data purchases, among other activities, may be subject to scrutiny under these laws. For example, a number of cases brought by local and state government entities are pending that allege generally that our wholly owned subsidiary, EPI, and numerous other pharmaceutical companies reported false pricing information in connection with certain drugs that are reimbursable under Medicaid. The cost of defending these cases and any other actions that may be brought under the False Claims Act or a similar state law, as well as any sanctions imposed, could adversely affect our financial performance.

Also, the Health Insurance Portability and Accountability Act of 1996, or HIPAA, created several new federal crimes, including health care fraud, and false statements relating to health care matters. The health care fraud statute prohibits knowingly and willfully executing a scheme to defraud any health care benefit program, including private third-party payers. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for health care benefits, items or services.

In addition, some states have enacted compliance and reporting requirements aimed at drug and device manufacturers. For example, under California law, pharmaceutical companies must adopt a comprehensive compliance program that is in accordance with both the April 2003 Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers and the Pharmaceutical Research and Manufacturers of

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America Code on Interactions with Healthcare Professionals, or the PhRMA Code. The PhRMA Code seeks to promote transparency in relationships between health care professionals and the pharmaceutical industry and to ensure that pharmaceutical marketing activities comport with the highest ethical standards. The PhRMA Code contains strict limitations on certain interactions between health care professionals and the pharmaceutical industry relating to gifts, meals, entertainment and speaker programs, among others. The AdvaMed Code of Ethics on Interactions with Healthcare Professionals contains similar limitations on interactions with health care professionals and the medical device industry. Massachusetts and Vermont require drug and device companies to adopt standards that are in some areas more restrictive than the AdvaMed Code or PhRMA Code, imposing additional restrictions on the types of interactions that pharmaceutical and medical device companies or their agents (e.g., sales representatives) may have with health care professionals, including bans or strict limitations on the provision of meals, entertainment, hospitality, travel and lodging expenses, and other financial support, including funding for continuing medical education activities. Some states, including Massachusetts, Vermont and Minnesota, also require public reporting of certain payments to physicians and other health care providers. The U.S. Health Report Law also imposes federal “sunshine” provisions, requiring reporting of various types of payments to physicians and teaching hospitals, beginning with payments made in 2012.

Finally, our HealthTronics subsidiary is subject to the federal self-referral prohibition commonly known as the Stark Law, which prohibits a physician from making a referral to an entity for certain “designated health services” (DHS) reimbursed by Medicare if the physician (or a member of the physician’s immediate family) has a financial relationship with the entity, and which also prohibits the submission of any claims for reimbursement for designated health services furnished pursuant to a prohibited referral. These restrictions generally prohibit us from billing a patient or any payor, including, without limitation, Medicare, for any DHS furnished by HealthTronics to a Medicare beneficiary, when the physician ordering the test, or any member of the physician’s immediate family, has an investment interest in, or compensation arrangement with, , HealthTronics, unless the arrangement meets an exception to the prohibition. Any person who presents or causes to be presented a claim to the Medicare program in violation of the Stark Law is subject to civil monetary penalties of up to $15,000 per bill submission, an assessment of up to three times the amount claims, and possible exclusion from participation in federal governmental payor programs. Many states also have self referral prohibitions which, unlike the Stark Law, are not limited to government payor referrals. While we have attempted to comply with the Stark Law and similar state laws, it is possible that some of our financial arrangements with physicians could be subject to regulatory scrutiny at some point in the future, and we cannot provide an assurance that we will be found to be in compliance with these laws following any such regulatory review.

Healthcare Privacy and Security Laws

Our HealthTronics subsidiary is a “covered entity” subject to the administrative simplification section of HIPAA, the Health Information Technology for Economic and Clinical Health Act (HITECH Act) and their implementing regulations (collectively, the HIPAA Regulations), which establish, among other things, standards for the privacy, security and notification of the security breach of certain individually identifiable health information (protected health information). To the extent that one of our other business units is a “business associate” because it receives protected health information from a health care provider, health plan or other covered entity to provide a service on behalf of the covered entity, the business unit is also directly subject to the privacy, security and breach notification standards and the HIPAA civil and criminal enforcement scheme. As a business associate of a covered entity, we also have potential contractual liability for privacy, security or breach notification standard violations to the covered entity under a business associate agreement. The HIPAA Regulations also limit our ability to use protected health information for certain marketing initiatives and receive payments from third parties for marketing initiatives involving protected health information. The HITECH Act, adopted in 2009 as part of the American Recovery and Reinvestment Act of 2009, commonly referred to as the economic stimulus package, increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the HIPAA Regulations and seek attorney’s fees and costs associated with pursuing federal civil actions.

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The states also have health information privacy and security laws which may be more restrictive of our uses and disclosures of patient information than the HIPAA Regulations. While we have attempted to comply with the HIPAA Regulations and similar state laws, it is possible that some of our health information management activities could be subject to regulatory scrutiny at some point in the future, and we cannot provide an assurance that we will be found to be in compliance with all of these laws following any such regulatory review.

Service Agreements

We contract with various third parties to provide certain critical services including manufacturing, warehousing, distribution, customer service, certain financial functions, certain research and development activities and medical affairs. Our most significant service agreement is with UPS Supply Chain Solutions, Inc. For a complete description of these agreements, see Note 14 of the Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Manufacturing, Supply and Other Service Agreements

We contract with various third party manufacturers and suppliers to provide us with raw materials used in our products and finished goods. Our most significant agreements are with Novartis Consumer Health, Inc., Novartis AG, Teikoku Seiyaku Co., Ltd., Mallinckrodt Inc., Noramco, Inc., and Sharp Corporation. In addition, through our agreement with Ventiv Commercial Services, LLC, we maintain a contracted field force consisting of approximately 228 sales representatives, 24 district managers, one project manager, and one national sales director. If for any reason we are unable to obtain sufficient quantities of any of the finished goods or raw materials or components required for our products or extend the term of our services agreement with Ventiv, it may have a material adverse effect on our business, financial condition, results of operations and cash flows.

For a complete description of these agreements, see Note 14 of the Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Acquisitions, License and Collaboration Agreements

We continue to seek to enhance our product line and develop a balanced portfolio of differentiated products through selective product acquisitions and in-licensing, or acquiring licenses to products, compounds and technologies from third parties or through company acquisitions. The Company enters into strategic alliances and collaborative arrangements with third parties, which give the Company rights to develop, manufacture, market and/or sell pharmaceutical products, the rights to which are primarily owned by these third parties. These alliances and arrangements can take many forms, including licensing arrangements, co-development and co-marketing agreements, co-promotion arrangements, research collaborations and joint ventures. Such alliances and arrangements enable us to share the risk of incurring all research and development expenses that do not lead to revenue-generating products; however, because profits from alliance products are shared with the counter-parties to the collaborative arrangement, the gross margins on alliance products are generally lower, sometimes substantially so, than the gross margins that could be achieved had the Company not opted for a development partner. For a full discussion, including agreement terms and status, see our disclosures under Note 7. “Acquisitions, License and Collaboration Agreements,” included in the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K.

Environmental Matters

Our operations are subject to substantial federal, state and local environmental laws and regulations concerning, among other matters, the generation, handling, storage, transportation, treatment and disposal of, and exposure to, toxic and hazardous substances. Violation of these laws and regulations, which frequently change, can lead to substantial fines and penalties. Some of our operations require environmental permits and controls to prevent and limit pollution of the environment. We believe that our facilities and the facilities of our third party service providers are in substantial compliance with applicable environmental laws and regulations and we do not believe that future compliance will have a material adverse effect on our financial condition or results of operations.

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Employees

As of February 18, 2011, we had 2,947 employees, of which 288 are engaged in research and development and regulatory work, 800 in sales and marketing, 276 in quality assurance and 1,583 in general and administrative capacities. Our employees are not represented by unions, and we believe that our relations with our employees are good.

Executive Officers of the Registrant

The following table sets forth information as of February 19, 2011 regarding each of our current executive officers:

Name	Age		Position and Offices
David P. Holveck		65	President and Chief Executive Officer and Director
Julie H. McHugh		46	Chief Operating Officer
Alan G. Levin.		48	Executive Vice President, Chief Financial Officer
Ivan P. Gergel, M.D.		50	Executive Vice President, Research and Development
Caroline B. Manogue		42	Executive Vice President, Chief Legal Officer and Secretary

Biographies

Our executive officers are briefly described below:

DAVID P. HOLVECK, 65, is President, Chief Executive Officer and a Director of Endo. Prior to joining Endo in April 2008, Mr. Holveck was President of Johnson & Johnson Development Corporation and Vice President, Corporate Development of Johnson & Johnson, a diversified healthcare company since 2004. Mr. Holveck joined Johnson & Johnson as a Company Group Chairman in 1999, following the acquisition of Centocor, Inc., a biotechnology company, by Johnson & Johnson. Mr. Holveck was Chief Executive Officer of Centocor, Inc. at the time of the acquisition. Mr. Holveck joined Centocor in 1983 and progressed through various executive positions. In 1992, he assumed the role of President and Chief Operating Officer and later that year was named President and Chief Executive Officer. Prior to joining Centocor, he had held positions at General Electric Company, Corning Glass Works, and Abbott Laboratories. Mr. Holveck is a member of the Board of Trustees for The Fund for West Chester University, the Board of Directors of the Eastern Technology Council as well as the Board of Directors of Light Sciences Oncology, Inc., an oncology research company.

JULIE H. MCHUGH, 46, was appointed Chief Operating Officer in March 2010. Prior to joining Endo, Ms. McHugh was the Chief Executive Officer of Nora Therapeutics, Inc., a venture capital backed biotech start-up focused on developing novel therapies for the treatment of infertility disorders. Prior to joining Nora Therapeutics, she was Company Group Chairman for Johnson & Johnson’s Worldwide Virology Business Unit where she led a growing area of the corporation’s pharmaceutical business, including the global launches of PREZISTA^® and INTELENCE^® and oversight of an R&D portfolio including compounds for HIV, Hepatitis C, and Tuberculosis. Prior to her role as Company Group Chairman, Ms. McHugh was President of Centocor, Inc., a J&J subsidiary, and was responsible for the product development and commercialization of REMICADE^®, a breakthrough therapeutic for Crohn’s disease, rheumatoid arthritis and several other autoimmune disorders. Ms. McHugh received a Bachelor of Science degree from Pennsylvania State University and her masters of business administration degree from St. Joseph’s University. She currently serves on the Board of Visitors for the Smeal College of Business of the Pennsylvania State University, the Board of Directors for the Nathaniel Adamczyk Foundation, and was 2009 Chairman of the Board of Directors for the Pennsylvania Biotechnology Association.

ALAN G. LEVIN, 48, began as our Executive Vice President and Chief Financial Officer in June, 2009. Prior to joining Endo, Mr. Levin worked with Texas Pacific Group, a leading private equity firm, and one of their start-up investments in Emerging Markets. Before that, he was Senior Vice President & Chief Financial Officer of Pfizer, Inc. where he worked for 20 years in a variety of executive positions of increasing responsibility,

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including Treasurer and Senior Vice President of Finance & Strategic Management for the company’s research and development organization. He received a bachelor’s degree from Princeton University and a master’s degree from New York University’s Stern School of Business. Mr. Levin is a certified public accountant; an Editorial Advisor for the Journal of Accountancy; and a member of the Advisory Board of Celtic Therapeutics, a private equity firm.

IVAN P. GERGEL, M.D., 50, was appointed Executive Vice President, Research & Development in April 2008. Prior to joining Endo, Dr. Gergel was Senior Vice President of Scientific Affairs and President of the Forest Research Institute of Forest Laboratories Inc., managing more than 900 physicians, scientists and staff at the Research Institute. Prior to that, Dr. Gergel served as Vice President and Chief Medical Officer at Forest and Executive Vice President of the Forest Research Institute. He joined Forest in 1998 as Executive Director of Clinical Research following nine years at SmithKline Beecham, and was named Vice President of Clinical Development and Clinical Affairs in 1999. Dr. Gergel received his M.D. from the Royal Free Medical School of the University of London and an MBA from the Wharton School. Dr. Gergel is a member of the Board of Directors of Pennsylvania BIO and a member of PhRMA’s Research and Development Executive Committee.

CAROLINE B. MANOGUE, 42, has served as our Executive Vice President, Chief Legal Officer and Secretary since 2004. Prior to joining Endo in 2000 as our Senior Vice President, General Counsel and Secretary, she practiced law in the New York office of the law firm Skadden, Arps, Slate, Meagher & Flom LLP, where she specialized in mergers & acquisitions, securities and corporate law. She has more than 15 years’ experience in securities and M&A law. Ms. Manogue received her J.D. from Fordham Law School and her B.A. cum laude from Middlebury College. She is a member of the PhRMA Law Section Executive Committee and the Board of Trustees of the Healthcare Institute of New Jersey.

We have employment agreements with each of our executive officers.

Available Information

Our internet address is http://www.endo.com. The contents of our website are not part of this Annual Report on Form 10-K, and our internet address is included in this document as an inactive textual reference only. We make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports available free of charge on our website as soon as reasonably practicable after we file such reports with, or furnish such reports to, the Securities and Exchange Commission.

You may also read and copy any materials we file with the SEC at the SEC’s Public Reference Room that is located at 100 F Street, N.E., Room 1580, NW, Washington, DC 20549. Information about the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330 or 1-202-551-8090. You can also access our filings through the SEC’s internet site: www.sec.gov (intended to be an inactive textual reference only).

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Item 1A. Risk Factors

Risks Related to Our Business

We face intense competition, in particular from companies that develop rival products to our branded products and from companies with which we compete to acquire rights to intellectual property assets.

The pharmaceutical industry is intensely competitive, and we face competition across the full range of our activities. If we fail to compete successfully in any of these areas, our business, results of operations, financial condition and cash flows could be adversely affected. Our competitors include many of the major brand name and generic manufacturers of pharmaceuticals, especially those doing business in the United States. In the market for branded pharmaceuticals, our competitors, including Abbott Laboratories, Johnson & Johnson, King Pharmaceuticals Inc., Cephalon, Inc., Pfizer, Inc., Purdue Pharma, L.P., Allergan, Inc. and Watson Pharmaceuticals Inc., vary depending on product category, dosage strength and drug-delivery systems. In addition to product safety, development and efficacy, other competitive factors in the branded pharmaceuticals market include product quality and price, reputation, service and access to scientific and technical information. It is possible that developments by our competitors will make our products or technologies uncompetitive or obsolete. Because we are smaller than many of our national competitors in the branded pharmaceuticals sector, we may lack the financial and other resources needed to maintain our profit margins and market share in this sector.

The intensely competitive environment of the branded products business requires an ongoing, extensive search for medical and technological innovations and the ability to market products effectively, including the ability to communicate the effectiveness, safety and value of branded products for their intended uses to healthcare professionals in private practice, group practices and managed care organizations. There can be no assurance that we will be able to successfully develop medical or technological innovations or that we will be able to effectively market existing products or new products we develop.

Our branded products face competition from generic versions. Generic versions are generally significantly cheaper than the branded version, and, where available, may be required or encouraged in preference to the branded version under third party reimbursement programs, or substituted by pharmacies for branded versions by law. The entrance of generic competition to our branded products generally reduces our market share and adversely affects our profitability and cash flows. Generic competition with our branded products, including Percocet^®, has had and will continue to have a material adverse effect on the net sales and profitability of our branded products.

Additionally, we compete to acquire the intellectual property assets that we require to continue to develop and broaden our product range. In addition to our in-house research and development efforts, we seek to acquire rights to new intellectual property through corporate acquisitions, asset acquisitions, licensing and joint venture arrangements. Competitors with greater resources may acquire assets that we seek, and even where we are successful, competition may increase the acquisition price of such assets or prevent us from capitalizing on such acquisitions or licensing opportunities. If we fail to compete successfully, our growth may be limited.

If generic manufacturers use litigation and regulatory means to obtain approval for generic versions of our branded drugs, our sales may suffer.

Under the Hatch-Waxman Act, the FDA can approve an ANDA, for a generic version of a branded drug and what is referred to as a Section 505(b)(2) NDA, for a branded variation of an existing branded drug, without undertaking the clinical testing necessary to obtain approval to market a new drug. We refer to this process as the “ANDA process”. In place of such clinical studies, an ANDA applicant usually needs only to submit data demonstrating that its product has the same active ingredient(s) and is bioequivalent to the branded product, in addition to any data necessary to establish that any difference in strength, dosage form, inactive ingredients, or delivery mechanism does not result in different safety or efficacy profiles, as compared to the reference drug.

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The Hatch-Waxman Act requires an applicant for a drug that relies, at least in part, on the patent of one of our branded drugs to notify us of their application and potential infringement of our patent rights. Upon receipt of this notice we have 45 days to bring a patent infringement suit in federal district court against the company seeking approval of a product covered by one of our patents. If such a suit is commenced, the FDA is generally prohibited from granting approval of the ANDA or Section 505(b)(2) NDA until the earliest of 30 months from the date the FDA accepted the application for filing, or the conclusion of litigation in the generic’s favor or expiration of the patent(s). If the litigation is so resolved in favor of the applicant or the challenged patent expires during the 30-month stay period, the stay is lifted and the FDA may thereafter approve the application based on the standards for approval of ANDAs and Section 505(b)(2) NDAs. Frequently, the unpredictable nature and significant costs of patent litigation leads the parties to settle to remove this uncertainty. Settlement agreements between branded companies and generic applicants may allow, among other things, a generic product to enter the market prior to the expiration of any or all of the applicable patents covering the branded product, either through the introduction of an authorized generic or by providing a license to the patents in suit.

On January 15, 2010, the Company and the holders of the Lidoderm^® NDA and relevant patent, Teikoku Seiyaku Co., Ltd. and Teikoku Pharma USA, Inc. (together, Teikoku) received a Paragraph IV Certification Notice under 21 U.S.C. 355(j) from Watson Laboratories, Inc. (Watson) advising of the filing of an ANDA for a generic version of Lidoderm^® (lidocaine topical patch 5%). The Paragraph IV Certification Notice refers to U.S. Patent No. 5,827,529 (the ‘529 patent), which covers the formulation of Lidoderm^®, a topical patch to relieve the pain of post herpetic neuralgia launched in 1999. This patent is listed in the FDA’s Orange Book and expires in October 2015. As a result of this Notice, on February 19, 2010, the Company and Teikoku filed a lawsuit against Watson, in the United States District Court of the District of Delaware. Because the suit was filed within the 45-day period under the Hatch-Waxman Act for filing a patent infringement action, we believe that it triggered an automatic 30-month stay of approval under the Act, which would expire in June 2012. On March 4, 2010, Watson filed an Answer and Counterclaims, claiming the ‘529 patent is invalid or not infringed. Litigation is inherently uncertain and we cannot predict the outcome of our case against Watson. If Watson wins this lawsuit and is able to obtain FDA approval of its product, it may be able launch its generic version of Lidoderm^® prior to the ‘529 patent’s expiration in 2015. Additionally, it is possible that another generic manufacturer would seek to launch a generic version of Lidoderm^® and challenge the ‘529 patent. For a complete description of the related legal proceeding see Note 14 of the Consolidated Financial Statements included in Part IV, Item 15 of this Report.

In October 2010, Teikoku obtained a license to U.S. Patent No. 5,741,510 (the ‘510 patent) and subsequently listed this patent in the FDA’s Orange Book. The ‘510 patent expires in March 2014. The ‘510 patent is currently the subject of litigation in the United States District Court for the Eastern District of Texas (LecTec Corporation v. Chattem, Inc., et al., Civil Action No. 5:08-CV-00130-DF), and although neither the Company nor Teikoku is a party to that litigation, if the litigation is decided in a manner adverse to the ‘510 patent (i.e., the patent is found invalid), the ‘510 patent may be of limited utility to us in the future in preventing the introduction of generic versions of Lidoderm^®. Likewise, if Watson or any other generic manufacturer certifies against the ‘510 patent and subsequently succeeds in proving noninfringement, invalidity, or unenforceability of the ‘510 patent and is able to obtain FDA approval of its product, such manufacturer may be able launch its generic version of Lidoderm^® prior to the ‘510 patent’s expiration in 2014. In addition to the ‘529 and ‘510 patents, the Company also holds a license from Hind Health Care, Inc. to U.S. Patent Nos. 5,411,738 and 5,601,838 (the Hind patents), both of which are listed in the FDA’s Orange Book for Lidoderm^®. The Hind patents will expire in May 2012. Watson presumably submitted a Paragraph III certification with respect to the Hind patents, which indicated that it would not introduce its generic Lidoderm^® product prior to the expiration of those patents. It is possible, however, that another generic manufacturer seeking approval of a generic version of Lidoderm^® could challenge the Hind patents.

In January 2011, the Company and Teikoku received a Paragraph IV Certification Notice under 21 U.S.C. 355(j) from Mylan Technologies Inc. (Mylan) advising of the filing of an ANDA for a generic version of Lidoderm^® (lidocaine topical patch 5%). The Paragraph IV Certification Notice refers to the ‘510 patent and the ‘529 patent. The Company is currently reviewing the details of this notice from Mylan and will pursue all

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available legal and regulatory pathways in defense of Lidoderm^®. If we are unsuccessful, however, and Mylan is able to obtain FDA approval of its product, it may be able to launch its generic version of Lidoderm^® prior to the applicable patents’ expirations in 2014 and 2015. Additionally, it is possible that another generic manufacturer would seek to launch a generic version of Lidoderm^® and challenge the applicable patents.

Notwithstanding the foregoing patent litigation, even if Watson or Mylan or any other generic manufacturer were to be successful with respect to the ‘510 and ‘529 patents, no generic version of Lidoderm^® can be marketed without the approval of the FDA of the respective ANDA for a generic version Lidoderm^®. In December 2006, the Division of Bioequivalence, Office of Generic Drugs, Center for Drug Evaluation and Research (OGD), issued draft guidance making recommendations regarding establishing bioequivalence with our patent-protected product, Lidoderm^® (lidocaine topical patch 5%), pursuant to which a party could seek ANDA approval of a generic version of that product. In that draft guidance, OGD has recommended a bioequivalence study characterizing the pharmacokinetic profile of lidocaine as well as a skin irritation/sensitization study of any lidocaine-containing patch formulation. This recommendation deviates from our understanding of the applicable regulations and of OGD’s past practices, which, for a topically acting product such as Lidoderm^®, would require demonstration of bioequivalence through a comparative clinical equivalency study rather than through a pharmacokinetic study.

On December 19, 2006, we submitted a Citizen Petition to the FDA requesting that the FDA apply existing bioequivalence regulations to any ANDA seeking regulatory approval of a generic drug product that references Lidoderm^®. We submitted an amendment to that filing in August 2007 in order to provide additional data. Our Citizen Petition emphasizes that the FDA’s recommendation deviates from applicable regulations and OGD’s past practices, both of which contemplate demonstration of bioequivalence for a topically acting product like Lidoderm^® through a comparative clinical efficacy study. We believe blood levels of the active ingredient, lidocaine, cannot properly be used as the key measure in proving bioequivalence. To appropriately assess the efficacy and safety of any generic version of Lidoderm^®, we believe that it is critical that the FDA require any ANDA applicant relying on Lidoderm^® as its reference listed drug satisfy the regulations by conducting comparative clinical studies demonstrating (1) bioequivalence between the generic version and Lidoderm^®, and (2) that the generic version produces the same local analgesic effect as Lidoderm^® without producing a complete sensory block, in order to assure that the generic product has the same labeling, efficacy and safety profile as Lidoderm^®. The FDA has not acted on our Citizen Petition, and it is unclear whether or not the FDA will agree with our position. In addition to this Petition, on September 28, 2007, we filed comments with the FDA regarding the draft guidance; those comments reiterated our position as set forth in the Citizen Petition, referencing the Citizen Petition and supporting data. The draft guidance remains available and has not been updated or revised since being issued.

Endo intends, and has been advised by Teikoku that they too intend, to vigorously defend Lidoderm^®’s intellectual property rights and to pursue all available legal, business and regulatory avenues in defense of Lidoderm^®, including enforcement of the product’s intellectual property rights and approved labeling. However, there can be no assurance that our defense will be successful. Additionally, we cannot predict or determine the timing or outcome of the Paragraph IV litigation discussed above but will explore all options as appropriate in the best interests of the Company.

We currently anticipate that Lidoderm^® will represent a decreasing percentage of our annual sales without taking into account any potential future business development transactions. However, if a generic version of Lidoderm^® were introduced to the market before 2015, our revenues from Lidoderm^® would decrease significantly and, depending on the timing of such introduction and its effect on Lidoderm^® pricing, could have a material adverse effect on our business, results of operations, financial condition and cash flows as well as our stock price.

The Company is also aware of various ANDA filings containing Paragraph IV certifications under 21 U.S.C. Section 355(j) with respect to oxymorphone hydrochloride extended-release tablets. For a complete description of these and other legal proceedings, see Note 14 of the Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

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Patent litigation which is often time-consuming and expensive could have a material adverse effect on our business, results of operations, financial condition and cash flows.

The discovery, trial and appeals process in patent litigation can take several years. Regardless of FDA approval, should we commence a lawsuit against a third party for patent infringement or should there be a lawsuit commenced against us with respect to any alleged patent infringement by us, whether because of the filing of an ANDA or otherwise, the cost of such litigation as well as the ultimate outcome of such litigation, if commenced, whether or not we are successful, could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Most of our total revenues come from a small number of products.

The following table displays our revenues by product category and as a percentage of total revenues for the years ended December 31 (dollars in thousands):

	2010				2009				2008
	$		%		$		%		$		%
Lidoderm®		782,609		46	$	763,698		52	$	765,097		61
Opana® ER and Opana®		299,080		17		230,631		16		180,429		14
Percocet®		121,347		7		127,090		9		129,966		10
Voltaren® Gel		104,941		6		78,868		5		23,791		2
Frova®		59,299		3		57,924		4		58,017		5
Supprelin® LA		46,910		3		27,822		2		—		—
Other brands		53,386		3		50,077		3		10,904		1
Total brands*		1,467,572		86		1,336,110		91		1,168,204		93
Total generics		146,513		9		124,731		9		92,332		7
Total devices and service revenue		102,144		6		—		—		—		—
Total revenues*		1,716,229		100	$	1,460,841		100	$	1,260,536		100

* – Percentages may not add due to rounding.

If we are unable to continue to market any of our products, if any of them were to lose market share, for example, as the result of the entry of new competitors, particularly from generic versions of branded drugs, or if the prices of any of these products were to decline significantly, our total revenues, profitability and cash flows would be materially adversely affected.

Our ability to protect our proprietary technology, which is vital to our business, is uncertain.

Our success, competitive position and amount of future income will depend in part on our ability to obtain patent protection relating to the technologies, processes and products we are currently developing and that we may develop in the future. Our policy is to seek patent protection and enforce the intellectual property rights we own and license. We cannot assure you that patent applications we submit and have submitted will result in patents being issued. If an advance is made that qualifies as a joint invention, the joint inventor or his or her employer may have rights in the invention. We cannot assure you that a third party will not infringe upon, design around or develop uses not covered by any patent issued or licensed to us or that these patents will otherwise be commercially viable. In this regard, the patent position of pharmaceutical compounds and compositions is particularly uncertain. Even issued patents may later be modified or revoked by the U.S. Patent and Trademark Office (PTO) or in legal proceedings. Moreover, we believe that obtaining foreign patents may be more difficult than obtaining domestic patents because of differences in patent laws and, accordingly, our patent position may be stronger in the United States than abroad. Foreign patents may be more difficult to protect and/or the remedies available may be less extensive than in the United States. Various countries limit the subject matter that can be patented and limit the ability of a patent owner to enforce patents in the medical field. This may limit our ability to obtain or utilize those patents internationally. Because unissued U.S. patent applications are maintained in

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secrecy for a period of eighteen months and U.S. patent applications filed prior to November 29, 2000 are not disclosed until such patents are issued, and since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain that we were the first creator of the inventions covered by pending patent applications or the first to file patent applications on those inventions. Several drug companies and research and academic institutions have developed technologies, filed patent applications or received patents for technologies that may be related to our business. Others may file patent applications and may receive patents that may conflict with patents or patent applications we have obtained or licensed for our use, either by claiming the same methods or compounds or by claiming methods or compounds that could dominate those owned by or licensed to us. We cannot assure you that any of our pending patent applications will be allowed, or, if allowed, whether the scope of the claims allowed will be sufficient to protect our products. Litigation to establish the validity of patents, to defend against patent infringement claims of others and to assert patent infringement claims against others can be expensive and time-consuming even if the outcome is favorable to us. If the outcome is unfavorable to us, this could have a material adverse effect on our business. We have taken and may, in the future, take steps to enhance our patent protection, but we cannot assure you that these steps will be successful or that, if unsuccessful, our patent protection will be adequate.

We also rely upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position. We attempt to protect our proprietary technology in large part by confidentiality agreements with our employees, consultants and other contractors. We cannot assure you, however, that these agreements will not be breached, that we would have adequate remedies for any breach or that competitors will not know of, or independently discover, our trade secrets. We cannot assure you that others will not independently develop substantially equivalent proprietary information or be issued patents that may prevent the sale of our products or know-how or require licensing and the payment of significant fees or royalties by us in order to produce our products. Moreover, we cannot assure you that our technology does not infringe upon any valid claims of patents that other parties own.

In the future, if we were found to be infringing on a patent, we might have to seek a license to use the patented technology. We cannot assure you that, if required, we would be able to obtain such a license on terms acceptable to us, if at all. If a third party brought a legal action against us or our licensors, we could incur substantial costs in defending ourselves, and we cannot assure you that such an action would be resolved in our favor. If such a dispute were to be resolved against us, we could be subject to significant damages, and the testing, manufacture or sale of one or more of our technologies or proposed products, if developed, could be enjoined.

We cannot assure you as to the degree of protection any patents will afford, whether the PTO will issue patents or whether we will be able to avoid violating or infringing upon patents issued to others or that others will not manufacture and distribute our patented products upon expiration of the applicable patents. Despite the use of confidentiality agreements and non-compete agreements, which themselves may be of limited effectiveness, it may be difficult for us to protect our trade secrets.

We may incur significant liability if it is determined that we are promoting or have in the past promoted the “off-label” use of drugs.

Companies may not promote drugs for “off-label” uses – that is, uses that are not described in the product’s labeling and that differ from those approved by the FDA. Under what is known as the “practice of medicine,” physicians and other healthcare practitioners may prescribe drug products for off-label or unapproved uses, and such uses are common across some medical specialties. Although the FDA does not regulate a physician’s choice of medications or treatments, the Federal Food, Drug and Cosmetic Act (FFDCA) and FDA regulations significantly restrict permissible communications on the subject of off-label uses of drug products by pharmaceutical companies. The FDA, the Office of Inspector General of the Department of Health and Human Services (OIG), and the Department of Justice (DOJ) actively enforce laws and regulations that prohibit the promotion of off-label uses. A company that is found to have improperly promoted off-label uses may be subject to significant liability, including civil fines, criminal fines and penalties, civil damages and exclusion from

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federal funded healthcare programs such as Medicare and Medicaid. Conduct giving rise to such liability could also form the basis for private civil litigation by third-party payors or other persons allegedly harmed by such conduct.

Notwithstanding the regulatory restrictions on off-label promotion, the FDA’s regulations and judicial caselaw allow companies to engage in some forms of truthful, non-misleading, and non-promotional speech concerning their products. The Company has endeavored to establish and implement extensive compliance programs in order to instruct employees on complying with the relevant advertising and promotion legal requirements. Nonetheless, the FDA, OIG or the DOJ may take the position that the Company is not in compliance with such requirements, and, if such non-compliance is proven, we may be subject to significant liability, including administrative, civil and criminal penalties and fines. In addition, management’s attention could be diverted from our business operations and our reputation could be damaged.

In January 2007, we received a subpoena issued by the OIG. The subpoena requests documents relating to Lidoderm^® (lidocaine patch 5%) focused primarily on the sale, marketing and promotion of Lidoderm^®. We are cooperating with the government. At this time, we cannot predict or determine the outcome of the government’s investigation or reasonably estimate the amount or range of amounts of fines or penalties that might result from a settlement or an adverse outcome. However, should the government choose to initiate action against us, we could face substantial penalties, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We have significant goodwill and other intangible assets. Consequently, potential impairment of goodwill and other intangibles may significantly impact our profitability.

Goodwill and other intangibles represent a significant portion of our assets. As of December 31, 2010, goodwill and other intangibles comprised approximately 57% of our total assets. Goodwill and other intangible assets are subject to an impairment analysis whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Additionally, goodwill and indefinite-lived assets are subject to an impairment test at least annually.

Events giving rise to impairment are an inherent risk in the pharmaceutical industry and cannot be predicted. As a result of the significance of goodwill and other intangible assets, our results of operations and financial position in a future period could be negatively impacted should an impairment of goodwill or other intangible assets occur.

We may incur liability if our continuing medical or health education programs and/or product promotions are determined, or are perceived, to be inconsistent with regulatory guidelines.

The FDA regulations and the Anti-Kickback Statutes provide guidelines with respect to the type and scope of appropriate product promotion and continuing medical and health education activities. Although we endeavor to follow these regulations, should it be determined that we have not appropriately followed the guidelines, the government may initiate an action against us which may result in significant liability, including administrative, civil and criminal sanctions. Such penalties could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, management’s attention could be diverted and our reputation could be damaged.

We are subject to various regulations pertaining to the marketing of our products and services.

We are subject to various federal and state laws pertaining to healthcare fraud and abuse, including prohibitions on the offer of payment or acceptance of kickbacks or other remuneration for the purchase of our products and services. Specifically, the federal Anti-Kickback Statute prohibits persons or entities from knowingly and willfully soliciting, receiving, offering or providing remuneration, directly or indirectly, to induce either the referral of an individual, or the furnishing, recommending, or arranging for a good or service, for which

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payment may be made under a federal healthcare program such as the Medicare and Medicaid programs. Because of the sweeping language of the federal Anti-Kickback Statute, many potentially beneficial business arrangements would be prohibited if the statute were strictly applied. To avoid this outcome, the U.S. Department of Health and Human Services’ Office of Inspector General has published regulations – known as “safe harbors” – that identify exceptions or exemptions to the statute’s prohibitions. Arrangements that do not fit within the safe harbors are not automatically deemed to be illegal, but must be evaluated on a case-by-case basis for compliance with the statute. We seek to comply with anti-kickback statutes and to fit within one of the defined “safe harbors”; we are unaware of any violations of these laws. However, due to the breadth of the statutory provisions and the absence of uniform guidance in the form of regulations or court decisions, there can be no assurance that our practices will not be challenged under anti-kickback or similar laws. Violations of such restrictions may be punishable by civil and/or criminal sanctions, including fines and civil monetary penalties, as well as the possibility of exclusion from U.S. federal healthcare programs (including Medicaid and Medicare). Any such violations could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In addition, the FDA has the authority to regulate the claims we make in marketing our prescription drug products to ensure that such claims are true, not misleading, supported by scientific evidence and consistent with the product’s approved labeling. Failure to comply with FDA requirements in this regard could result in, among other things, suspensions or withdrawal of approvals, product seizures, injunctions against the manufacture, holding, distribution, marketing and sale of a product, civil and criminal sanctions.

Also, the federal False Claims Act prohibits persons from knowingly filing, or causing to be filed, a false claim to, or the knowing use of false statements to obtain payment from, the federal government. When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. Various states have also enacted laws modeled after the federal False Claims Act. Federal and state authorities and private whistleblower plaintiffs recently have brought actions against drug and device manufacturers alleging that the manufacturers’ activities constituted aiding and abetting healthcare providers in the submission of false claims, alleging that the manufacturers themselves made false or misleading statements to the federal government, or alleging that the manufacturers improperly promoted their products for “off-label” uses not approved by the FDA, or pursuant to inducements prohibited by the federal Anti-Kickback Statute. Such investigations or litigation could be time-consuming and costly to us and could have a material adverse effect on our business. In addition, if our activities are found to violate federal or state false claims provisions, it could have a material adverse effect on our business, financial conditions, results of operations and cash flows.

Many of our core products contain narcotic ingredients. As a result of reports of misuse or abuse of prescription narcotics, the sale of such drugs may be subject to new regulation, including the development and implementation of REMS, which may prove difficult or expensive to comply with, and we and other pharmaceutical companies may face lawsuits.

Many of our core products contain narcotic ingredients. Misuse or abuse of such drugs can lead to physical or other harm. For example, in the past, reportedly widespread misuse or abuse of OxyContin^®, a product of Purdue Pharma L.P., or Purdue, containing the narcotic oxycodone, resulted in the strengthening of warnings on its labeling. In addition, we believe that Purdue, the manufacturer of OxyContin^®, faces or did face numerous lawsuits, including class action lawsuits, related to OxyContin^® misuse or abuse. We may be subject to litigation similar to the OxyContin^® suits related to any narcotic-containing product that we market.

The FDA or the U.S. Drug Enforcement Administration (DEA) may impose new regulations concerning the manufacture, storage, transportation and sale of prescription narcotics. Such regulations may include new labeling requirements, the development and implementation of formal Risk Evaluation and Mitigation Strategy (REMS), restrictions on prescription and sale of these products and mandatory reformulation of our products in order to make abuse more difficult. On September 27, 2007, Congress passed legislation authorizing the FDA to require companies to undertake post-approval studies in order to assess known or signaled potential serious

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safety risks and to make any labeling changes necessary to address safety risks. Congress also empowered the FDA to require companies to formulate REMS to ensure a drug’s benefits outweigh its risks. In addition, state health departments and boards of pharmacy have authority to regulate distribution and may modify their regulations with respect to prescription narcotics in an attempt to curb abuse. In either case, any such new regulations or requirements may be difficult and expensive for us to comply with, may delay our introduction of new products, may adversely affect our total revenues and may have a material adverse effect on our business, results of operations, financial condition and cash flows.

In December 2007, we entered into a license, development and supply agreement with Grünenthal AG for the exclusive clinical development and commercialization rights in Canada and the United States for a new oral formulation of long-acting oxymorphone (an opioid), which is designed to be crush resistant. In July 2010, we filed an NDA with the FDA for a new extended-release formulation of oxymorphone, which is a semi-synthetic opioid analgesic intended for the treatment of moderate to severe chronic pain in patients requiring continuous, around-the-clock opioid treatment for an extended period of time. The NDA submission is based on a non-clinical and clinical development program designed to demonstrate the crush-resistant properties of this formulation of oxymorphone. In September 2010, we received notification from the FDA that this NDA has been granted priority review status. In November 2010, we were informed by the FDA that it no longer saw a need to convene a public advisory committee meeting to review our NDA, which the FDA had previously contemplated as a joint meeting of the Anesthetic and Life Support Drugs Advisory Committee and the Drug Safety and Risk Management Advisory Committee. In January 2011, we received a complete response letter from the FDA. The letter did not require that additional clinical studies be conducted for approval of the NDA. We have begun to address the issue described in the complete response letter and will work closely with the FDA to finalize our response. We are confident that we can address the issue set forth, currently anticipate responding to the FDA by mid 2011 and would expect a six month review cycle once our response is filed.

The pharmaceutical and medical device industry is heavily regulated, which creates uncertainty about our ability to bring new products to market and imposes substantial compliance costs on our business.

Federal and state governmental authorities in the United States, principally the FDA, impose substantial requirements on the development, manufacture, holding, labeling, marketing, advertising, promotion, distribution and sale of therapeutic pharmaceutical and medical device products through lengthy and detailed laboratory and clinical testing and other costly and time-consuming procedures.

With respect to pharmaceutical products, the submission of an NDA or ANDA to the FDA with supporting clinical safety and efficacy data, for example, does not guarantee that the FDA will grant approval to market the product. Meeting the FDA’s regulatory requirements to obtain approval to market a product typically takes many years, varies substantially based upon the type, complexity and novelty of the pharmaceutical product, and the application process is subject to uncertainty. The NDA approval process for a new product varies in time, generally requiring a minimum of 10 months, but could also take several years from the date of application. The timing for the ANDA approval process for generic products is difficult to estimate and can vary significantly.

NDA approvals, if granted, may not include all uses (known as indications) for which a company may seek to market a product. The FDA also requires companies to undertake post-approval surveillance regarding their drug products and to report adverse events.

With respect to medical devices, such as those manufactured by HealthTronics, before a new medical device, or a new use of, or claim for, an existing product can be marketed, it must first receive either premarket clearance under Section 510(k) of the FFDCA, or premarket approval (PMA) from the FDA, unless an exemption applies. In the 510(k) clearance process, the FDA must determine that the proposed device is “substantially equivalent” to a device legally on the market, known as a “predicate” device, with respect to intended use, technology and safety and effectiveness to clear the proposed device for marketing. Clinical data is sometimes required to support substantial equivalence. The PMA pathway requires an applicant to demonstrate the safety and effectiveness of the device for its intended use based, in part, on extensive data including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data. The PMA process is typically

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required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices. Both the 510(k) and PMA processes can be expensive and lengthy and entail significant user fees. HealthTronics’ currently commercialized products have received premarket clearance under Section 510(k) of the FFDCA.

Failure to comply with applicable regulatory requirements can result in, among other things, suspensions or withdrawals of approvals or clearances, seizures or recalls of products, injunctions against the manufacture, holding, distribution, marketing and sale of a product, civil and criminal sanctions. Furthermore, changes in existing regulations or the adoption of new regulations could prevent us from obtaining, or affect the timing of, future regulatory approvals. Meeting regulatory requirements and evolving government standards may delay marketing of our new products for a considerable period of time, to impose costly procedures upon our activities and result in a competitive advantage to larger companies that compete against us.

We cannot assure you that the FDA or other regulatory agencies will approve any products developed by us, on a timely basis, if at all, or, if granted, that approval will not entail limiting the indicated uses for which we may market the product, which could limit the potential market for any of these products.

Based on scientific developments, post-market experience, or other legislative or regulatory changes, the current FDA standards of review for approving new pharmaceutical and medical device products are sometimes more stringent than those that were applied in the past. For example, the FDA is currently evaluating the 510(k) process for clearing medical devices and may make substantial changes to industry requirements, including which devices are eligible for 510(k) clearance, the ability to rescind previously granted 510(k) clearances and additional requirements that may significantly impact the process. Further, some new or evolving review standards or conditions for approval or clearance were not applied to many established products currently on the market, including certain opioid products. As a result, the FDA does not have as extensive safety databases on these products as on some products developed more recently. Accordingly, we believe the FDA has recently expressed an intention to develop such databases for certain of these products, including many opioids.

In particular, the FDA has expressed interest in specific chemical structures that may be present as impurities in a number of opioid narcotic active pharmaceutical ingredients, such as oxycodone, which based on certain structural characteristics and laboratory tests may indicate the potential for having mutagenic effects.

More stringent controls of the levels of these impurities have been required and may continue to be required for FDA approval of products containing these impurities. Also, labeling revisions, formulation or manufacturing changes and/or product modifications may be necessary for new or existing products containing such impurities. The FDA’s more stringent requirements together with any additional testing or remedial measures that may be necessary could result in increased costs for, or delays in, obtaining approval for certain of our products in development. Although we do not believe that the FDA would seek to remove a currently marketed product from the market unless such mutagenic effects are believed to indicate a significant risk to patient health, we cannot make any such assurance.

In addition, on September 27, 2007, through passage of the Food and Drug Administration Amendments Act of 2007 (FDAAA), Congress passed legislation authorizing the FDA to require companies to undertake additional post-approval studies in order to assess known or signaled potential serious safety risks and to make any labeling changes necessary to address safety risks. Congress also empowered the FDA to require companies to formulate REMS to ensure a drug’s benefits outweigh its risks.

The FDA and the DEA have important and complementary responsibilities with respect to our business. The FDA administers an application and post-approval monitoring process to assure that marketed products are safe, effective and consistently of uniform, high quality. The DEA administers registration, drug allotment and accountability systems to assure against loss and diversion of controlled substances. Both agencies have trained investigators that routinely, or for cause, conduct inspections, and both have authority to seek to enforce their statutory authority and regulations using administrative remedies as well as civil and criminal enforcement actions.

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The FDA regulates the facilities, processes and procedures used to manufacture and market pharmaceutical and medical products in the United States. Manufacturing facilities must be registered with the FDA and all products made in such facilities must be manufactured in accordance with “current good manufacturing practices,” or cGMP, regulations enforced by the FDA. Compliance with cGMP regulations requires the dedication of substantial resources and requires significant expenditures. The FDA periodically inspects both our third party and owned manufacturing facilities and procedures to assure compliance. The FDA may cause a suspension or withdrawal of product approvals if regulatory standards are not maintained. In the event an approved manufacturing facility for a particular drug or medical device is required by the FDA to curtail or cease operations, or otherwise becomes inoperable, or a third party contract manufacturing facility faces manufacturing problems, obtaining the required FDA authorization to manufacture at the same or a different manufacturing site could result in production delays, which could adversely affect our business, results of operations, financial condition and cash flow.

On May 17, 2010, our subsidiary, HealthTronics, received a warning letter from the FDA in connection with an FDA inspection of Endocare, a subsidiary of HealthTronics, conducted in November 2009. The warning letter alleges instances of deficiencies relating to medical device reporting (MDR), complaint handling and corrective and preventative action procedures, design control, and failure to seek FDA clearance of a design change. On June 15, 2010, HealthTronics provided a detailed response to the warning letter, including a description of its comprehensive corrective action plan to address the FDA’s concerns. On August 25, 2010, the FDA issued a reply to HealthTronics indicating that, with the exception of the remaining close-out of a corrective action and preventative action (CAPA) review, its responses and corrective action plan appear to be adequate and will be verified at future inspections. On November 1, 2010, after ongoing updates and discussions with the FDA, HealthTronics reported that it had completed the remaining CAPA review, and was implementing corrective action to address and close-out the CAPA . To date, the FDA has not responded, and the matter remains open.

The stringent DEA regulations on our use of controlled substances include restrictions on their use in research, manufacture, distribution and storage. A breach of these regulations could result in imposition of civil penalties, refusal to renew or action to revoke necessary registrations, or other restrictions on operations involving controlled substances. See also “The DEA limits the availability of the active ingredients used in many of our current products and products in development and, as a result, our procurement quota may not be sufficient to meet commercial demand or complete clinical trials.”

We cannot determine what effect changes in regulations or legal interpretations by the FDA or the courts, when and if promulgated or issued, may have on our business in the future. Changes could, among other things, require different labeling, monitoring of patients, interaction with physicians, education programs for patients or physicians, curtailment of necessary supplies, or limitations on product distribution. These changes, or others required by the FDA could have an adverse effect on the sales of these products. On February 6, 2009, the FDA sent letters to manufacturers of certain opioid drug products, indicating that these drugs will be required to have a REMS to ensure that the benefits of the drugs continue to outweigh the risks. The FDA has authority to require a REMS under the FDAAA when necessary to address whether the benefits of these products continue to outweigh the risks. In addition, on September 27, 2007, Congress re-authorized requirements for testing drug products in children, which may increase the time and cost necessary for new drug development. The evolving and complex nature of regulatory science and regulatory requirements, the broad authority and discretion of the FDA and the generally high level of regulatory oversight results in a continuing possibility that from time to time, we will be adversely affected by regulatory actions despite ongoing efforts and commitment to achieve and maintain full compliance with all regulatory requirements.

Implementation by the FDA of certain specific public advisory committee recommendations regarding acetaminophen use in both over-the-counter and prescription products could have an adverse material impact on our net sales of Percocet^® and Endocet^®.

The FDA held a public advisory committee meeting in June 2009 to discuss acetaminophen use in both over-the-counter and prescription products, the potential for liver injury, and potential interventions to reduce the

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incidence of liver injury. The panel’s recommendations included the banning of certain prescription painkillers which combine acetaminophen with an opiate narcotic, and lowering the maximum dose of over-the-counter painkillers containing acetaminophen. These recommendations were made following the release in May 2009 of a FDA report that found severe liver damage, and even death, can result from a lack of consumer awareness that acetaminophen can cause such injury. These recommendations were advisory in nature and the FDA was not bound to follow these recommendations.

On January 14, 2011, the FDA announced in the Federal Register that it was taking steps to reduce the maximum amount of acetaminophen in prescription drug products to help reduce or prevent the risk of liver injury from an unintentional overdose of acetaminophen. A variety of combination drug products include acetaminophen, such as those that contain the opioids oxycodone hydrochloride or hydrocodone bitartrate and acetaminophen, among others. Under additional authority granted to the FDA by the FDAAA, the FDA notified holders of approved NDA’s and ANDAs that they would be required to modify the labeling of prescription acetaminophen drug products to reflect new safety information about acetaminophen and liver toxicity. The FDA also announced that it was asking product sponsors to limit the maximum strength of acetaminophen per unit of the combination drug products to 325 mg over a three-year phase-out period. At the end of that period, the FDA could seek to withdraw those products that contain more than 325 mg of acetaminophen from the market. Among the products impacted by the FDA’s action are three Endo combination drug pain relief products: Percocet, Endocet and Zydone. These regulatory changes, or others required by the FDA, could have an adverse effect on our business, financial condition, results of operations, and cash flows.

Timing and results of clinical trials to demonstrate the safety and efficacy of products as well as the FDA’s approval of products are uncertain.

Before obtaining regulatory approvals for the sale of any of our products, other than generic products, we must demonstrate through preclinical studies and clinical trials that the product is safe and effective for each intended use. Preclinical and clinical studies may fail to demonstrate the safety and effectiveness of a product. Even promising results from preclinical and early clinical studies do not always accurately predict results in later, large scale trials. A failure to demonstrate safety and efficacy would result in our failure to obtain regulatory approvals.

The rate of patient enrollment sometimes delays completion of clinical studies. There is substantial competition to enroll patients in clinical trials and such competition has delayed clinical development of our products in the past. Delays in planned patient enrollment can result in increased development costs and delays in regulatory approval. In addition, we rely on collaboration partners that may control or make changes in trial protocol and design enhancements that may also delay clinical trials. We cannot assure you that we will not experience delays or undesired results in these or any other of our clinical trials.

We cannot assure you that the FDA or other regulatory agencies will approve any products developed by us, on a timely basis, if at all, or, if granted, that such approval will not subject the marketing of our products to certain limits on indicated use. Any limitation on use imposed by the FDA or delay in or failure to obtain FDA approvals of products developed by us would adversely affect the marketing of these products and our ability to generate product revenue, as well as adversely affect the value of our securities.

Before obtaining regulatory approvals for certain generic products, we must conduct limited clinical or other trials to show comparability to the branded products. A failure to obtain satisfactory results in these trials would prevent us from obtaining required regulatory approvals.

The success of our acquisition and licensing strategy is subject to uncertainty and any completed acquisitions or licenses may reduce our earnings, be difficult to integrate, not perform as expected or require us to obtain additional financing.

We regularly evaluate selective acquisitions and look to continue to enhance our product line by acquiring rights to additional products and compounds. Such acquisitions may be carried out through the purchase of

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assets, joint ventures and licenses or by acquiring other companies. However, we cannot assure you that we will be able to complete acquisitions that meet our target criteria on satisfactory terms, if at all. In particular, we may not be able to identify suitable acquisition candidates, and we may have to compete for acquisition candidates.

Our competitors may have greater resources than us and therefore be better able to complete acquisitions or may cause the ultimate price we pay for acquisitions to increase. If we fail to achieve our acquisition goals, our growth may be limited.

Acquisitions, such as the recent Indevus, HealthTronics, Penwest and Qualitest acquisitions, may expose us to additional risks and may have a material adverse effect on our profitability and cash flows. Any acquisitions we make may:

• fail to accomplish our strategic objectives;

• not be successfully combined with our operations;

• not perform as expected; and

• expose us to cross border risks.

In addition, based on current acquisition prices in the pharmaceutical industry, acquisitions could decrease our net income per share and add significant intangible assets and related amortization or impairment charges. Our acquisition strategy may require us to obtain additional debt or equity financing, resulting in leverage, increased debt obligations as compared to equity, or dilution of ownership. We may not be able to finance acquisitions on terms satisfactory to us.

Further, if we are unable to maintain, on commercially reasonable terms, product, compound or other licenses that we have acquired, our ability to develop or commercially exploit our products may be inhibited.

Our growth and development will depend on developing, commercializing and marketing new products, including both our own products and those developed with our collaboration partners. If we do not do so successfully, our growth and development will be impaired.

Our future revenues and profitability will depend, to a significant extent, upon our ability to successfully commercialize new branded and generic pharmaceutical products in a timely manner. As a result, we must continually develop, test and manufacture new products, and these new products must meet regulatory standards and receive requisite regulatory approvals. Products we are currently developing may or may not receive the regulatory approvals necessary for us to market them. Furthermore, the development and commercialization process is time-consuming and costly, and we cannot assure you that any of our products, if and when developed and approved, can be successfully commercialized. Some of our collaboration partners may decide to make substantial changes to a product’s formulation or design, may experience financial difficulties or have limited financial resources, any of which may delay the development, commercialization and/or marketing of new products. In addition, if a co-developer on a new product terminates our collaboration agreement or does not perform under the agreement, we may experience delays and, possibly, additional costs in developing and marketing that product.

We conduct research and development primarily to enable us to manufacture and market FDA-approved pharmaceuticals in accordance with FDA regulations. Much of our development effort is focused on technically difficult-to-formulate products and/or products that require advanced manufacturing technology. Typically, research expenses related to the development of innovative compounds and the filing of NDAs for these products are significantly greater than those expenses associated with ANDAs for generic products. 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 new pharmaceutical products. Also, after we submit an NDA or ANDA, the FDA may require that we conduct additional studies,

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including, depending on the product, studies to assess the product’s interaction with alcohol, and as a result, we may be unable to reasonably predict the total research and development costs to develop a particular product. Indeed, on September 27, 2007, Congress passed legislation authorizing the FDA to require companies to undertake post-approval studies in order to assess known or signaled potential serious safety risks and to make any labeling changes necessary to address safety risks. Congress also empowered the FDA to require companies to formulate REMS to ensure a drug’s benefits outweigh its risks.

We face intense competition from brand-name companies that sell or license their own generic versions of our generic products or seek to delay the introduction of our generic products.

Brand-name pharmaceutical companies have taken aggressive steps to thwart competition from generic equivalents of their brand-name products. In particular, brand-name companies sell directly to the generics market or license their products for sale to the generics market through licensing arrangements or strategic alliances with generic pharmaceutical companies (so-called authorized generics). No significant regulatory approvals are currently required for a brand-name manufacturer to sell directly or through a third party to the generic market. Brand-name manufacturers do not face any other significant barriers to entry into such market. The introductions of these so-called “authorized generics” have had and may continue to have an adverse effect by reducing our market share and adversely affecting our profitability and cash flows.

In addition, brand-name companies continually seek new ways to delay generic introduction and decrease the impact of generic competition, such as filing new patents on drugs whose original patent protection is about to expire; filing an increasing number of patents that are more complex and costly to challenge; filing suits for patent infringement that automatically delay approval by the FDA; developing patented controlled release or other next generation products, which often reduces the demand for the generic version of the existing product for which we may be seeking approval; changing product claims and product labeling; developing and marketing as over-the-counter products those branded products that are about to face generic competition; or filing Citizens’ Petitions with the FDA seeking restraints on our products or seeking to prevent them from coming to market. These strategies may increase the costs and risks associated with our efforts to introduce generic products and may delay or prevent such introduction altogether.

Our revenues and profits from generic pharmaceutical products typically decline as a result of competition from other pharmaceutical companies.

Net selling prices of generic drugs typically decline, often dramatically, as additional generic pharmaceutical companies, both domestic and foreign, receive approvals and enter the market for a given generic product and competition intensifies. Our ability to sustain our sales and profitability on any generic product over time is affected by the number of new companies selling such product and the timing of their approvals.

We face intense competition from other manufacturers of generic versions of our generic products.

Our generic products compete with branded products and with generic versions made by or for other manufacturers, such as Mallinckrodt Inc. and Watson Pharmaceuticals, Inc. When additional versions of one of our generic products enter the market, we generally lose market share and our selling prices and margins on the product decline. Because we are smaller than many of our full-line competitors in the generic pharmaceutical products sector, we may lack the financial and other resources needed to maintain our profit margins and market share in this sector.

If the efforts of manufacturers of branded pharmaceuticals to use litigation and legislative and regulatory means to limit the use of generics and certain other products are successful, sales of our generic products may suffer.

Pharmaceutical companies that produce patented brand products can employ a range of legal and regulatory strategies to delay the introduction of competing generics and other products to which we do not have a right of reference to all necessary preclinical and clinical data. Opposing such efforts or litigation actions can be costly and time-consuming and result in delays in the introduction of our products.

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The products for which we are developing generic versions may be claimed by their manufacturer to be protected by one or more patents. If we file an ANDA to seek FDA approval of our generic version of such a drug, we are required to certify that any patent or patents listed as covering the approved listed drug are invalid, unenforceable or will not be infringed by our generic version. Similar certification requirements apply to new drug applications filed under Section 505(b)(2) of the FFDCA, where we rely on information to which we do not have a right of reference. Once the FDA accepts our ANDA or Section 505(b)(2) NDA, we are required to notify the brand manufacturer of this fact. The brand manufacturer then has 45 days from the receipt of the notice in which to file a suit for patent infringement. If it does so, the FDA is generally prevented from granting approval of the ANDA or Section 505(b)(2) NDA until the earliest of 30 months from the date the FDA accepted the application for filing, the conclusion of litigation in the generic’s favor or expiration of the patent(s).

We may be the subject of product liability claims or product recalls, and we may be unable to obtain or maintain insurance adequate to cover potential liabilities.

Our business exposes us to potential liability risks that arise from the testing, manufacturing, marketing and sale of our products. In addition to direct expenditures for damages, settlement and defense costs, there is a possibility of adverse publicity as a result of product liability claims. Product liability is a significant commercial risk for us. Some plaintiffs have received substantial damage awards in some jurisdictions against pharmaceutical companies based upon claims for injuries allegedly caused by the use of their products. In addition, it may be necessary for us to recall products that do not meet approved specifications or which subsequent data demonstrate may be unsafe or ineffective, which would also result in adverse publicity, as well as resulting in costs connected to the recall and loss of revenue.

We have acquired Qualitest, and Qualitest is named as a defendant in a number of cases that have been filed in various state and federal courts that allege plaintiffs experienced injuries as a result of ingesting the prescription medicine metoclopramide, which is and has been manufactured and marketed by Qualitest. Many of these cases are in the discovery phase of the litigation, and certain cases have been scheduled for trial in the Fall of 2011. We may be subject to liabilities arising out of these cases, and will be responsible for the cost of managing these cases. We intend to contest all of these cases vigorously. Additional litigation similar to that described above may also be brought by other plaintiffs in various jurisdictions in the future. However, we cannot predict the timing or outcome of any such litigation, or whether any such litigation will be brought against Qualitest. Subject to certain terms and conditions, we will be indemnified by the former owners of Qualitest with respect to, among other things, metoclopramide litigation arising out of the sales of the product by Qualitest between January 1, 2006 and November 30, 2010, the date on which the acquisition was completed, subject to an overall liability cap of $100 million for all claims arising out of or related to the acquisition, including the claims described above.

We cannot assure you that a product liability claim or series of claims brought against us would not have an adverse effect on our business, financial condition, results of operations and cash flows. If any claim is brought against us, regardless of the success or failure of the claim, we cannot assure you that we will be able to obtain or maintain product liability insurance in the future on acceptable terms or with adequate coverage against potential liabilities or the cost of a recall.

We may incur liabilities as the result of “over-time” cases which, if ultimately determined adverse to the industry, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

A number of pharmaceutical companies are defendants in litigation brought by their own current and former pharmaceutical sales representatives, alleging that the companies violated wage and hour laws by misclassifying the sales representatives as “exempt” employees, and by failing to pay overtime compensation. We are and may in the future be the subject of similar cases. Depending on developments in the ongoing and any future litigation, there is a possibility that we will suffer an adverse decision or verdicts of substantial amounts, or that we will enter into monetary settlements. Any unfavorable outcome as a result of such litigation could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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The availability of third party reimbursement for our products is uncertain, and thus we may find it difficult to maintain current price levels. Additionally, the market may not accept those products for which third party reimbursement is not adequately provided.

Our ability to commercialize our products depends, in part, on the extent to which reimbursement for the costs of these products is available from government healthcare programs, private health insurers and others. We cannot assure you that third party payment for our products will be adequate for us to maintain price levels sufficient for realization of an appropriate return on our investment. Government, private insurers and other third party payers are increasingly attempting to contain healthcare costs by (1) limiting both coverage and the level of reimbursement (including adjusting co-pays) for products approved for marketing by the FDA, (2) refusing, in some cases, to provide any coverage for uses of approved products for indications for which the FDA has not granted marketing approval and (3) requiring or encouraging, through more favorable reimbursement levels or otherwise, the substitution of generic alternatives to branded products.

Examples of some of the major government healthcare programs include Medicare and Medicaid. The Medicare Prescription Drug Improvement and Modernization Act (Medicare Modernization Act) of 2003 created a new prescription drug coverage program for people with Medicare through a new system of private market insurance providers beginning in January 2006. This new benefit has resulted in an increased use of formularies (listings of prescription drugs approved for use) such that, in the event a Medicare beneficiary’s medications are not listed on the applicable formulary, such Medicare beneficiary may not receive reimbursement for such medications. Moreover, once these formularies are established, Medicare is not obligated to pay for drugs omitted from a formulary, and the cost of these non-covered drugs will not be counted towards the annual out-of-pocket beneficiary deductible established by the Medicare Modernization Act. Further, since 2006, Medicare prescription drug program beneficiaries are not permitted to purchase private insurance policies, known as “Medigap” policies, to cover the cost of off-formulary medications. If our products are or become excluded from these formularies, demand for our products might decrease and we may be forced to lower prices for our products, which may adversely affect our business, financial condition, results of operations and cash flows.

From time to time, state Medicaid programs review our products to assess whether such products should be subject to a prior authorization process, which processes vary state-by-state but generally require physicians prescribing the products to answer several questions prior to the product being dispensed. The institution of a prior authorization process may adversely impact the sales of the related product in the state and depending on the state, may adversely affect our business and results of operations. On February 20, 2008, in connection with its Clinical Drug Review Program, the Pharmacy and Therapeutics Committee of the New York State Department of Health reviewed our product Lidoderm^® and recommended that it be subject to a prior authorization process. As a result, on July 31, 2008, the New York State Department of Health placed Lidoderm^® in its Clinical Drug Review Program, which is a specific program within its prior authorization program. There can be no assurance that such a process, or the implementation thereof, in New York State or elsewhere would not have a material adverse effect on our business, financial condition, results of operations and cash flows.

If government and commercial third party payers do not provide adequate coverage and reimbursement levels for users of our products, the market acceptance of these products could be adversely affected. In addition, the following factors could significantly influence the purchase of pharmaceutical products, which would result in lower prices and a reduced demand for our products that might force us to reduce the price of these products to remain competitive:

• the trend toward managed healthcare in the United States;

• the growth of organizations such as HMOs and managed care organizations;

• legislative proposals to reform healthcare and government insurance programs; and

• price controls and non-reimbursement of new and highly priced medicines for which the economic therapeutic rationales are not established.

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In February, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009, which appropriates $1.1 billion to fund comparative effectiveness research (CER) relating to healthcare treatments. In March 2010, the President signed the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (together, the U.S. Health Reform Law), which, among other things, created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct CER. Although the concept of CER now has significant momentum, numerous unresolved and potentially contentious issues remain, and stakeholders are following implementation of these new laws closely. Depending on how CER is implemented, CER could possibly present regulatory and reimbursement issues under certain circumstances. For additional discussion of the U.S. Health Reform Law, see Risk Factor – “While healthcare reform may increase the number of patients who have insurance coverage for our products, its cost containment measures may adversely affect reimbursement for our products.”

Our reporting and payment obligations under the Medicaid rebate program and other governmental pricing programs are complex and may involve subjective decisions. Any failure to comply with those obligations could subject us to penalties and sanctions.

We are subject to various federal and state laws pertaining to healthcare fraud and abuse, including prohibitions on the offer of payment or acceptance of kickbacks or other remuneration in return for the purchase of our products. Sanctions for violating these laws include criminal penalties and civil sanctions and possible exclusion from the Medicare, Medicaid, and other government healthcare programs. There can be no assurance that our practices will not be challenged under these laws in the future or that such a challenge would not have a material adverse effect on our business or results of operations.

We also are subject to federal and state laws prohibiting the presentation (or the causing to be presented) of claims for payment (by Medicare, Medicaid, or other third-party payers) that are determined to be false, fraudulent, or for an item or service that was not provided as claimed. These false claims statutes include the Federal Civil False Claims Act and the Federal Criminal False Claims Act, the former of which permits private persons to bring suit in the name of the government alleging false or fraudulent claims presented to or paid by the government (or other violations of the statutes) and to share in any amounts paid by the entity to the government in fines or settlement. Such suits, known as qui tam actions, have increased significantly in the healthcare industry in recent years. These actions against healthcare companies may result in payment of fines or exclusion from the Medicare, Medicaid, and/or other government healthcare programs.

We and other pharmaceutical companies are defendants in a number of lawsuits filed by local and state government entities, alleging generally that we and numerous other pharmaceutical companies reported false pricing information in connection with certain drugs that are reimbursable under Medicaid. We intend to defend these lawsuits vigorously. Depending on developments in the litigation however, as with all litigation, there is a possibility that we will suffer adverse decisions or verdicts of substantial amounts, or that we will enter into monetary settlements in one or more of these actions as we recently did with a number of New York counties. See “Legal proceedings” in Note 14 of the Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K. Any unfavorable outcomes as a result of such litigation could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Government regulations regarding reporting and payment obligations are complex and we are continually evaluating the methods we use to calculate and report the amounts owed with respect to Medicaid and other government pricing programs. Our calculations are subject to review and challenge by various government agencies and authorities and it is possible that any such review could result either in material changes to the method used for calculating the amounts owed to the pertinent government agency (or agencies), or to the amounts themselves. In addition, because our processes for these calculations and our judgments supporting these calculations involve, and will continue to involve, subjective decisions, these calculations are subject to the risk of errors. As noted above, any governmental agency that commences an action, if successful, could impose, based on a claim of violation of fraud and false claims laws or otherwise, civil and/or criminal sanctions, including fines, penalties and possible exclusion from federal healthcare programs (including Medicaid and

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Medicare). Some of the applicable laws impose liability even in the absence of specific intent to defraud. Furthermore, should there be ambiguity with regard to how to properly calculate and report payments—and even in the absence of such ambiguity—a governmental authority may take a position contrary to a position we have taken, and may impose civil and/or criminal sanctions. Any such penalties or sanctions could have a material adverse effect on our business, financial position, results of operations and cash flows, and could cause the market value of our common stock to decline.

Once approved, there is no guarantee that the market will accept our future products, and regulatory requirements could limit the commercial usage of our products.

Even if we obtain regulatory approvals, uncertainty exists as to whether the market will accept our products. A number of factors may limit the market acceptance of our products, including the timing of regulatory approvals and market entry relative to competitive products, the availability of alternative products, the price of our products relative to alternative products, the availability of third party reimbursement and the extent of marketing efforts by third party distributors or agents that we retain. We cannot assure you that our products will receive market acceptance in a commercially viable period of time, if at all. We cannot be certain that any investment made in developing products 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 as a result of those efforts, our business, financial position, results of operations and cash flows may be materially adversely affected, and the market value of our common stock could decline. In addition, many of our products contain narcotic ingredients that carry stringent record keeping obligations, strict storage requirements and other limitations on these products’ availability, which could limit the commercial usage of these products.

We primarily sell our products to a limited number of wholesale drug distributors and large pharmacy chains. In turn, these wholesale drug distributors and large pharmacy chains supply products to pharmacies, hospitals, governmental agencies and physicians. Total revenues from customers who accounted for 10% or more of our total revenues during the years ended December 31 are as follows:

	2010			2009			2008
Cardinal Health, Inc.		33	%		35	%		36	%
McKesson Corporation		28	%		29	%		31	%
AmerisourceBergen Corporation		15	%		16	%		15	%

Revenues from these customers are included within our Branded Pharmaceuticals and Generics segments. If we were to lose the business of any of these customers, or if any were to experience difficulty in paying us on a timely basis, our total revenues, profitability and cash flows could be materially and adversely affected.

We are currently dependent on outside manufacturers for the manufacture of a significant amount of our products; therefore, we will have limited control of the manufacturing process and related costs. Certain of our manufacturers currently constitute the sole source of one or more of our products, including Teikoku, our sole source of Lidoderm^®.

Third party manufacturers currently manufacture a significant amount of our products pursuant to contractual arrangements. Certain of our manufacturers currently constitute the sole source of one or more of our products. Because of contractual restraints and the lead-time necessary to obtain FDA approval, and possibly DEA registration, of a new manufacturer, replacement of any of these manufacturers may be expensive and time consuming and may cause interruptions in our supply of products to customers. As a result, any such delay could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Because most of our products are manufactured by third parties, we have a limited ability to control the manufacturing process or costs related to this process. Increases in the prices we pay our manufacturers, interruptions in our supply of products or lapses in quality could adversely impact our margins, profitability and

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cash flows. We are reliant on our third party manufacturers to maintain the facilities at which they manufacture our products in compliance with FDA, DEA, state and local regulations. If they fail to maintain compliance with FDA, DEA or other critical regulations, they could be ordered to cease manufacturing which would have a material adverse impact on our business, results of operations, financial condition and cash flows. In addition to FDA and DEA regulation, violation of standards enforced by the Environmental Protection Agency (the EPA), and the Occupational Safety and Health Administration (OSHA), and their counterpart agencies at the state level, could slow down or curtail operations of third party manufacturers.

We have entered into minimum purchase requirement contracts with some of our third party manufacturers. In May 2001, we entered into a long-term manufacturing and development agreement with Novartis Consumer Health, Inc. pursuant to which Novartis Consumer Health Inc. has agreed to manufacture certain of our commercial products in addition to products in development. On February 23, 2011, we gave notice to Novartis that we would terminate this agreement effective February 2014. As of December 31, 2010, we are required to purchase a minimum of approximately $14 million of product from Novartis Consumer Health Inc. per year, or pro rata portion thereof, until the effective date of the termination of this agreement.

We also have a long-term contract with Teikoku Seiyaku Co., Ltd., under which Teikoku manufactures Lidoderm^® at its Japanese facility for commercial sale by us in the United States. We agreed to purchase a minimum number of patches per year from Teikoku through 2012, representing the noncancelable portion of the Teikoku agreement. Teikoku has agreed to fix the supply price of Lidoderm^® for a period of time after which the price will be adjusted at future set dates based on a price index defined in the Teikoku agreement. Since future price changes are unknown, we have used prices currently existing under the Teikoku agreement, and estimated our minimum purchase requirement to be approximately $32 million per year through 2012. The minimum purchase requirement shall remain in effect subsequent to 2012, except that we have the right to terminate the Teikoku agreement after 2012 if we fail to meet the annual minimum requirement.

In addition, we may consider entering into additional manufacturing arrangements with third party manufacturers. In each case, we will incur significant costs in obtaining the regulatory approvals and taking the other steps necessary to begin commercial production by these manufacturers. If the market for the products manufactured by these third parties substantially contracts or disappears, we will continue to be financially obligated under these contracts, an obligation which could have a material adverse effect on our business.

We are dependent on third parties to supply all raw materials used in our products and to provide services for certain core aspects of our business. Any interruption or failure by these suppliers, distributors and collaboration partners to meet their obligations pursuant to various agreements with us could have a material adverse effect on our business, results of operations, financial condition and cash flows.

We rely on third parties to supply all raw materials used in our products. In addition, we rely on third party suppliers, distributors and collaboration partners to provide services for certain core aspects of our business, including manufacturing, warehousing, distribution, customer service support, medical affairs services, clinical studies, sales and other technical and financial services. All third party suppliers and contractors are subject to FDA, and very often DEA, requirements. Our business and financial viability are dependent on the regulatory compliance of these third parties, and on the strength, validity and terms of our various contracts with these third party manufacturers, distributors and collaboration partners. Any interruption or failure by these suppliers, distributors and collaboration partners to meet their obligations pursuant to various agreements with us could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In addition, we have entered into minimum purchase requirement contracts with some of our third party raw material suppliers. If the market for the products that utilize these raw materials substantially contracts or disappears, we will continue to be financially obligated under these contracts and meeting such obligations could have a material adverse effect on our business.

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We are dependent upon third parties to provide us with various estimates as a basis for our financial reporting. While we undertake certain procedures to review the reasonableness of this information, we cannot obtain absolute assurance over the accounting methods and controls over the information provided to us by third parties. As a result we are at risk of them providing us with erroneous data which could have a material adverse impact on our business.

If the manufacturing facilities we own as a result of our acquisition of Qualitest are unable to manufacture the Qualitest products or the manufacturing process is interrupted due to failure to comply with regulations or for other reasons, the manufacture of those products could be interrupted.

In November 2010, we acquired Qualitest’s pharmaceutical manufacturing facilities located in Huntsville, Alabama and Charlotte, North Carolina (the Qualitest facilities). The Qualitest facilities currently manufacture many of the Qualitest products that we acquired. Because the manufacture of pharmaceutical products requires precise and reliable controls, and due to significant compliance obligations imposed by laws and regulations, we may face delays in qualifying the Qualitest facilities for the manufacture of new products or for other products that are currently manufactured for us by third parties.

Failure by the Qualitest facilities to comply with regulatory requirements could adversely affect their ability to supply products to us. All facilities and manufacturing techniques used for the manufacture of pharmaceutical products must be operated in conformity with current Good Manufacturing Practices, or cGMPs. Compliance with the FDA’s cGMP requirements applies to both drug products seeking regulatory approval and to approved drug products. In complying with cGMP requirements, pharmaceutical manufacturing facilities must continually expend time, money and effort in production, record-keeping and quality assurance and control so that their products meet applicable specifications and other requirements for product safety, efficacy and quality. Failure to comply with applicable legal requirements subjects the Qualitest facilities to possible legal or regulatory action, including shutdown, which may adversely affect their ability to supply us with product. Were we not able to manufacture products at the Qualitest facilities because of regulatory, business or any other reasons, the manufacture of these products would be interrupted. This could have a negative impact on our business, results of operation, financial condition, cash flows and competitive position.

The DEA limits the availability of the active ingredients used in many of our current products and products in development, as well as the production of these products, and, as a result, our procurement and production quotas may not be sufficient to meet commercial demand or complete clinical trials.

The DEA regulates chemical compounds as Schedule I, II, III, IV or V substances, with Schedule I substances considered to present the highest risk of substance abuse and Schedule V substances the lowest risk. The active ingredients in some of our current products and products in development, including oxycodone, oxymorphone, morphine, fentanyl, sufentanil and hydrocodone, are listed by the DEA as Schedule II or III substances under the Controlled Substances Act of 1970. Consequently, their manufacture, shipment, storage, sale and use are subject to a high degree of regulation. For example, generally, all Schedule II drug prescriptions must be signed by a physician, physically presented to a pharmacist and may not be refilled without a new prescription.

Furthermore, the DEA limits the availability of the active ingredients used in many of our current products and products in development, as well as the production of these products and, and we must annually apply to the DEA for procurement and production quotas in order to obtain and produce these substances. As a result, our procurement and production quotas may not be sufficient to meet commercial demand or to complete clinical trials. Moreover, the DEA may adjust these quotas from time to time during the year, although the DEA has substantial discretion in whether or not to make such adjustments. Any delay or refusal by the DEA in establishing our quotas, or modification of our quotas, for controlled substances could delay or result in the stoppage of our clinical trials or product launches, or could cause trade inventory disruptions for those products that have already been launched, which could have a material adverse effect on our business, financial position, results of operations and cash flows.

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We invest in securities that are subject to market risk and the recent issues in the financial markets could adversely affect the value of our assets.

At December 31, 2010, $18.8 million of our marketable securities portfolio was invested in AAA rated investments in auction-rate debt securities. Auction-rate securities are long-term variable rate bonds tied to short-term interest rates. After the initial issuance of the securities, the interest rate on the securities is reset periodically, at intervals established at the time of issuance (e.g., every seven, twenty-eight, or thirty-five days; every six months; etc.). In an active market, auction-rate securities are bought and sold at each reset date through a competitive bidding process, often referred to as a “Dutch auction”. Auctions are successful when the supply and demand of securities are in balance. Financial institutions brokering the auctions would also participate in the auctions to balance the supply and demand. Beginning in the second half of 2007, auctions began to fail for specific securities and in mid-February 2008 auction failures became common, prompting market participants, including financial institutions, to cease or limit their exposure to the auction-rate market. Given the current liquidity conditions in the global credit markets, the auction-rate securities market has become inactive. Consequently, our auction-rate securities are currently illiquid through the normal auction process.

The underlying assets of our auction-rate securities are student loans. The student loans are insured by the Federal Family Education Loan Program (FFELP).

Throughout 2010, the auction-rate securities market has continued to be inactive. If credit and capital markets deteriorate further or we experience any additional ratings downgrades on any investments in our portfolio (including on our auction-rate securities), we may incur additional impairments in future periods, which could negatively affect our financial condition, cash flow or reported earnings.

Any of these events could materially affect our results of operations and our financial condition. In the event we need to access these funds, we could be required to sell these securities at an amount below our original purchase value. However, based on our ability to access our cash and cash equivalents and our other liquid investments, and our expected operating cash flows, we do not expect to be required to sell these securities at a loss. However, there can be no assurance that we will not have to sell these securities at a loss.

Sales of our products may be adversely affected by the consolidation of the wholesale drug distribution and retail pharmacy industries, a trend which may continue.

The network through which we sell our products has undergone significant consolidation marked by mergers and acquisitions among wholesale distributors and the growth of large retail drug store chains. As a result, a small number of large wholesale distributors control a significant share of the market, and the number of independent drug stores and small drug store chains has decreased. We expect that consolidation of drug wholesalers and retailers will place competitive pressures on drug manufacturers, including us. If we lose any of these customer accounts, or if our relationship with them were to deteriorate, our business could also be materially and adversely affected. Orders for our products may increase or decrease depending on the inventory levels held by our major customers. Significant increases and decreases in orders from our major customers could cause our operating results to vary significantly from quarter to quarter.

Retail availability of our products is greatly affected by the inventory levels our customers hold. We monitor wholesaler inventory of our products using a combination of methods, including tracking prescriptions filled at the pharmacy level to determine inventory amounts the wholesalers have sold to their customers. Pursuant to distribution service agreements with five of our significant wholesale customers, we receive inventory level reports. For other wholesalers where we do not receive inventory level reports, however, our estimates of wholesaler inventories may differ significantly from actual inventory levels. Significant differences between actual and estimated inventory levels may result in excessive inventory production, inadequate supplies of products in distribution channels, insufficient or excess product available at the retail level, and unexpected increases or decreases in orders from our major customers. Forward buying by wholesalers, for example, may result in significant and unexpected changes in customer orders from quarter to quarter. These changes may

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cause our revenues to fluctuate significantly from quarter to quarter, and in some cases may cause our operating results for a particular quarter to be below our expectations or internal projections. If our financial results are below expectations for a particular period, the market price of our securities may drop significantly.

We may not be able to maintain our current insurance policies covering our business, assets, directors and officers and product liability claims and we may not be able to obtain new policies in the future.

Property, product liability, directors’ and officers’ and general liability insurance represent significant costs to us. Since the events of September 11, 2001, and due to an increased focus on corporate governance in the United States, and product liability lawsuits related to pharmaceuticals, liability and other types of insurance have, in some instances, become more difficult and costly to obtain. As we continue to expand our portfolio of available products, we may experience an increase in the number of product liability claims against us. Moreover, we may be subject to claims that are not covered by insurance. In addition, products for which we currently have coverage may be excluded from coverage in the future. Certain claims may be subject to our self-insured retention, exceed our policy limits or relate to damages that are not covered by our policy. In addition, product liability coverage for certain pharmaceutical entities is becoming more expensive and increasingly difficult to obtain and, as a result, we may not be able to obtain the type and amount of coverage we desire or to maintain our current coverage. Unanticipated additional insurance costs could have a material adverse effect on our results of operations and cash flows. There can be no assurance that we will be able to maintain our existing insurance policies or obtain new policies in meaningful amounts or at a reasonable cost. Any failure to obtain or maintain any necessary insurance coverage could have a material adverse effect on our business, financial condition, results of operations and cash flows.

If we are unable to retain our key personnel, and continue to attract additional professional staff, we may be unable to maintain or expand our business.

Because of the specialized scientific nature of our business, our ability to develop products and to compete with our current and future competitors will remain highly dependent, in large part, upon our ability to attract and retain qualified scientific, technical and commercial personnel. The loss of key scientific, technical and commercial personnel or the failure to recruit additional key scientific, technical and commercial personnel could have a material adverse effect on our business. While we have consulting agreements with certain key individuals and institutions and have employment agreements with our key executives, we cannot assure you that we will succeed in retaining personnel or their services under existing agreements. There is intense competition for qualified personnel in the areas of our activities, and we cannot assure you that we will be able to continue to attract and retain the qualified personnel necessary for the development of our business.

We are a holding company with no operations.

We are a holding company with no direct operations. Our principal assets are the equity interests we hold in our operating subsidiaries. As a result, we are dependent on loans, dividends and other payments from our subsidiaries to generate the funds necessary to meet our financial obligations. Our subsidiaries are legally distinct from us and have no obligation to make funds available to us.

Our revenues and operating results may fluctuate in future periods and we may fail to meet expectations, which may cause the value of our securities to decline.

Our quarterly operating results are difficult to predict and may fluctuate significantly from period to period. Accordingly, one cannot predict our quarterly financial results based on our full-year financial guidance. We cannot predict with certainty the timing or level of sales of our products in the future. If our quarterly sales or operating results fall below the expectations of investors or securities analysts, the value of our securities could decline substantially. Our operating results may fluctuate due to various factors including those set forth above. As a result of these factors, we believe that period-to-period comparisons of our operating results are not a good indication of our future performance.

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The trading prices of our securities may be volatile, and your investment in our securities could decline in value.

The market prices for securities of healthcare companies in general have been highly volatile and may continue to be highly volatile in the future. For example, for the twelve months ended December 31, 2010, our stock traded between $19.19 and $38.20 per share. The following factors, in addition to other risk factors described in this section, may cause the market value of our securities to fluctuate:

• FDA approval or disapproval of any of the drug applications we have submitted;

• the success or failure of our clinical trials;

• new data or new analyses of older data that raises potential safety or effectiveness issues concerning our approved products;

• competitors announcing technological innovations or new commercial products;

• introduction of generic substitutes for our products, including the filing of ANDAs with respect to generic versions of our branded products, such as Lidoderm^®;

• developments concerning our or others’ proprietary rights, including patents;

• competitors’ publicity regarding actual or potential products under development;

• regulatory developments in the United States and foreign countries, or announcements relating to these matters;

• period-to-period fluctuations in our financial results;

• new legislation in the United States relating to the development, sale or pricing of pharmaceuticals;

• a determination by a regulatory agency that we are engaging or have engaged in inappropriate sales or marketing activities, including promoting the “off-label” use of our products;

• litigation; and

• economic and other external factors, including disasters and other crises.

Our operations could be disrupted if our information systems fail or if we are unsuccessful in implementing necessary upgrades.

Our business depends on the efficient and uninterrupted operation of our computer and communications systems and networks, hardware and software systems and our other information technology. If our systems were to fail or we are unable to successfully expand the capacity of these systems, or we are unable to integrate new technologies into our existing systems, our operations and financial results could suffer.

The publication of negative results of studies or clinical trials may adversely impact our sales revenue.

From time to time, studies or clinical trials on various aspects of pharmaceutical products are conducted by academics or others, including government agencies. The results of these studies or trials, when published, may have a dramatic effect on the market for the pharmaceutical product that is the subject of the study. The publication of negative results of studies—or clinical trials related to our products or the therapeutic areas in which our products compete—could adversely affect our sales, the prescription trends for our products and the reputation of our products. In the event of the publication of negative results of studies or clinical trials related to our products or the therapeutic areas in which our products compete, our business, financial condition, results of operations and cash flows could be materially adversely affected. In addition, on September 27, 2007, Congress enacted requirements that the results of studies and clinical trials be provided by the investigator to the National Institutes of Health (NIH) for inclusion in a publicly-available database registry of clinical trials. There is an exception for clinical research performed on behalf of a sponsor who has not yet submitted an NDA in connection with the drug being studied; however, it is unclear what impact the potential publication of clinical research data for our products will have.

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Actions that may be taken by significant stockholders may divert the time and attention of our board of directors and management from our business operations.

Campaigns by significant investors to effect changes at publicly traded companies have increased in recent years. In August 2007, affiliates of D.E. Shaw & Co., L.P., which, as of October 1, 2010, collectively beneficially own approximately 5 million shares of our outstanding common stock, sent letters to our Board of Directors suggesting, among other things, that the Company begin a process of evaluating strategic alternatives and explore a recapitalization. In April 2008, we reached an agreement with the D. E. Shaw group, pursuant to which Endo’s Board of Directors nominated William F. Spengler at the 2008 Annual Meeting of Stockholders to serve as a member of the Company’s Board of Directors. Mr. Spengler is an independent unaffiliated person who was recommended by D.E. Shaw to our Board of Directors. The D. E. Shaw group agreed to vote all of its shares in favor of the election of each of the Board’s nominees at our 2008 Annual Meeting of Stockholders. At the 2008 Annual Meeting of Stockholders, the Company stockholders elected Mr. Spengler as a director of the Company. The D.E. Shaw group is no longer subject to any restrictions with respect to its shares in the Company.

If a proxy contest were to be pursued by any of our stockholders, it could result in substantial expense to the Company and consume significant attention of our management and Board of Directors. In addition, there can be no assurance that any stockholder will not pursue actions to effect changes in the management and strategic direction of the Company, including through the solicitation of proxies from the Company’s stockholders.

The regulatory approval process outside the United States varies depending on foreign regulatory requirements, and failure to obtain regulatory approval in foreign jurisdictions would prevent the marketing of our products in those jurisdictions.

We have worldwide rights to market many of our products and product candidates. We intend to seek approval of and market certain of our products outside of the United States. To market our products in the European Union and many other foreign jurisdictions, we must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. Approval of a product by the comparable regulatory authorities of foreign countries must still be obtained prior to manufacturing or marketing that product in those countries. The approval procedure varies among countries and can involve additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval. The foreign regulatory approval process includes all of the risks associated with obtaining FDA approval set forth in this Annual Report on Form 10-K and approval by the FDA does not ensure approval by the regulatory authorities of any other country, nor does the approval by foreign regulatory authorities in one country ensure approval by regulatory authorities in other foreign countries or the FDA. Other than the approval of Vantas^® for marketing in the European Union and certain other foreign jurisdictions, we may not be able to file for regulatory approvals or may not receive necessary approvals to commercialize our products in any foreign market. If we fail to comply with these regulatory requirements or obtain and maintain required approvals, our target market will be reduced and our ability to generate revenue from abroad will be adversely affected.

If the indemnitors default on their obligations, the outcome of the Redux litigation could materially harm us.

On September 15, 1997, Indevus (then known as Interneuron Pharmaceuticals, Inc.) announced a market withdrawal of its first commercial prescription product, the anti-obesity medication Redux (dexfenfluramine hydrochloride capsules C-IV), which had been launched in June 1996 by its licensee, American Home Products Corporation, which became Wyeth and was later acquired by Pfizer. The withdrawal of Redux was based on a preliminary analysis by the FDA of potential abnormal echocardiogram findings associated with certain patients taking Redux or the combination of fenfluramine with phentermine. Following the withdrawal, Indevus was named, together with other pharmaceutical companies, as a defendant in several thousand product liability legal actions, some of which purport to be class actions, in federal and state courts relating to the use of Redux and other weight loss drugs. The existence of such litigation may materially adversely affect our business. In addition, although we are unable to predict the outcome of any such litigation, if successful uninsured or insufficiently insured claims, or if a successful indemnification claim, were made against us, our business, financial condition and results of operations could be materially adversely affected. In addition, the uncertainties

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associated with these legal actions may have an adverse effect on the market price of our common stock and on our ability to obtain product liability insurance for other products at costs acceptable to us, or at all, which may materially adversely affect our business, financial condition and results of operations.

On May 30, 2001, Indevus (then known as Interneuron Pharmaceuticals, Inc.) entered into an Indemnity and Release Agreement with Wyeth (then known as American Home Products Corporation and referred to herein as Wyeth, which provides for indemnification of Redux-related claims brought by plaintiffs who initially opted out of Wyeth’s national class action settlement of diet drug litigation and by those claimants who allege primary pulmonary hypertension. This agreement also provides for funding of all defense costs related to all Redux-related claims and provides for Wyeth to fund certain additional insurance coverage to supplement the Company’s existing product liability insurance. However, there can be no assurance that uninsured or insufficiently insured Redux-related claims or Redux-related claims for which we are not otherwise indemnified or covered under the indemnity and release agreement will not have a material adverse effect on our future business, results of operations or financial condition or that the potential of any such claims would not adversely affect our ability to obtain sufficient financing to fund operations. Additionally, there is no assurance that as indemnitor, Wyeth will remain solvent and able to respond to all claims covered by the indemnity and release agreement. We are unable to predict whether the existence of such litigation may adversely affect our business.

Pursuant to agreements we have with Les Laboratories Servier, from whom Indevus in-licensed rights to Redux, Boehringer Ingelheim Pharmaceuticals, Inc., which assembled Redux, and other parties, we may be required to indemnify such parties for Redux-related liabilities. We are unable to predict whether such indemnification obligations, if they arise, may adversely affect our business.

Agreements between brand pharmaceutical companies and generic pharmaceutical companies are facing increased government scrutiny in both the United States and abroad.

We are involved in numerous patent litigations in which generic companies challenge the validity or enforceability of our products’ listed patents and/or their applicability of these patents to the generic applicant’s products. Likewise, our generics business is also involved in patent litigations in which we challenge the validity or enforceability of innovator companies’ listed patents and/or their applicability to our generic products. Therefore settling patent litigations has been and is likely to continue to be part of our business. Parties to such settlement agreements in the U.S., including us, are required by law to file them with the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice for review. The FTC has publicly stated that, in its view, some of these settlement agreements violate the antitrust laws and has brought actions against some brand and generic companies that have entered into such agreements. Accordingly, we may receive formal or informal requests from the FTC for information about a particular settlement agreement, and there is a risk that the FTC may commence an action against us alleging violation of the antitrust laws. Any adverse outcome of these actions or investigations could have a significant adverse effect on our business, financial condition and results of operations. In addition, some members of Congress are trying to pass legislation that would limit the types of settlement agreements generic manufacturers can enter into with brand companies. The impact of such pending litigation is uncertain and could adversely affect our business, financial condition and results of operations.

While healthcare reform may increase the number of patients who have insurance coverage for our products, its cost containment measures may adversely affect reimbursement for our products.

In March 2010, the U.S. Health Reform Law was enacted in the United States. This legislation has both current and longer-term impacts on us, as discussed below.

The provisions of the U.S. Health Reform Law are effective on various dates over the next several years. The principal provisions affecting us provide for the following:

• an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively (effective January 1, 2010);

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• extension of Medicaid prescription drug rebates to drugs dispensed to enrollees in certain Medicaid managed care organizations (effective March 23, 2010);

• an increase in the additional Medicaid rebates for “new formulations” of oral solid dosage forms of innovator drugs;

• the revision of the average manufacturers’ price (AMP) definition to remove the “retail pharmacy class of trade” (effective October 1, 2010);

• expansion of the types of institutions eligible for the “Section 340B discounts” for outpatient drugs provided to hospitals meeting the qualification criteria under Section 340B of the Public Health Service Act of 1944 (effective January 1, 2010) (340B Pricing);

• a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition of the manufacturer’s outpatient drugs to be covered under Medicare Part D (effective January 1, 2011);

• an annual fee payable to the federal government (which is not deductible for U.S. income tax purposes) based on our prior-calendar-year share relative to other companies of branded prescription drug sales to specified government programs (effective January 1, 2011, with the total fee to be paid each year by the pharmaceutical industry increasing annually through 2018);

• a deductible 2.3% excise tax on any entity that manufactures or imports medical devices offered for sale in the United States, with limited exceptions (effective January 1, 2013);

• new requirements to report certain financial arrangements with physicians and others, including reporting any “transfer of value” made or distributed to prescribers and other healthcare providers and reporting any investment interests held by physicians and their immediate family members during each calendar year (beginning in 2012, with reporting starting in 2013);

• a new requirement to annually report drug samples that manufacturers and distributors provide to physicians (effective April 1, 2012);

• creation of the Independent Payment Advisory Board which, beginning in 2014, will have authority to recommend certain changes to the Medicare program that could result in reduced payments for items and services (recommendations could have the effect of law even if Congress does not act on the recommendations); and

• establishment of a Center for Medicare Innovation at the Centers for Medicare & Medicaid Services to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending, (beginning January 1, 2011).

A number of the provisions of the U.S. Health Reform Law may adversely affect reimbursement for our products. Additionally, the best price requirements with respect to Medicaid rebates have traditionally been a significant consideration with respect to the level of rebates in our Medicare and commercial contracting. The U.S. Health Reform Law’s effects on rebate amounts could adversely impact our future results of operations.

Over the next few years, regulations and guidance implementing the U.S. Health Reform Law as well as additional healthcare reform proposals may have a financial impact on the Company. In addition, the U.S. Health Reform Law requires that, except in certain circumstances, individuals must obtain health insurance beginning in 2014, and it also provides for an expansion of Medicaid coverage in 2014. It is expected that, as a result of these provisions, there will be a substantial increase in the number of Americans with health insurance beginning in 2014, a significant portion of whom will be eligible for Medicaid. We anticipate that this will increase demand for pharmaceutical products overall. However, in view of the many uncertainties, including but not limited to pending litigation challenging the new law and changes in the partisan composition of Congress, we are unable at this time to determine whether and to what extent sales of our prescription pharmaceutical products in the U.S. will be impacted.

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We may not be able to realize all of the anticipated benefits of our acquisitions of HealthTronics, Penwest and Qualitest.

The success of our recent acquisitions of HealthTronics, Penwest, and Qualitest will depend, in large part, on our ability to realize the anticipated benefits and expand our business from integrating aspects of the operations of Endo with aspects of the operations of HealthTronics, Penwest and Qualitest. If we are not able to successfully integrate certain aspects of these companies, the anticipated benefits of the applicable acquisition may not be realized fully or at all or may take longer to realize than expected.

Our Consolidated Financial Statements may be impacted in future periods based on the accuracy of our valuations of each of our acquired businesses.

Accounting for our acquisitions involves complex and subjective valuations of the assets, liabilities, and noncontrolling interests of the acquired entities, which will be recorded in the Company’s Consolidated Financial Statements pursuant to the general accounting rules applicable for business combinations. Differences between the inputs and assumptions used in the valuations and actual results could have a material effect on our Consolidated Financial Statements in future periods.

If HealthTronics is not able to establish or maintain relationships with physicians and hospitals, its ability to successfully commercialize current or future service offerings will be materially harmed.

HealthTronics is dependent on healthcare providers in two respects. First, if physicians and hospitals and other healthcare facilities, which HealthTronics refers to as Customers, determine that HealthTronics’ services are not of sufficiently high quality or reliability, or if its Customers determine that its services are not cost effective, they will not utilize HealthTronics’ services. In addition, any change in the rates of or conditions for reimbursement could substantially reduce (1) the number of procedures for which HealthTronics or its Customers can obtain reimbursement or (2) the amounts reimbursed to HealthTronics or its Customers for services provided by HealthTronics. If third-party payors reduce the amount of their payments to Customers, HealthTronics Customers may seek to reduce their payments to HealthTronics or seek an alternate supplier of services. Because unfavorable reimbursement policies have constricted and may continue to constrict the profit margins of the hospitals and other healthcare facilities which HealthTronics bills directly, HealthTronics may need to lower fees to retain existing customers and attract new ones. These reductions could have a significant adverse effect on revenues and financial results of HealthTronics by decreasing demand for its services or creating downward pricing pressure. Second, physicians generally own equity interests in the HealthTronics’ partnerships. HealthTronics provides a variety of services to the partnerships and, in general, manages the partnerships’ day-to-day affairs. HealthTronics operations could become disrupted, and financial results adversely affected, if these physician partners became dissatisfied with HealthTronics’ services, if these physician partners believe that its competitors or other persons provide higher quality services or a more cost-beneficial model or service, or if HealthTronics became involved in disputes with its partners.

Third party payors could refuse to reimburse healthcare providers for use of HealthTronics’ current or future service offerings and products, which could negatively impact our business, results of operations, financial condition and cash flows.

Third party payors are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement of medical procedures and treatments. In addition, significant uncertainty exists as to the reimbursement status of newly approved healthcare products. Lithotripsy treatments are reimbursed under various federal and state programs, including Medicare and Medicaid, as well as under private healthcare programs, primarily at fixed rates. Governmental programs are subject to statutory and regulatory changes, administrative rulings, interpretations of policy and governmental funding restrictions, and private programs are subject to policy changes and commercial considerations, all of which may have the effect of decreasing program payments, increasing costs or requiring HealthTronics to modify the way in which it operates the business.

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We are subject to health information privacy and security standards that include penalties for noncompliance.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) and its implementing regulations impose stringent requirements on “covered entities” (healthcare providers, health plans and healthcare clearinghouses) to safeguard the privacy and security of individually-identifiable health information. Certain of our operations are subject to these requirements, and we believe that we are in compliance with the applicable standards. Penalties for noncompliance with these rules include both criminal and civil penalties. In addition, the Health Information Technology for Economic and Clinical Health Act (HITECH), included in the American Recovery and Reinvestment Act of 2009, expanded federal health information privacy and security protections. Among other things, HITECH makes certain of HIPAA’s privacy and security standards directly applicable to “business associates”—independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also set forth new notification requirements for health data security breaches, increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorney’s fees and costs associated with pursuing federal civil actions.

New and proposed federal and state laws and regulatory initiatives relating to various initiatives in healthcare reform (such as improving privacy and the security of patient information and combating healthcare fraud) could require us to expend substantial sums to appropriately respond to and comply with this broad variety of legislation (such as acquiring and implementing new information systems for privacy and security protection), which could negatively impact our business, results of operations, financial condition and cash flows.

Recent legislation and several regulatory initiatives at the state and federal levels address patient privacy concerns. New federal legislation extensively regulates the use and disclosure of individually identifiable health-related information and the security and standardization of electronically maintained or transmitted health-related information. We do not yet know the total financial or other impact of these regulations on us. Continuing compliance with these regulations will likely require us to spend substantial sums, including, but not limited to, purchasing new computer systems, which could negatively impact financial results. Additionally, if we fail to comply with the privacy laws and regulations, we could suffer civil penalties of up to $1,500,000 per calendar year for violations of an identical standard and criminal penalties of up to $250,000 and 10 years in prison for offenses committed with the intent to sell, transfer, or use individually identifiable health information for commercial advantage, personal gain or malicious harm. In addition, healthcare providers will continue to remain subject to any state laws that are more restrictive than the federal privacy regulations. These privacy laws vary by state and could impose additional penalties.

The provisions of HIPAA criminalize situations that previously were handled exclusively civilly through repayments of overpayments, offsets and fines by creating new federal healthcare fraud crimes. Further, as with the federal laws, general state criminal laws may be used to prosecute healthcare fraud and abuse. We believe that our business arrangements and practices comply with existing healthcare fraud law. However, a violation could subject us to penalties, fines and/or possible exclusion from Medicare or Medicaid. Such sanctions could significantly reduce our financial results.

Future healthcare legislation or other changes in the administration of or interpretation of existing legislation regarding governmental healthcare programs could have an adverse effect on our business and the results of our operations.

We may be required to modify HealthTronics’ agreements, operations, marketing and expansion strategies in response to changes in the statutory and regulatory environment.

We regularly monitor developments in statutes and regulations relating to our business. However, we may be required to modify our agreements, operations, marketing and expansion strategies from time to time in

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response to changes in the statutory and regulatory environment. We carefully structure all of our and HealthTronics’ agreements, operations, marketing and strategies, although we can provide no assurance that these arrangements will not be challenged successfully.

HealthTronics could be adversely affected by special risks and requirements related to its medical products manufacturing business.

HealthTronics is subject to various risks and requirements associated with being a medical equipment manufacturer, which could have adverse effects. These include the following:

• the need to comply with applicable federal Food and Drug Administration and foreign regulations relating to good manufacturing practices and medical device approval requirements, and with state licensing requirements;

• the need for special non-governmental certifications and registrations regarding product safety, product quality and manufacturing procedures in order to market products in the European Union;

• potential product liability claims for any defective goods that are distributed; and

• the need for research and development expenditures to develop or enhance products and compete in the equipment markets.

We are heavily regulated, which poses significant compliance risks for the business and places constraints on business opportunities.

We are subject to various federal and state laws and regulations. Among the applicable federal laws and regulations are the Stark Law, Anti-Kickback Statute, False Claims Act, and Clinical Laboratory Improvement Amendments (CLIA) and associated regulations and anti-markup regulations, reassignment regulations, and Medicare usual charge regulations. Among the applicable state laws and regulations are account billing statutes and regulations of various forms (including direct billing, anti-markup, and disclosure statutes and regulations), fee-splitting statutes and regulations, anti-kickback statutes and regulations, self-referral statutes and regulations, lab licensure and certification statutes and regulations, and insurance fraud statutes and regulations. If it is determined that any aspect of our pathology laboratory services business model or any specific pathology laboratory services facility or partnership is not in compliance with any of these laws or regulations, this could threaten our ability to carry on aspects of the business model, the business model in its entirety, or activities relating to one or more facilities or partnerships. Noncompliance could also expose the Company to federal or state enforcement actions or other proceedings or private lawsuits or other proceedings against the Company. Our obligation to operate the pathology laboratory services unit within the strictures of various applicable federal and state laws and regulations constrains our ability to implement new strategies for generating business opportunities. In the future, additional laws and regulations may arise at the federal or state level in the pathology laboratory services field that may create additional uncertainty, negatively impact results for this unit, or jeopardize the functioning of aspects of the business model, the business model in its entirety, or specific facilities or partnerships.

We are also subject to many environmental, health and safety laws and regulations. Compliance with these laws and regulations can be a significant factor in our business, and we have incurred and expect to continue to incur expenditures to maintain compliance. Moreover, some or all of the environmental laws and regulations to which we are subject could become more stringent or more stringently enforced in the future. Our failure to comply with applicable environmental laws and regulations and permit requirements could result in civil or criminal fines or penalties or enforcement actions, including regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures, installation of pollution control equipment or remedial actions. Additionally, some environmental laws and regulations impose liability and responsibility on present and former owners, operators or users of facilities and sites for environmental contamination at such facilities and sites without regard to causation or knowledge of contamination. We could incur material liabilities under these and other laws and regulations related to environmental protection and safety.

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Penwest is dependent on a limited number of suppliers for the gums used in its TIMERx materials.

Penwest’s TIMERx drug delivery systems are based on a hydrophilic matrix combining a heterodispersed mixture primarily composed of two polysaccharides, xanthan gum and locust bean gum, in the presence of dextrose. These gums are also used in Penwest’s Geminex, gastroretentive and SyncroDose drug delivery systems. Penwest purchases these gums from a primary supplier. Penwest has qualified, or is in the process of qualifying, alternate suppliers with respect to such materials, but it can provide no assurance that interruptions in supplies will not occur in the future. TIMERx is the extended-release technology used in Opana^® ER. Any interruption in TIMERx supply could have a material adverse effect on our sales of Opana^® ER.

We have indebtedness which could adversely affect our financial position and prevent us from fulfilling our obligations under such indebtedness.

We currently have a moderate amount of indebtedness. As of December 31, 2010, we have total debt of approximately $1,184.7 million, consisting of $400.0 million of borrowings under the five-year senior secured term loan facility (the Term Loan Facility), $400.0 million of 7.00% Senior Notes due 2020 (the Senior Notes), and $384.7 million of other debt, representing the aggregate principal amounts. Additionally, we have unused availability under the five-year senior secured revolving credit facility (the Revolving Credit Facility and, together with the Term Loan Facility, the 2010 Credit Facility) of up to $500.0 million, not including an up to $200.0 million expansion option available under the Revolving Credit Facility, for total unused availability of up to $700.0 million under the 2010 Credit Facility if the expansion option is exercised. Our indebtedness may:

• make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments on the notes and our other indebtedness;

• limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes;

• limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general business purposes;

• require us to use a substantial portion of our cash flow from operations to make debt service payments;

• limit our flexibility to plan for, or react to, changes in our business and industry;

• place us at a competitive disadvantage compared to our less leveraged competitors; and

• increase our vulnerability to the impact of adverse economic and industry conditions.

We may also incur additional indebtedness in the future. For a description of our indebtedness, see Note 18 of the Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Despite our current level of indebtedness, we may still be able to incur substantially more indebtedness. This could exacerbate the risks associated with our substantial indebtedness.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future, including potential additional indebtedness pursuant to the expansion option under our Revolving Credit Facility. The terms of the indenture will limit, but not prohibit, us or our subsidiaries from incurring additional indebtedness. If we incur any additional indebtedness that ranks equally with the notes and the guarantees, the holders of that indebtedness will be entitled to share ratably with the holders of the notes and the guarantees in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding-up of us. This may have the effect of reducing the amount of proceeds paid to you. If new indebtedness is added to our current debt levels, the related risks that we and our subsidiaries now face could intensify.

Covenants in our debt agreements restrict our business in many ways.

The agreements governing our outstanding indebtedness subject us to various covenants that limit our ability and/or our restricted subsidiaries’ ability to, among other things:

• incur or assume liens or additional debt or provide guarantees in respect of obligations of other persons;

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• issue redeemable stock and preferred stock;

• pay dividends or distributions or redeem or repurchase capital stock;

• prepay, redeem or repurchase debt;

• make loans, investments and capital expenditures;

• enter into agreements that restrict distributions from our subsidiaries;

• sell assets and capital stock of our subsidiaries;

• enter into certain transactions with affiliates; and

• consolidate or merge with or into, or sell substantially all of our assets to, another person.

A breach of any of these covenants could result in a default under our indebtedness.

Our failure to comply with the agreements relating to our outstanding indebtedness, including as a result of events beyond our control, could result in a default under our outstanding indebtedness that could materially and adversely affect our results of operations and our financial condition.

If there were an event of default under any of the agreements relating to our outstanding indebtedness, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately and our lenders could terminate all commitments to extend further credit. The instruments governing our debt contain cross-default or cross-acceleration provisions that may cause all of the debt issued under such instruments to become immediately due and payable as a result of a default under an unrelated debt instrument. An event of default or an acceleration under one debt agreement could cause a cross-default or cross-acceleration of other debt agreements. We cannot assure you that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding debt instruments if the obligations thereunder are accelerated upon an event of default. Further, if we are unable to repay, refinance or restructure our secured debt, the holders of such debt could proceed against the collateral securing that indebtedness. We have pledged substantially all of our assets as collateral under our 2010 Credit Facility. If the lenders under our 2010 Credit Facility accelerate the repayment of borrowings, we may not have sufficient assets to repay the obligations outstanding under our 2010 Credit Facility and our other indebtedness, including the Senior Notes. Furthermore, our borrowings under our 2010 Credit Facility are, and are expected to continue to be, at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remains the same, and our net income would decrease. For a description of our indebtedness, see Note 18 of the Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

To service our indebtedness, we will require a significant amount of cash. If we fail to generate sufficient cash flow from future operations, we may have to refinance all or a portion of our indebtedness or seek to obtain additional financing.

We expect to obtain the funds to pay our expenses and the amounts due under our other indebtedness primarily from operations. Our ability to meet our expenses and make these payments thus depends on our future performance, which will be affected by financial, business, economic, competitive, legislative, regulatory and other factors, many of which are beyond our control. Our business may not generate sufficient cash flow from operations in the future and our currently anticipated growth in revenue and cash flow may not be realized, either or both of which could result in our being unable to pay amounts due under our outstanding indebtedness or to fund other liquidity needs, such as future capital expenditures. If we do not have sufficient cash flow from operations, we may be required to refinance all or part of our then existing indebtedness, sell assets, reduce or delay capital expenditures or seek to raise additional capital, any of which could have a material adverse effect on our operations. There can be no assurance that we will be able to accomplish any of these alternatives on terms acceptable to us, or at all. Our ability to restructure or refinance our indebtedness will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our

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business operations. In addition, the terms of existing or future debt agreements may restrict us from adopting any of these alternatives. Any failure to make scheduled payments of interest or principal on our outstanding indebtedness would likely result in a reduction of our credit rating, which could negatively impact our ability to incur additional indebtedness on commercially reasonable terms or at all. The failure to generate sufficient cash flow or to achieve any of these alternatives could materially adversely affect our business, financial condition and other results of operations.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

All of our properties are either owned or leased pursuant to operating leases. Our significant properties are as follows:

Property	Location	Purpose	Square Footage	Ownership
Painter’s Crossing One Associates, L.P.(1)	Chadds Ford, Pennsylvania	Corporate Headquarters	approximately 47,756 square feet	Leased
Painter’s Crossing Two Associates, L.P.(2)	Chadds Ford, Pennsylvania	Corporate Headquarters	approximately 64,424 square feet	Leased
Painter’s Crossing Three Associates, L.P.(3)	Chadds Ford, Pennsylvania	Corporate Headquarters	approximately 48,600 square feet	Leased
Brandywine Seven(4)	Chadds Ford, Pennsylvania	Corporate Headquarters	approximately 23,949 square feet	Leased
177 Cantiaque Rock Road LLC(5)	Westbury, New York	Research and Development	approximately 24,190 square feet	Leased
Cedar Brook LP(6)	Cranbury, New Jersey	Distribution / Manufacturing	approximately 51,000 square feet	Leased
HEP Davis Spring, L.P.(7)	Austin, Texas	HealthTronics Headquarters and Manufacturing / Service Center	approximately 67,405 square feet	Leased
Qualitest Building	Huntsville, Alabama	Qualitest Headquarters / Distribution	approximately 280,000 square feet	Owned
Vintage Pharmaceuticals, LLC liquids formulation facility	Huntsville, Alabama	Distribution / Manufacturing / Laboratories	approximately 180,000 square feet	Owned
Vintage Pharmaceuticals, LLC tablets manufacturing facility	Huntsville, Alabama	Distribution / Manufacturing / Laboratories	approximately 309,000 square feet	Owned
Charlotte Building	Charlotte, North Carolina	Distribution / Manufacturing / Laboratories	approximately 60,000 square feet	Owned
Charlotte Warehouse(8)	Charlotte, North Carolina	Distribution	approximately 58,000 square feet	Leased

(1) - Lease term ends August, 2012

(2) - Lease term ends January, 2015

(3) - Lease term ends March, 2018

(4) - Lease term ends January, 2015

(5) - Lease term ends May, 2013

(6) - Lease term ends March, 2015

(7) - Lease term ends September, 2015

(8) - Lease term ends May, 2021

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Item 3. Legal Proceedings

The disclosures under Note 14, Commitments and Contingencies-Legal Proceedings, included in the Consolidated Financial Statements in Part IV, Item 15 of this Annual Report on Form 10-K are incorporated in this Part I, Item 3 by reference.

Item 4. (Removed and Reserved)

PART II

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

Market Information. Our common stock is traded on the NASDAQ Global Select Market under the symbol “ENDP”. The following table sets forth the quarterly high and low share price information for the periods indicated. The prices shown represent quotations between dealers, without adjustment for retail markups, markdowns or commissions, and may not represent actual transactions.

	Endo Common Stock
	High		Low
Year Ending December 31, 2010
1st Quarter	$	24.85	$	19.19
2nd Quarter	$	24.29	$	19.58
3rd Quarter	$	34.26	$	21.30
4th Quarter	$	38.20	$	32.80
Year Ending December 31, 2009
1st Quarter	$	26.14	$	16.29
2nd Quarter	$	18.55	$	15.75
3rd Quarter	$	23.37	$	16.81
4th Quarter	$	24.10	$	19.11

Holders . As of February 18, 2011, we estimate that there were approximately 57 record holders of our common stock.

Dividends. We have never declared or paid any cash dividends on our capital stock. In November 2010, we established a $400 million, five-year senior secured term loan facility (the Term Loan Facility), and a $500 million, five-year senior secured revolving credit facility (the Revolving Credit Facility and, together with the Term Loan Facility, the 2010 Credit Facility) with JP Morgan Chase Bank, Royal Bank of Canada and certain other lenders. We also entered into an indenture among the Company, the guarantors named therein and Wells Fargo Bank, National Association, as trustee, which governs the terms of the Company’s $400 million aggregate principal amount of 7.00% Senior Notes due 2020 (the Senior Notes). Subject to certain limitations, we are permitted to pay dividends under the 2010 Credit Facility and the indenture governing the Senior Notes.

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Performance Graph. The following graph provides a comparison of the cumulative total stockholder return on the Company’s common stock with that of the cumulative total stockholder return on the (i) NASDAQ Stock Market Index (U.S.) and (ii) the NASDAQ Pharmaceutical Index, commencing on December 31, 2005 and ending December 31, 2010. The graph assumes $100 invested on December 31, 2005 in the Company’s common stock and in each of the comparative indices. Our historic stock price performance is not necessarily indicative of future stock price performance.

	December 31,
	2005		2006		2007		2008		2009		2010
Endo Pharmaceuticals Holdings Inc.	$	100.00	$	91.14	$	88.14	$	85.53	$	67.81	$	118.01
NASDAQ Composite Index	$	100.00	$	111.74	$	124.67	$	73.77	$	107.12	$	125.93
NASDAQ Pharmaceutical Index	$	100.00	$	101.61	$	94.58	$	87.40	$	95.29	$	101.44

Recent sales of unregistered securities; Use of proceeds from registered securities. During the fourth quarter of 2010, the Company did not sell any unregistered securities.

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Purchase of equity securities by the issuer and affiliated purchasers. The following table reflects purchases of Endo Pharmaceuticals Holdings Inc. common stock by the Company during the three-months ended December 31, 2010:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan		Approximate Dollar Value of Shares that May Yet be Purchased Under the Plan
October 1, 2010 to October 31, 2010		—	$	—		—	$	266,209,864
November 1, 2010 to November 30, 2010		—		—		—		266,209,864
December 1, 2010 to December 31, 2010		—		—		—		266,209,864
Total		—	$	—		—	$	266,209,864

Item 6. Selected Financial Data

The consolidated financial data presented below have been derived from our audited financial statements. The selected historical consolidated financial data presented below should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data.” The selected data in this section is not intended to replace the consolidated financial statements. The information presented below is not necessarily indicative of the results of our future operations. Certain prior year amounts have been reclassified to conform to the current year presentation.

	Year Ended December 31,
	2010		2009		2008		2007		2006
	(dollars in thousands, except per share data)
Consolidated Statement of Operations Data:
Total revenues	$	1,716,229	$	1,460,841	$	1,260,536	$	1,085,608	$	909,659
Operating income		465,366		390,024		387,474		317,226		210,529
Income before income tax		420,698		359,660		391,828		353,250		233,734
Consolidated net income	$	287,020	$	266,336	$	255,336	$	227,440	$	137,839
Less: Net income attributable to noncontrolling interests		28,014		—		—		—		—
Net income attributable to Endo Pharmaceuticals Holdings Inc.	$	259,006	$	266,336	$	255,336	$	227,440	$	137,839
Basic and Diluted Net Income Per Share Attributable to Endo Pharmaceuticals Holdings Inc.:
Basic	$	2.23	$	2.27	$	2.07	$	1.70	$	1.03
Diluted	$	2.20	$	2.27	$	2.06	$	1.69	$	1.03
Shares used to compute basic net income per share attributable to Endo Pharmaceuticals Holdings Inc.		116,164		117,112		123,248		133,903		133,178
Shares used to compute diluted net income per share attributable to Endo Pharmaceuticals Holdings Inc.		117,951		117,515		123,720		134,525		133,911
Cash dividends declared per share	$	—	$	—	$	—	$	—	$	—

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	As of and for the Year Ended December 31,
	2010			2009			2008			2007			2006
	(dollars in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	466,214		$	708,462		$	775,693		$	350,325		$	628,085
Total assets		3,912,389			2,488,803			1,908,733			1,702,638			1,396,689
Long-term debt, less current portion, net		1,045,801			322,534			243,150			—			—
Other long-term obligations, including capitalized leases		327,431			196,678			71,999			13,390			17,602
Total Endo Pharmaceuticals Holdings Inc. stockholders’ equity	$	1,741,591		$	1,497,411		$	1,207,111		$	1,292,290		$	1,040,988
Noncontrolling interests		61,738			—			—			—			—
Total stockholders’ equity	$	1,803,329		$	1,497,411		$	1,207,111		$	1,292,290		$	1,040,988
Other Financial Data:
Net cash provided by operating activities	$	453,646		$	295,406		$	355,627		$	365,742		$	345,334
Net cash (used in) provided by investing activities		(896,323	)		(245,509	)		179,807			(614,528	)		(66,449	)
Net cash provided by (used in) financing activities	$	200,429		$	(117,128	)	$	(110,066	)	$	(28,974	)	$	(151,756	)

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) describes the principal factors affecting the results of operations, liquidity and capital resources, and critical accounting estimates at Endo. This discussion should be read in conjunction with our audited Consolidated Financial Statements and related notes thereto. Except for the historical information contained in this Report, this Report, including the following discussion, contains forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements” beginning on page 1 of this Report.

EXECUTIVE SUMMARY

About the Company

Endo Pharmaceuticals Holdings Inc., which we refer to as “Endo”, “we”, “us”, or the “Company”, is a United States-based, specialty healthcare solutions company focused on branded products and generics, and devices and services. Endo is redefining its position in the healthcare marketplace by anticipating and embracing the evolution of health decisions based on the need for high-quality and cost-effective care. We aim to be the premier partner to healthcare professionals and payment providers, delivering an innovative suite of complementary branded and generic drugs, devices, services and clinical data to meet the needs of patients in areas such as pain management, urology, oncology and endocrinology. Most recently, we have moved in this direction through our acquisition of Qualitest, which expands and diversifies our generic drug product offerings and enhances our pain management portfolio, and through our acquisition of HealthTronics, which has expanded and diversified our reach as a provider of healthcare services and medical devices and our presence in urology.

We have a portfolio of branded pharmaceuticals that includes established brand names such as Lidoderm^®, Opana^® ER and Opana^®, Percocet^®, Frova^®, Voltaren^® Gel, Vantas^®, Valstar^®, and Supprelin^® LA. Branded products comprised approximately 86% of our revenues in the year ended December 31, 2010, with 46% of our revenues coming from Lidoderm^®. Our non-branded generic portfolio, which accounted for 9% of revenues in the year ended December 31, 2010, currently consists of products primarily focused in pain management. We focus on selective generics that have one or more barriers to market entry, such as complex formulation, regulatory or legal challenges or difficulty in raw material sourcing. Revenue from our devices and services portfolio accounted for the remainder of our revenues for the year ended December 31, 2010. We generated total revenues of $1.72 billion for the year ended December 31, 2010.

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In November 2010, we acquired Qualitest, a leading United States based privately-held generics company. As a combined company, we expect to deliver more comprehensive healthcare solutions across our diversified businesses in Branded Pharmaceuticals, Generics, and Devices and Services in key therapeutic areas including pain and urology. Qualitest, the sixth largest U.S. generics company, as measured by prescriptions filled in the year ended December 31, 2010, is focused on cost-competitive, high-quality manufactured products with cost advantages or with high barriers to entry. We believe Qualitest brings critical mass to our current generics business, further diversifies our business lines and product offerings and enhances our portfolio of pain management products.

In July 2010, we completed our acquisition of HealthTronics, a provider of healthcare services and manufacturer of medical devices, primarily for the urology community. In September 2010, we acquired Penwest, a drug development company.

Financial information presented herein reflects the operating results of HealthTronics from July 2, 2010, Penwest from September 20, 2010, and Qualitest from November 30, 2010.

In February 2009, we completed our acquisition of Indevus, a specialty pharmaceutical company engaged in the acquisition, development and commercialization of products to treat conditions in urology, endocrinology and oncology. Indevus’ approved products include Sanctura^® and Sanctura XR^® for OAB, which are promoted in the United States by Allergan, Inc., Vantas^® for advanced prostate cancer, Supprelin^® LA for CPP, Delatestryl^® for the treatment of hypogonadism and Valstar^® for bladder cancer. We also acquired from Indevus a core urology and endocrinology portfolio containing multiple compounds in development including Aveed ^TM for hypogonadism and the octreotide implant for acromegaly and carcinoid syndrome. Financial information presented herein reflects the operating results of Indevus from February 23, 2009.

We have dedicated sales forces in the United States, consisting of 493 Endo pharmaceutical sales representatives and 228 sales contracted representatives focusing primarily on pain products, 81 Endo sales representatives focusing primarily on bladder and prostate cancer products, 34 Endo medical center representatives focusing on the treatment of central precocious puberty and 51 Endo account executives focusing on managed markets customers. We market our branded pharmaceuticals to primary care physicians and specialty physicians, including those specializing in pain management, orthopedics, neurology, rheumatology, surgery, anesthesiology, urology and pediatric endocrinology. Our sales force also targets retail pharmacies and other healthcare professionals throughout the United States.

2010—A Year in Review

During 2010, we achieved record revenues and further diversified our Branded Pharmaceuticals, Generics, and Devices and Services businesses in key therapeutic areas, including pain management and urology. We executed on our growth strategy by acquiring Qualitest, a leading generics pharmaceutical company and HealthTronics, a provider of healthcare services and manufacturer of medical devices primarily for the urology community. Our acquisition of Penwest contributed to our core pain management franchise and will permit us to maximize the value of our Opana^® ER franchise. Additionally, in December 2010, the FDA approved Fortesta^TM Gel as a treatment for men suffering from low testosterone (Low T), also known as hypogonadism. The approval of Fortesta^TM Gel reinforces our commitment to men’s health by providing an important new treatment option for millions of men with Low T. In 2010, we were committed to our strategy of delivering more comprehensive healthcare solutions across our diversified businesses.

Revenues for the year ended December 31, 2010 were $1.72 billion, a 17.5% increase over 2009, with net income attributable to Endo Pharmaceuticals Holdings Inc. in 2010 of $259.0 million, or $2.20 per diluted share, as compared to $266.3 million or $2.27 per diluted share in 2009. The increase in revenues was driven by organic growth in our branded pharmaceuticals product portfolio, including Lidoderm^®, Opana^® ER and Voltaren^® Gel, as well as our acquisitions of both HealthTronics and Qualitest, which contributed $102.1 million and $30.3 million, respectively, to our total 2010 revenue. Also included in 2010 are the revenues from the products we

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acquired, including Supprelin^® LA and other brands, resulting from our acquisition of Indevus. The full year of revenues from these products in 2010 compares to a partial year in 2009 as the revenue from Indevus was included from February 23, 2009 through December 31, 2009.

Business Environment

The Company conducts its business within the pharmaceutical and healthcare services industries, which are highly competitive and subject to numerous government regulations. Many competitive factors may significantly affect the Company’s sales of its products and services, including efficacy, safety, price and cost-effectiveness, marketing effectiveness, product labeling, quality control and quality assurance at our third-party manufacturing operations, and research and development of new products. To successfully compete for business in the healthcare industry, the Company must demonstrate that its products and services offer medical benefits as well as cost advantages. Currently, most of the Company’s products compete with other products already on the market in the same therapeutic category, and are subject to potential competition from new products that competitors may introduce in the future. The Company manufactures branded products, which are priced higher than generic products. Generic competition is one of the Company’s leading challenges. Similarly, the Company competes with other providers of the services we offer as well as providers of alternative treatments.

In the pharmaceutical industry, the majority of an innovative product’s commercial value is usually realized during the period that the product has market exclusivity. When a product loses exclusivity, it is no longer protected by a patent and is subject to new competing products in the form of generic brands. Upon exclusivity loss, the Company can lose a major portion of that product’s sales in a short period of time. Intellectual property rights have increasingly come under attack in the current healthcare environment. Generic drug firms have filed Abbreviated New Drug Applications (ANDAs) seeking to market generic forms of certain of the Company’s key pharmaceutical products, prior to expiration of the applicable patents covering those products. In the event the Company is not successful in defending the patent claims challenged in ANDA filings, the generic firms will then introduce generic versions of the product at issue, resulting in the potential for substantial market share and revenue losses for that product. For a complete description of legal proceedings, see Note 14 of the Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

The healthcare industry is subject to various government-imposed regulations authorizing prices or price controls that have and will continue to have an impact on the Company’s sales. The U.S. Congress and some state legislatures have considered a number of proposals and have enacted laws that could result in major changes in the current healthcare system, either nationally or at the state level. Driven in part by budget concerns, Medicaid access and reimbursement restrictions have been implemented in some states and proposed in many others. In addition, the Medicare Prescription Drug Improvement and Modernization Act provides outpatient prescription drug coverage to senior citizens in the United States. This legislation has had a modest favorable impact on the Company as a result of an increase in the number of seniors with drug coverage. At the same time, there continues to be a potential negative impact on the U.S. pharmaceutical business that could result from pricing pressures or controls.

The growth of Managed Care Organizations (MCOs) in the United States has increased competition in the healthcare industry. MCOs seek to reduce healthcare expenditures for participants by making volume purchases and entering into long-term contracts to negotiate discounts with various pharmaceutical providers. Because of the market potential created by the large pool of participants, marketing prescription drugs to MCOs has become an important part of the Company’s strategy. Companies compete for inclusion in MCO formularies and the Company generally has been successful in having its major products included. The Company believes that developments in the managed care industry, including continued consolidation, have had and will continue to have a generally downward pressure on prices.

Changes in the behavior and spending patterns of purchasers of health care products and services, including delaying medical procedures, rationing prescription medications, reducing the frequency of physician visits and foregoing health care insurance coverage, as a result of the current global economic downturn may impact the Company’s business.

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Pharmaceutical production processes are complex, highly regulated and vary widely from product to product. We contract with various third party manufacturers and suppliers to provide us with raw materials used in our products and finished goods. Our most significant agreements are with Novartis Consumer Health, Inc., Teikoku Seiyaku Co., Ltd., Mallinckrodt Inc., Noramco, Inc., Almac Pharma Services and Sharp Corporation. Shifting or adding manufacturing capacity can be a lengthy process that could require significant expenditures and regulatory approvals. If for any reason we are unable to obtain sufficient quantities of any of the finished goods or raw materials or components required for our products, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

The Company has maintained a competitive position in the market and strives to uphold this position, which is dependent on its success in discovering and developing innovative, cost-effective products that serve unmet medical need.

Healthcare Reform

On March 23, 2010, President Obama signed into law H.R. 3590, the Patient Protection and Affordable Care Act (PPACA), which will make major changes to the U.S. healthcare system. On March 30, 2010, the President signed H.R. 4872, the Health Care and Education Reconciliation Act of 2010 (Reconciliation Act), which included a package of changes to the PPACA, as well as additional elements to reform health care in the United States.

While some provisions of the new healthcare reform law go into effect this year, most of the provisions will not begin to be implemented until 2014 and beyond. Since implementation will be incremental to the enactment date of the law, there are still many challenges and uncertainties ahead. Such a comprehensive reform measure may require expanded implementation efforts on the part of federal and state agencies embarking on rule-making to develop the specific components of their new authority. The Company will monitor closely the implementation of the new law. In addition, the Company will continue to monitor attempts to repeal, replace, or defund the U.S. Health Reform Law. This effort will primarily take place on two fronts: 1) in Congress through attempts to pass legislation to overturn all or specific sections of the law and 2) in the Courts through attempts to have the law declared unconstitutional.

The passage of the PPACA and the Reconciliation Act will result in a transformation of the delivery and payment for health care services in the U.S. The combination of these measures will expand health insurance coverage to an estimated 32 million Americans. In addition, there are significant health insurance reforms that are expected to improve patients’ ability to obtain and maintain health insurance. Such measures include: the elimination of lifetime caps, no rescission of policies, and no denial of coverage due to preexisting conditions. The expansion of healthcare insurance and these additional market reforms should result in greater access to the Company’s products.

The overall impact from healthcare reform reflects a number of uncertainties. Nevertheless, we believe that changes to the Medicaid fee for service program and Medicaid Managed Care plans drove the bulk of our impact in 2010. There are a number of other provisions in the legislation that collectively are expected to have a small impact, including originator AMP for new formulations, the expansion of 340B pricing and the revision of the AMP definition (effective October 1, 2010) to remove physician class of trade. These various elements of healthcare reform adversely impacted our total revenues by approximately $20 million for the year ending December 31, 2010. Other elements will affect us during 2011. In particular, reducing the size of the donut hole in Medicare Part D coverage by 50% and the payment of an annual fee based on branded prescription drug sales to specific government programs will both have an incremental effect next year. As a result, the overall impact of Healthcare reform in 2011 is expected to increase compared to 2010.

In the United States, the Medicare Prescription Drug Improvement and Modernization Act of 2003 continues to provide an effective prescription drug benefit to seniors and individuals with disabilities in the Medicare program (Medicare Part D). Currently, uncertainty exists due to the healthcare reform legislation

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currently being considered by Congress. While these proposals have the potential to increase the number of U.S. residents with access to health care services, they also have the potential to impose new costs and increase pricing pressures on the pharmaceutical industry. Virtually all of the proposals seek to reduce significantly the number of uninsured Americans through a combination of private insurance market reforms, mandates on individuals to have health insurance coverage, and premium subsidies to individuals to assist in the purchase of healthcare insurance. Upon obtaining healthcare coverage, previously uninsured individuals are likely to consume more healthcare services, including pharmaceutical products. However, many of the legislative proposals being debated by Congress seek cost savings through additional pricing pressures on prescription products. For example, one proposal being considered would require the Secretary of Health and Human Services to negotiate Medicare Part D prescription drug prices directly with pharmaceutical manufacturers in order to leverage greater savings. Further, proposals to expand coverage to the uninsured may be financed through increased rebates or the imposition of a tax on the pharmaceutical industry. In addition to the federal debate on health care reform, many states are facing substantial budget difficulties due to the downturn in the economy and are expected to seek aggressive cuts or other offsets in healthcare spending. Accordingly, we expect pricing pressures at the federal and state levels to intensify, which could have a material effect on the consolidated results of operations, cash flows and/or financial position.

FDA advisory committee

The FDA held a public advisory committee meeting in June 2009 to discuss acetaminophen use in both over-the-counter (OTC) and prescription (Rx) products, the potential for liver injury, and potential interventions to reduce the incidence of liver injury. The panel’s recommendations followed the release in May 2009 of an FDA report that found severe liver damage, and even death, can result from a lack of consumer awareness that acetaminophen can cause such injury. These recommendations were advisory in nature and the FDA was not bound to follow these recommendations.

On January 14, 2011, the FDA announced in the Federal Register that it was taking steps to reduce the maximum amount of acetaminophen in prescription drug products, to help reduce or prevent the risk of liver injury from an unintentional overdose of acetaminophen. A variety of combination drug products include acetaminophen, such as those that contain the opioids oxycodone hydrochloride or hydrocodone bitartrate and acetaminophen, among others. Under additional authority granted to the FDA by the FDAAA, the FDA notified holders of approved NDA’s and ANDAs that they would be required to modify the labeling of prescription acetaminophen drug products to reflect new safety information about acetaminophen and liver toxicity. The FDA also announced that it was asking product sponsors to limit the maximum strength of acetaminophen per unit of the combination drug products to 325 mg over a three-year phase-out period. At the end of that period, the FDA could seek to withdraw those products that contain more than 325 mg of acetaminophen from the market. Among the products impacted by the FDA’s action are three Endo combination drug pain relief products: Percocet, Endocet and Zydone. These regulatory changes, or others required by the FDA, could have an adverse effect on our business, financial condition, results of operations, and cash flows.

Qualitest Acquisition

On November 30, 2010 (the Qualitest Acquisition Date), Endo completed its acquisition of all of the issued and outstanding capital stock of Generics International (US Parent), Inc (Qualitest) from an affiliate of Apax Partners, L.P. for approximately $769.4 million. In addition, Endo paid $406.8 million to retire Qualitest’s outstanding debt and related interest rate swap on November 30, 2010.

HealthTronics Acquisition

On July 2, 2010 (the HealthTronics Acquisition Date), the Company completed its initial tender offer for all outstanding shares of common stock of HealthTronics. On July 12, 2010, Endo completed its acquisition of HealthTronics for approximately $214.8 million in aggregate cash consideration for 100% of the outstanding

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shares, at which time HealthTronics became a wholly-owned subsidiary of the Company. The HealthTronics shares were purchased at a price of $4.85 per share. In addition, Endo paid $40 million to retire HealthTronics debt that had been outstanding under its senior credit facility. As a result of the acquisition, the HealthTronics senior credit facility was terminated.

Penwest Acquisition

On September 20, 2010 (the Penwest Acquisition Date), the Company completed its tender offer for the outstanding shares of common stock of Penwest, at which time Penwest became a majority-owned subsidiary of the Company. On November 4, 2010, we closed this acquisition immediately following a special meeting of shareholders of Penwest at which they approved the merger. We paid approximately $171.8 million in aggregate cash consideration. Penwest is now our wholly-owned subsidiary.

Pipeline Developments

In February 2011, the FDA requested that additional pre-clinical studies, including a carcinogenicity study, be completed prior to the submission of the NDA for the octreotide implant for the treatment of acromegaly. Although this development causes a delay of up to four years in the timing associated with regulatory approval, the Company intends to continue the development of this product and is encouraged by recent preliminary results from its Phase III study.

In addition, the Company recently assessed all of its in-process research and development assets and concluded, separately, to discontinue development of its octreotide implant for the treatment of carcinoid syndrome due to recent market research that indicates certain commercial challenges, including the expected rate of physician acceptance and the expected rate of existing patients willing to switch therapies.

In January 2011, the Company entered into a Discovery, Development and Commercialization Agreement (the 2011 Orion Agreement) with Orion Corporation (Orion) to exclusively co-develop products for the treatment of certain cancers and solid tumors. In January 2011, Endo exercised its option to obtain a license to jointly develop and commercialize Orion’s Anti-Androgen program focused on castration-resistant prostate cancer, one of Orion’s four contributed research programs, and made a corresponding payment to Orion for $10 million, which will be expensed in the first quarter of 2011.

In December 2010, the FDA approved Fortesta^TM Gel for the treatment of Low T, also known as hypogonadism. Endo expects to introduce Fortesta^TM Gel in the United States in early 2011.

In July 2010, we filed an NDA with the FDA for a new extended-release formulation of oxymorphone, which is a semi-synthetic opioid analgesic intended for the treatment of moderate to severe chronic pain in patients requiring continuous, around-the-clock opioid treatment for an extended period of time. The NDA submission is based on a non-clinical and clinical development program designed to demonstrate the crush-resistant properties of this formulation of oxymorphone. In January 2011, we received a complete response letter from the FDA. The FDA issues complete response letters to communicate that its initial review of an NDA or ANDA is complete and that the application cannot be approved in its present form. A complete response also informs applicants of changes that must be made before an application can be approved, with no implication regarding the ultimate approvability of the application. The letter did not require that additional clinical studies be conducted for approval of the NDA. We have begun to address the issue described in the complete response letter and will work closely with the FDA to finalize our response. We are confident that we can address the issue set forth, currently anticipate responding to the FDA by mid 2011 and would expect a six month review cycle once our response is filed.

In June 2010, the Company entered into a Development and Co-Promotion Agreement (the Impax Agreement) with Impax Laboratories, Inc. (Impax), whereby the Company was granted a royalty-free license for the co-exclusive rights to co-promote a next generation Parkinson’s disease product. Under the terms of the

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Impax Agreement, Endo paid Impax an upfront payment of $10 million, which was recorded as research and development expense for the year ended December 31, 2010. In addition, under the terms of the Impax agreement, Impax could potentially receive up to approximately $30 million in additional payments linked to the achievement of future clinical, regulatory, and commercial milestones related to the development product. Prior to the completion of Phase III trials, Endo may only terminate the Impax Agreement upon a material breach.

On December 2, 2009, we received a complete response letter from the FDA regarding Aveed^TM. In the complete response letter, the FDA has requested information from Endo to address the agency’s concerns regarding very rare but serious adverse events, including post-injection anaphylactic reaction and pulmonary oily microembolism. The letter also specified that the proposed REMS is not sufficient. We continue to evaluate how best to address the concerns of the FDA and intend to have future additional dialogue with the agency regarding a possible regulatory pathway.

In July 2009, we entered into a License, Development and Supply Agreement (Bioniche Agreement) with Bioniche Life Sciences Inc. and Bioniche Urology Inc. (collectively, Bioniche), whereby we licensed from Bioniche the exclusive rights to develop and market Bioniche’s proprietary formulation of Mycobacterial Cell Wall-DNA Complex (MCC), known as Urocidin^TM in the United States with an option for global rights. We exercised our option for global rights in the first quarter of 2010. Urocidin^TM is a patented formulation of MCC developed by Bioniche for the treatment of non-muscle-invasive bladder cancer that is currently undergoing Phase III clinical testing.

Branded Business Activity

In June 2010, the Company and Penwest settled litigation with both Impax and Sandoz, Inc. (Sandoz) regarding the production and sale of generic formulations of Opana^® ER (oxymorphone hydrochloride) Extended Release Tablets CII. The Company and Penwest have agreed to dismiss our suit with prejudice and Impax and Sandoz have agreed to dismiss their counterclaims with prejudice. Under the terms of the settlement, the Company and Penwest have agreed to grant Impax and Sandoz a license to the patents to sell a generic version of Opana^® ER on or after January 1, 2013 and September 15, 2012, respectively, and earlier under certain circumstances, and have agreed not to sue Impax or Sandoz under such patents.

Change in Directors and Executive Officers

On April 28, 2010, Clive A. Meanwell, M.D., Ph.D. notified us of his intent to not stand for reelection as a director of Endo at our 2010 Annual Meeting of Stockholders, so that he may better focus on his other professional responsibilities. Dr. Meanwell served as a director of the Company until the expiration of his term at our 2010 Annual Meeting of Stockholders.

On March 12, 2010, our Board of Directors appointed Julie H. McHugh as our Executive Vice President and Chief Operating Officer.

RESULTS OF OPERATIONS

The Company reported net income attributable to Endo Pharmaceuticals Holdings, Inc. for 2010 of $259.0 million or $2.20 per diluted share on total revenues of $1.72 billion compared with net income of $266.3 million or $2.27 per diluted share on total revenues of $1.46 billion for 2009.

Consolidated Results Review

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

Revenues

Revenues for the year ended December 31, 2010 increased 17.5% to $1.72 billion from $1.46 billion in the comparable 2009 period. This increase in revenues is primarily driven by organic growth in our branded

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pharmaceuticals product portfolio, including Lidoderm^®, Opana^® ER, and Voltaren^® Gel, as well as our 2010 acquisitions, including $102.1 million in revenues from HealthTronics and $30.3 million in revenues from Qualitest. Lastly, included in 2010 are the revenues from the products we acquired, including Supprelin^® LA and other brands, resulting from our acquisition of Indevus. The full year of revenues from these products in 2010 compares to a partial year in 2009 as the revenue from Indevus was included from February 23, 2009 through December 31, 2009. For the year-ended December 31, 2010, sales growth was essentially volume driven, while price fluctuations had no material impact.

The following table displays our revenues by product category and as a percentage of total revenues for the years ended December 31 (dollars in thousands):

	2010				2009
	$		%		$		%
Lidoderm®		782,609		46	$	763,698		52
Opana® ER and Opana®		299,080		17		230,631		16
Percocet®		121,347		7		127,090		9
Voltaren® Gel		104,941		6		78,868		5
Frova®		59,299		3		57,924		4
Supprelin® LA		46,910		3		27,822		2
Other brands		53,386		3		50,077		3
Total brands*		1,467,572		86		1,336,110		91
Total generics		146,513		9		124,731		9
Total devices and service revenue		102,144		6		—		—
Total revenues*		1,716,229		100	$	1,460,841		100

* – Percentages may not add due to rounding.

Lidoderm^®. Net sales of Lidoderm^® for the year ended December 31, 2010 increased by $18.9 million or 2% to $782.6 million from $763.7 million in the comparable 2009 period. The growth of this product has slowed, in recent years, as it matures and competition in the topical pain market increases. Notwithstanding, the product has had a solid performance this year and continues to generate strong cash flow that we can use to invest in our business to continue to further diversify our revenue base.

Opana^® ER and Opana^®. Net sales of Opana^® ER and Opana^® for the year ended December 31, 2010 increased by 30% or $68.4 million to $299.1 million from $230.6 million in the comparable 2009 period. The growth in net sales is primarily attributable to continued prescription and market share growth of the products. In addition, our strategy to effectively contract with managed care organizations has resulted in increases in volume as we have broadened our access for the brand.

Percocet^®. Net sales of Percocet^® for the year ended December 31, 2010 decreased by $5.7 million or 5% to $121.3 million from $127.1 million in the comparable 2009 period. The decrease is primarily attributable to decreased volumes during 2010 as compared to 2009, partially offset by price increases.

Voltaren^® Gel. Net sales of Voltaren^® Gel for the year ended December 31, 2010 increased by $26.1 million or 33% to $104.9 million from $78.9 million in the comparable 2009 period. The increase was driven by volume. The Company launched Voltaren^® Gel in March 2008. We believe the growth of Voltaren^® Gel since its launch is driven by improved formulary positioning with MCOs, and the product’s proven clinical efficacy combined with our continued promotional activities aimed at increasing product awareness in the target audience. We believe we are establishing a strong position in the osteoarthritis market with Voltaren^® Gel.

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Frova^®. Net sales of Frova^® for the year ended December 31, 2010 increased by $1.4 million or 2% to $59.3 million from $57.9 million in the comparable 2009 period. The growth in net sales is primarily attributable to price increases, partially offset by decreases in volume.

Supprelin^® LA. Net sales of Supprelin^® LA during 2010 increased by $19.1 million or 69% from the comparable 2009 period. This increase was driven primarily by volume growth in 2010, as well as a full twelve months of activity in 2010 compared to a partial period in 2009. In 2010, volume growth was driven primarily by an increase in new patient starts and a growing base of continued care patients. We believe this growth is largely due to a strong base of national opinion leader support and ongoing efforts to streamline the treatment initiation process.

Other brands. Net sales of our other branded products for the year ended December 31, 2010 increased by $3.3 million or 7% to $53.4 million from $50.1 million in the comparable 2009 period. This increase is primarily attributable to a full year of royalty revenue from Sanctura^® and Sanctura XR^® compared to approximately ten months in 2009.

Generics. Net sales of our generic products for the year ended December 31, 2010 increased by $21.8 million or 17% to $146.5 million from $124.7 million in the comparable 2009 period. This increase was primarily driven by our acquisition of Qualitest on November 30, 2010, which contributed $30.3 million of net sales of generic products in 2010. This increase was partially offset by a shortage of other competing generic opioids in the market during the first half of 2009, which was an anomaly and did not recur to the same extent during 2010.

Device and service revenues. Device and service revenues were $102.1 million during the year ended December 31, 2010. This amount consists of revenues from the acquisition of HealthTronics.

Gross Margin, Costs and Expenses

The following table sets forth costs and expenses for the years ended December 31 (dollars in thousands):

	2010					2009
	$		% of revenues			$			% of revenues
Cost of revenues	$	504,757		29	%	$	375,058			26	%
Selling, general and administrative		547,605		32	%		534,523			37	%
Research and development		144,525		8	%		185,317			13	%
Impairment of other intangible assets		35,000		2	%		69,000			5	%
Acquisition-related items		18,976		1	%		(93,081	)		(6	)%
Total costs and expenses*	$	1,250,863		73	%	$	1,070,817			73	%

* – Percentages may not add due to rounding.

Costs of Revenues and Gross Margin

Costs of revenues for the year ended December 31, 2010 increased by $129.7 million or 35%, to $504.8 million from $375.1 million in the comparable 2009 period, primarily due to increased revenues in 2010. Gross profit margins were 71% for the year ended December 31, 2010 compared with 74% during the year ended December 31, 2009. The reduction in gross profit margin in 2010 is primarily due to the acquisitions of HealthTronics and Qualitest, which have contributed a lower gross profit margin percentage than Endo’s branded pharmaceuticals net sales relative to total revenues. Gross profit margin has also been unfavorably impacted by the increased amortization expense in 2010 compared to the 2009 period as a result of our recent acquisitions, including a full twelve months of amortization on the acquired Indevus intangible assets. Lastly, gross profit margin was negatively impacted by the increase in royalty expense recorded on net sales of Opana^® ER during

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2010 compared to the 2009 period, as a result of the expiration of the 50% royalty holiday during the three months ended March 31, 2010, partially offset by the elimination of this royalty obligation in the latter portion of the year, subsequent to our acquisition of Penwest. This royalty, however, was no longer payable beginning on September 20, 2010 as a result of the acquisition of Penwest.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the year ended December 31, 2010 increased by 2% to $547.6 million from $534.5 million in the comparable 2009 period. The increase in selling, general and administrative expenses for 2010 compared to 2009 is primarily attributable to increased expenses as a result of our acquisitions of HealthTronics, Qualitest, and Penwest of $24.7 million as well as $10.1 million of certain costs incurred in connection with continued efforts to enhance the cost structure of the Company, and $6.7 million in start-up costs associated with our contract sales organization. These amounts were partially offset by a reduction in selling, general and administrative expenses from Indevus in 2010 compared to 2009 resulting from further integration of Indevus into our operations during 2010, the favorable impact of certain cost reduction initiatives, and the timing of certain sales and marketing programs.

Research and Development Expenses

Research and development expenses for the year ended December 31, 2010 decreased by 22% to $144.5 million from $185.3 million in the comparable 2009 period. This decrease is primarily a result of lower upfront and milestone payments in 2010, as compared to 2009.

Impairment of Other Intangible Assets

In May 2010, Teva Pharmaceutical Industries Ltd. terminated the pagoclone development and licensing arrangement with the Company upon the completion of the Phase IIb study. As a result, the Company concluded that there was a decline in the fair value of the corresponding indefinite-lived intangible asset. Accordingly, we recorded a $13.0 million impairment charge during the year ended December 31, 2010. As part of our annual review of all in-process research and development assets, we conducted an in-depth review of both octreotide indications. This review covered a number of factors including the market potential of each product given its stage of development, taking into account, among other things, issues of safety and efficacy, product profile, competitiveness of the marketplace, the proprietary position of the product and its potential profitability. Our review resulted in no impact to the carrying value of our octreotide – acromegaly intangible asset. However, the analysis identified certain commercial challenges with respect to the octreotide – carcinoid syndrome intangible asset including the expected rate of physician acceptance and the expected rate of existing patients willing to switch therapies. Upon analyzing the Company’s R&D priorities, available resources for current and future projects, and the commercial potential for octreotide – carcinoid syndrome, the Company has decided to discontinue development of octreotide for the treatment of carcinoid syndrome. As a result of the above developments, the Company recorded a pre-tax non-cash impairment charge of $22.0 million for the year ended December 31, 2010, to write-off, in its entirety, the octreotide – carcinoid syndrome intangible asset. This compares to a $65.0 million impairment charge relating to the write-down of our Aveed^TM indefinite-lived intangible asset and a $4.0 million write-off of our Pro2000 indefinite-lived intangible asset in 2009. However, due to the unsuccessful Phase III clinical trials for Pro2000, which were completed in December of 2009, the Company concluded there was no further value or alternative use associated with this indefinite-lived asset. As a result of the FDA’s response letter received in December of 2009, the Company reassessed the fair value of our Aveed^TM indefinite-lived intangible asset and concluded that the asset was impaired due to a change in probability of approval, relative timing of commercialization and the changes to the targeted population of eligible recipients. The extent of the impairment was partially offset due to the Company being notified that the U.S. patent office had issued a Notice of Allowance on a patent covering the Aveed^TM formulation. The patent should expire no earlier than late 2025.

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Acquisition-Related Items

Acquisition-related items for the year ended December 31, 2010 were $19.0 million in expense compared to $93.1 million of income in 2009. Acquisition-related items in 2010 primarily consisted of transaction fees of $70.4 million, including legal, separation, integration, and other expenses for our 2010 acquisitions, partially offset by favorable changes in the fair value of the acquisition-related contingent consideration of $51.4 million, which was recorded as a gain. The change in the fair value of the acquistion-related contingent consideration was primarily due to management’s current assessment that it will not be obligated to make contingent consideration payments based on the anticipated timeline for the NDA filing and FDA approval of octreotide for the treatment of acromegaly. This compares to $93.1 million in income in the comparable 2009 period, in which we incurred $35.0 million of acquisition-related costs which were attributable to transaction fees, professional service fees, employee retention and separation arrangements and other costs related to the Indevus acquisition. These costs were more than offset by favorable changes in the fair value of the acquisition-related contingent consideration which resulted in a gain of $128.1 million during the year ended December 31, 2009.

Interest Expense (Income), net

The components of interest expense, net for the years ended December 31 are as follows (in thousands):

	2010			2009
Interest expense	$	47,956		$	41,247
Interest income		(1,355	)		(3,529	)
Interest expense, net	$	46,601		$	37,718

Interest expense for the year ended December 31, 2010 was $48.0 million compared with $41.2 million for the comparable period in 2009. This increase is primarily due to $8.5 million of interest expense resulting from the $800 million of indebtedness the Company incurred in November of 2010. Interest income decreased to $1.4 million for the year ended December 31, 2010 compared to $3.5 million in the comparable 2009 period. This decrease is a result of the fluctuations in the amount of cash invested in interest-bearing accounts, including our money market funds and auction-rate securities, as well as the yields on those investments.

Other Income, net

The components of other expense, net for the years ended December 31 are as follows (in thousands):

	2010			2009
Gain on trading securities		(15,420	)		(15,222	)
Loss on auction-rate securities rights		15,659			11,662
Other (income) expense		(2,172	)		231
Other income, net	$	(1,933	)	$	(3,329	)

During 2010, the value of our trading auction-rate securities increased by $15.4 million. The increase in fair value was more than offset by losses recorded as a result of decreases in the fair value of our auction-rate securities rights totaling $15.7 million. These changes were primarily a result of the Company exercising the auction-rate securities rights in the second quarter of 2010 and liquidating our outstanding UBS AG (UBS) auction-rate security portfolio at par value. During 2009, the value of our trading auction-rate securities increased by $15.2 million, which was partially offset by losses recorded as a result of decreases in the fair value of our auction-rate securities rights totaling $11.7 million.

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Income Tax

Income tax expense for the year ended December 31, 2010 increased by 43% to $133.7 million from $93.3 million in the comparable 2009 period. The increase in income tax expense is due to the increase in income before income tax as compared to 2009, as well as the increase in our effective income tax rate to 31.8% from 25.9% in 2009. The increase in the effective income tax rate is primarily the result of a smaller favorable impact related to changes in the fair value of acquisition related contingent consideration of $15.7 million in 2010, compared to $40.5 million in 2009. These impacts resulted from non-taxable reductions in the fair value of contingent consideration of $44.8 million in 2010, compared to $115.7 million in 2009. The increase in rate was also impacted by an increase in non-deductable transaction costs, which unfavorably impacted 2010 income tax expense by $9.6 million, compared to $3.3 million in 2009. These increases were partially offset by the impact of the noncontrolling interests in our consolidated limited partnerships and limited liability companies assumed with the HealthTronics acquisition, as they are not taxable to Endo and favorably impacted 2010 income tax expense by $9.8 million.

2011 Outlook

We estimate that our 2011 total revenues will be between $2.35 billion and $2.45 billion. Our estimate is based on the continued growth of both our generic and branded product portfolios, driven by ongoing prescription demand for our key inline products, including Lidoderm^®, Opana^® ER, and Voltaren^® Gel, and by new revenues from launching Fortesta^TM Gel as well as the full-year effect of our acquisitions of HealthTronics and Qualitest. Cost of revenues as a percent of total revenues is expected to increase when compared to 2010. This increase is expected due to a full year of amortization expense associated with the intangible assets acquired with HealthTronics and Qualitest as well as a full year’s change in mix of revenues as a result of the Qualitest, HealthTronics, and Penwest acquisitions. Selling, general and administrative expenses, as a percentage of revenues, are expected to decline in 2011, relative to 2010, reflecting new approaches to customer segmentation and marketing, annualized effects of the prior year’s cost reduction efforts and forecasted synergies associated with our 2010 acquisitions. Absolute selling, general and administrative expenses, however, will increase, reflecting the full year effects of our acquisitions. As well, we will continue to provide promotional support behind our key on-market products. Research and development expenses are expected to increase due to the addition of Qualitest’s research and development portfolio to our existing programs, the progress of our branded pharmaceutical portfolio’s development, as well as the expansion of our efforts in the pharmaceutical discovery and device research and development areas. Of course, there can be no assurance that the Company will achieve these results.

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

Revenues

Revenues for the year ended December 31, 2009 increased 16% to $1.46 billion from $1.26 billion in the comparable 2008 period. This increase in revenues is primarily driven by increased sales of Opana^® ER and Opana^®, and Voltaren^® Gel, a topical drug added to our portfolio in March 2008. Additionally, new products from our acquisition of Indevus, included in other brands, accounted for 4% of total revenues at December 31, 2009. Lidoderm^® net sales as a percent of total revenues have decreased from 61% of total revenues at December 31, 2008 to 52% of total revenues at December 31, 2009. We expect this trend to continue as we continue to diversify our product portfolio. For the year-ended December 31, 2009, increased sales volume contributed 12% of the total revenue growth while price increases contributed the remaining 4%.

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The following table displays our revenues by product category and as a percentage of total revenues for the years ended December 31 (dollars in thousands):

	2009				2008
	$		%		$		%
Lidoderm®	$	763,698		52	$	765,097		61
Opana® ER and Opana®		230,631		16		180,429		14
Percocet®		127,090		9		129,966		10
Voltaren® Gel		78,868		5		23,791		2
Frova®		57,924		4		58,017		5
Supprelin® LA		27,822		2		—		—
Other brands		50,077		3		10,904		1
Total brands*		1,336,110		91		1,168,204		93
Total generics		124,731		9		92,332		7
Total revenues*	$	1,460,841		100	$	1,260,536		100

* – Percentages may not add due to rounding.

Lidoderm^®. Net sales of Lidoderm^® for the year ended December 31, 2009 decreased by $1.4 million to $763.7 million from $765.1 million in the comparable 2008 period. The growth of this product has slowed as it matures and competition in the topical pain market increases. Notwithstanding, the product has had a solid performance this year and continues to generate strong cash flow that we can use to invest in our business to continue to further diversify our revenue base.

Opana^® ER and Opana^®. Net sales of Opana^® ER and Opana^® for the year ended December 31, 2009 increased by 28% or $50.2 million to $230.6 million from $180.4 million in the comparable 2008 period. The growth in net sales is primarily attributable to continued prescription and market share growth of the products, as we continue to drive our promotional efforts through physician targeting. In addition, our strategy to effectively contract with managed care organizations has resulted in increases in volume as we have broadened our access for the brand.

Percocet^®. Net sales of Percocet^® for the year ended December 31, 2009 decreased by $2.9 million or 2% to $127.1 million from $130.0 million in the comparable 2008 period.

Voltaren^® Gel. Net sales of Voltaren^® Gel for the year ended December 31, 2009 increased by $55.1 million or 232% to $78.9 million from $23.8 million in the comparable 2008 period. The Company launched Voltaren^® Gel in March 2008. This increase reflects a full year of activity versus a partial year of sales in the comparable 2008 period. Additionally, we believe the growth of Voltaren^® Gel since its launch is driven by the product’s proven clinical efficacy combined with our continued promotional activities aimed at increasing product awareness in the target audience. We believe we are establishing a strong position in the osteoarthritis market with Voltaren^® Gel.

Frova^®. Net sales of Frova^® for the year ended December 31, 2009 remained relatively unchanged at $57.9 million compared to $58.0 million in 2008.

Supprelin^® LA. Net sales of Supprelin^® LA during 2009 were $27.8 million. The Company began selling Supprelin^® LA in February 2009 upon our acquisition of Indevus.

Other brands. Net sales of our other branded products for the year ended December 31, 2009 increased by $39.2 million or 359% to $50.1 million from $10.9 million in the comparable 2008 period. This increase is primarily driven by net sales of Vantas^®, acquired from Indevus during 2009. Net sales of Vantas^® from the

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acquisition date through December 31, 2009 were $20.0 million. Also contributing to this increase was royalty income, primarily from Sanctura^® and Sanctura XR^®, of $9.3 resulting from our acquisition of Indevus in February 2009.

Generics . Net sales of our generic products for the year ended December 31, 2009 increased by $32.4 million or 35% to $124.7 million from $92.3 million in the comparable 2008 period. The 2009 increase was primarily due to a shortage of other competing generic opioids in the market during the first half of 2009. The supply of these generic products has largely returned to normal levels in the second half of 2009.

Gross Margin, Costs and Expenses

The following table sets forth costs and expenses for the years ended December 31 (dollars in thousands):

	2009						2008
	$			% of revenues			$			% of revenues
Cost of revenues	$	375,058			26	%	$	267,235			21	%
Selling, general and administrative		534,523			37	%		488,063			38	%
Research and development		185,317			13	%		110,211			9	%
Acquisition-related items		(93,081	)		(6	)%		—			—	%
Impairment of other intangible assets		69,000			5	%		8,083			1	%
Purchased in-process research and development		—			—	%		(530	)		*	%
Total costs and expenses**	$	1,070,817			73	%	$	873,062			69	%

* – amount less than 1%.

** – Percentages may not add due to rounding.

Costs of Revenues and Gross Margin

Costs of revenues for the year ended December 31, 2009 increased by $107.9 million or 40%, to $375.1 million from $267.2 million in the comparable 2008 period. Gross profit margins were 74% for the year ended December 31, 2009 compared with 79% during the year ended December 31, 2008. The decrease in the gross margin is primarily due to a $32.1 million increase in intangible asset amortization expense mainly related to the increase in intangible assets acquired as part of the Indevus acquisition during the first quarter of 2009. In addition, cost of revenues includes an additional $19.3 million for royalties on sales of Opana^® ER for the year ended December 31, 2009 compared to $5.0 million for the comparable 2008 period. Furthermore, as part of our acquisition of Indevus, we were required to fair value the acquired inventories which has resulted in the recognition of an additional $11.3 million in cost of revenues for the year ended December 31, 2009 which has negatively impacted our gross profit margin.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the year ended December 31, 2009 increased by 10% to $534.5 million from $488.1 million in the comparable 2008 period. This increase is primarily due to the acquisition of Indevus during the first quarter of 2009 which contributed approximately $63 million or 13% of the increase. These amounts were partially offset by the favorable impact of certain cost reduction initiatives and the timing of certain sales and marketing programs.

Research and Development Expenses

Research and development expenses for the year ended December 31, 2009 increased by 68% to $185.3 million from $110.2 million in the comparable 2008 period. Research and development expense reflects the Company’s ongoing commitment to clinical research as well as the impact of the Company’s external collaborations. The increase in expense for the year ended December 31, 2009 when compared to the same

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period in 2008 is primarily attributable to the upfront payments of $10.0 million and $20.0 million made to ProStrakan and Bioniche, respectively; and $34.7 million of upfront and milestone payments made to Grünenthal related to axomadol, all of which were expensed during the year ended December 31, 2009. During 2008, we incurred upfront milestone payments of $8.9 million.

Acquisition-Related Items

As a result of our acquisition of Indevus in the first quarter of 2009, we incurred acquisition-related costs of $35.0 million attributable to transaction fees, professional service fees, employee retention and separation arrangements, and other costs related to the acquisition. These costs were more than offset by favorable changes in the fair value of the acquisition-related contingent consideration which resulted in a gain of $128.1 million during the year ended December 31, 2009.

Impairment of Other Intangible Assets

During the year ended December 31, 2009, we recorded an impairment charge of $65.0 million relating to the write-down of our Aveed^TM indefinite-lived intangible asset and a $4.0 million write-off of our Pro2000 indefinite-lived intangible asset. As a result of the FDA’s response letter received in December of 2009, the Company reassessed the fair value of our Aveed^TM indefinite-lived intangible asset and concluded that the asset was impaired due to a change in probability of approval, relative timing of commercialization and the changes to the targeted population of eligible recipients. The extent of the impairment was partially offset due to the Company being notified that the U.S. patent office had issued a Notice of Allowance on a patent covering the Aveed^TM formulation. The patent should expire no earlier than late 2025. However, due to the unsuccessful Phase III clinical trials for Pro2000, which were completed in December of 2009, the Company concluded there was no further value or alternative use associated with this indefinite-lived asset. During the year ended December 31, 2008, as a result of our decision to discontinue the development of Rapinyl^TM, we recorded an impairment charge in the amount of $8.1 million to write-off the remaining balance of our Rapinyl^TM intangible asset.

Purchased In-Process Research and Development

Purchased in-process research and development in 2008 reflects the reversal of a contingent payment liability originally recorded upon the acquisition of RxKinetix in 2006.

Interest Expense (Income), net

The components of interest expense (income), net for the years ended December 31 are as follows (in thousands):

	2009			2008
Interest expense	$	41,247		$	18,726
Interest income		(3,529	)		(24,833	)
Interest expense (income), net	$	37,718		$	(6,107	)

Interest expense for the year ended December 31, 2009 was $41.2 million compared with $18.7 million for the comparable period in 2008. This increase is primarily due to interest expense recognized on the Non-recourse notes and the 6.25% Convertible senior notes due July 2009 assumed from Indevus (the Indevus Notes). Additionally, the increase in interest expense reflects a full year of debt discount accretion and interest expense relating to our 1.75% Convertible Senior Subordinated Notes due 2015 (the Convertible Notes) for the year ended December 31, 2009 compared to approximately eight months for the year ended December 31, 2008. Interest income decreased to $3.5 million for the year ended December 31, 2009 compared to $24.8 million in the comparable 2008 period. This decrease is a result of the fluctuations in the amount of cash invested in interest-bearing accounts, including our money market funds and auction-rate securities and the yields on those

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investments. During the first half of 2008, as a result of uncertainties in the global credit markets, the auction-rate securities market became illiquid and since that time, yields on these securities have decreased significantly.

Other (Income) Expense, net

The components of other (income) expense, net for the years ended December 31 are as follows (in thousands):

	2009			2008
Other-than-temporary impairment of auction-rate securities	$	—		$	26,417
Unrealized (gain) loss on trading securities		(15,222	)		4,225
Loss (gain) on Auction-Rate Securities Rights		11,662			(27,321	)
Other		231			(1,568	)
Other (income) expense, net	$	(3,329	)	$	1,753

During the fourth quarter of 2008, the Company recorded a $26.4 million other-than-temporary impairment charge related to certain of its auction-rate securities and upon accepting the UBS Offer of auction-rate securities rights, the Company made a one-time election to transfer these auction-rate securities out of the available-for-sale category and into the trading category. As such, the change in the fair value of these securities is now charged to earnings. During the year ended December 31, 2009, the value of our trading auction-rate securities increased by $15.2 million. The increases in fair value were partially offset by losses recorded as a result of decreases in the fair value of our auction-rate securities rights totaling $11.7 million.

Gain on Extinguishment of Debt

As a result of the cash tender offer for any and all outstanding Non-recourse notes, which closed in September 2009, the Company accepted for payment and purchased Non-recourse notes at a purchase price of $1,000 per $1,000 principal amount, for a total amount of approximately $48 million (excluding accrued and unpaid interest up to, but not including, the payment date for the Notes, fees and other expenses in connection with the tender offer). The aggregate principal amount of Non-recourse notes purchased represents approximately 46% of the $105 million aggregate principal amount of Non-recourse notes that were outstanding prior to the tender offer closing. Accordingly, the Company recorded a $4.0 million gain on the extinguishment of debt, net of transaction costs. The gain was calculated as the difference between the aggregate amount paid to purchase the Non-recourse notes and their carrying amount.

Income Tax

Income tax expense for the year ended December 31, 2009 decreased by 32% to $93.3 million from $136.5 million in the comparable 2008 period. The decrease in income tax expense is primarily a result of a decrease in our effective tax rate. Our effective tax rate for the year ended December 31, 2009 decreased to 26.0% from 34.8% in 2008. The decrease in the effective income tax rate is primarily the result of a reduction in the Indevus contingent consideration of $128.1 million during the year ended December 31, 2009, of which $115.7 million was non-taxable resulting in a favorable impact on the effective tax rate. The decrease in the Company’s effective income tax rate is also attributable to a decrease in the Company’s state effective tax rate, which was due primarily to Pennsylvania state income tax law changes enacted in the fourth quarter of 2009 and further integration of Indevus into our state tax profile. These decreases in the Company’s effective income tax rate were partially offset by lower tax exempt interest income compared to 2008, the absence of tax benefits realized in 2008 for the reversal of certain of the Company’s unrecognized tax contingencies, for the settlement of various tax positions, as well as the transaction costs incurred for the acquisition of Indevus in 2009 which were determined to be non-deductible.

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Business Segment Results Review

As a result of our recent acquisitions, the Company has realigned its internal management reporting to reflect a total of three reportable segments. These segments reflect the level at which executive management regularly reviews financial information to assess performance and to make decisions about resources to be allocated.

The three reportable business segments in which the Company now operates include: (1) Branded Pharmaceuticals, (2) Generics and (3) Devices and Services. Each segment derives revenue from the sales or licensing of their respective products or services and is discussed below.

Branded Pharmaceuticals

This group of products includes a variety of branded prescription products related to treating and managing pain as well as our urology, endocrinology and oncology products. The established products that are included in this operating segment includes Lidoderm^®, Opana^® ER and Opana^®, Percocet^®, Voltaren^® Gel, Frova^®, Supprelin^® LA, Vantas^®, Valstar^®.

Generics

This segment is comprised of our legacy Endo non-branded generic portfolio and the portfolio from our newly acquired Qualitest business. Our generics business has historically focused on selective generics related to pain that have one or more barriers to market entry, such as complex formulation, regulatory or legal challenges or difficulty in raw material sourcing. With the addition of Qualitest, the segment’s product offerings now include products in the pain management, urology, central nervous system (CNS) disorder, immunosuppression, oncology and hypertension markets.

Devices and Services

The Devices and Services operating segment provides urological services, products, and support systems to urologists, hospitals, surgery centers and clinics across the United States. These services and products are sold through the following five business lines: Lithotripsy services, Prostate treatment services, Radiation therapy services, Anatomical pathology services, and Medical products manufacturing, sales and maintenance. These business lines are discussed in greater detail within Note 5 of the Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

In 2010, the Company began to evaluate segment performance based on each segment’s adjusted income (loss) before tax. We define adjusted income (loss) before tax as income (loss) before tax before certain upfront and milestone payments to partners, acquisition-related items, cost reduction initiatives, asset impairment charges, amortization of commercial intangible assets related to marketed products, inventory step-up recorded as part of our acquisitions, and certain other items that the Company believes do not reflect its core operating performance.

Certain corporate general and administrative expenses are not allocated and are therefore included within Corporate unallocated. We calculate consolidated adjusted income (loss) before tax by adding the adjusted income (loss) before tax of each of our reportable segments to corporate unallocated adjusted income (loss) before tax.

Endo refers to adjusted income (loss) before tax in making operating decisions because it believes it provides meaningful supplemental information regarding the Company’s operational performance. For instance, Endo believes that this measure facilitates its internal comparisons to its historical operating results and

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comparisons to competitors’ results. The Company believes this measure is useful to investors in allowing for greater transparency related to supplemental information used by Endo in its financial and operational decision-making. In addition, Endo has historically reported similar financial measures to its investors and believes that the inclusion of comparative numbers provides consistency in its financial reporting at this time. Further, Endo believes that adjusted income (loss) before tax may be useful to investors as it is aware that certain of its significant stockholders utilize adjusted income (loss) before tax to evaluate its financial performance. Finally, adjusted operating income (loss) is utilized in the calculation of adjusted diluted net income per share, which is used by the Compensation Committee of Endo’s Board of Directors in assessing the performance and compensation of substantially all of its employees, including its executive officers.

There are limitations to using financial measures such as adjusted income (loss) before tax. Other companies in our industry may define adjusted income (loss) before tax differently than we do. As a result, it may be difficult to use adjusted income (loss) before tax or similarly named adjusted financial measures that other companies may use to compare the performance of those companies to our performance. Because of these limitations, adjusted income (loss) before tax should not be considered as a measure of the income generated by our business or discretionary cash available to us to invest in the growth of our business. The Company compensates for these limitations by providing reconciliations of our consolidated adjusted income (loss) before income tax to our consolidated operating income and our consolidated income before tax, which are determined in accordance with U.S. GAAP and included in our Consolidated Statements of Operations in our Consolidated Financial Statements included in this Annual Report on Form 10-K.

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

Revenues

The following table displays our revenue by reportable segment and as a percentage of total revenues for 2010 and 2009 (dollars in thousands):

	2010		2009
Branded Pharmaceuticals	$	1,467,572	$	1,336,110
Generics		146,513		124,731
Devices and Services		102,144		—
Total revenues	$	1,716,229	$	1,460,841

Branded Pharmaceuticals. Net sales during 2010 increased 10% to $1,467.6 million from $1,336.1 million in 2009. This increase was primarily driven by increased revenues of Lidoderm^®, Opana^® ER and Opana^® and Voltaren^® Gel. Also, included in the 2010 amount are the full year revenues from the products we acquired, including Supprelin^® LA and other brands, from Indevus. This compares to a partial year in 2009 as the revenue from Indevus products was included from February 23, 2009 through December 31, 2009.

Generics. Net sales during 2010 increased 17% to $146.5 million from $124.7 million in 2009. This increase was primarily driven by our acquisition of Qualitest in November 2010, which contributed $30.3 million of net sales to our Generics segment in 2010. This increase was partially offset by a shortage of other competing generic opioids in the market during the first half of 2009, which was an anomaly and did not recur to the same extent during 2010.

Devices and Services. Revenue during 2010 was $102.1 million. This amount consists entirely of revenues from the acquisition of HealthTronics in July 2010.

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Adjusted income (loss) before tax

The following table displays our adjusted income (loss) before tax by reportable segment and as a percentage of total revenues for 2010 and 2009 (dollars in thousands).

	2010			2009
Branded Pharmaceuticals	$	757,453		$	642,997
Generics		24,722			28,557
Devices and Services		35,538			—
Corporate unallocated		(194,459	)		(174,994	)
Total income before income taxes	$	623,254		$	496,560

Branded Pharmaceuticals. Adjusted income (loss) before income tax during 2010 increased 18% to $757.5 million from $643.0 million in 2009. This increase was primarily driven by increased revenues from our Branded Pharmaceuticals segment as well as decreases in operating expenses as a result of companywide cost reduction initiatives, particularly related to sales and marketing.

Generics. Adjusted income (loss) before income tax during 2010 decreased 13% to $24.7 million from $28.6 million in 2009. This decrease was primarily driven by the operating expenses related to our acquisition of Qualitest in November 2010, as well as investments that the company is making in the legacy Endo generics portfolio. These amounts were partially offset by increased revenues from our Generics business in 2010 compared to 2009.

Devices and Services. Adjusted income (loss) before income tax during 2010 was $35.5 million. This amount consists entirely of the operating results of HealthTronics, which we acquired in July 2010.

Corporate unallocated. Corporate unallocated adjusted loss before tax during 2010 increased 11% to $194.5 million from $175.0 million in 2009. Corporate unallocated adjusted loss before tax as a percent of consolidated total revenues decreased to 11.3% in 2010 compared to 12.0% in 2009. These fluctuations were primarily driven by the continued growth of the business in 2010, partially offset by the favorable impact of companywide cost reduction initiatives.

Reconciliation to GAAP. The table below provides reconciliations of our consolidated adjusted income (loss) before income tax to our consolidated operating income and our consolidated income before tax, which are determined in accordance with U.S. GAAP, for the years ended December 31, 2010 and 2009 (in thousands):

	Twelve Months Ended December 31,
	2010			2009
Total consolidated adjusted income (loss) before tax	$	623,254		$	496,560
Upfront and milestone payments to partners		(23,850	)		(77,099	)
Acquisition-related items		(18,976	)		93,081
Cost reduction initiatives		(17,245	)		(2,549	)
Asset impairment charges		(35,000	)		(69,000	)
Amortization of commercial intangible assets related to marketed products		(83,974	)		(62,931	)
Inventory step-up		(6,289	)		(11,268	)
Purchased in-process research and development		—			—
Non-cash interest expense		(16,983	)		(14,719	)
Other (expense) income		(239	)		3,560
Gain on extinguishment of debt		—			4,025
Total consolidated income before income tax	$	420,698		$	359,660

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

Revenues

The following table displays our revenue by reportable segment and as a percentage of total revenues for 2009 and 2008 (dollars in thousands).

	2009		2008
Branded Pharmaceuticals	$	1,336,110	$	1,168,204
Generics		124,731		92,332
Total revenues	$	1,460,841	$	1,260,536

Branded Pharmaceuticals. Net sales during 2009 increased 14% to $1,336.1 million from $1,168.2 million in the comparable 2008 period. This increase in revenues is primarily driven by increased sales of Opana^® ER and Opana^®, and Voltaren^® Gel. Additionally, new products from our acquisition of Indevus in February 2009, included in other brands, accounted for 4% of total revenues at December 31, 2009.

Generics. Net sales during 2009 increased 35% to $124.7 million from $92.3 million in the comparable 2008 period. The 2009 increase was primarily due to a shortage of other competing generic opioids in the market during the first half of 2009. The supply of these generic products largely returned to normal levels in the second half of 2009.

Adjusted income (loss) before tax

The following table displays our adjusted income (loss) before tax by reportable segment and as a percentage of total revenues for 2009 and 2008 (dollars in thousands):

	2009			2008
Branded Pharmaceuticals	$	642,997		$	581,152
Generics		28,557			23,163
Corporate unallocated		(174,994	)		(130,539	)
Total consolidated adjusted income (loss) before tax	$	496,560		$	473,776

Branded Pharmaceuticals. Adjusted income (loss) before tax during 2009 increased 11% to $643.0 million from $581.1 million in the comparable 2008 period. This increase was primarily driven by increased net sales.

Generics. Adjusted income (loss) before tax during 2009 increased 23% to $28.6 million from $23.2 million in the comparable 2008 period. This increase was primarily driven by increased net sales.

Corporate unallocated. Corporate unallocated adjusted loss before tax during 2009 increased 34% to $175.0 million from $130.5 million in the comparable 2008 period. This fluctuation was primarily driven by the continued growth of the business in 2009, including the operational costs resulting from the acquisition of Indevus.

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Reconciliation to GAAP. The table below provides reconciliations of our consolidated adjusted income (loss) before income tax to our consolidated operating income and our consolidated income before tax, which are determined in accordance with U.S. GAAP, for the years ended December 31, 2009 and 2008 (in thousands).

	Twelve Months Ended December 31,
	2009			2008
Total consolidated adjusted income (loss) before tax	$	496,560		$	473,776
Upfront and milestone payments to partners		(77,099	)		(8,910	)
Acquisition-related items		93,081			—
Cost reduction initiatives		(2,549	)		(16,375	)
Asset impairment charges		(69,000	)		(12,680	)
Amortization of commercial intangible assets related to marketed products		(62,931	)		(30,821	)
Inventory step-up		(11,268	)		—
Purchased in-process research and development		—			530
Non-cash interest expense		(14,719	)		(10,372	)
Other income (expense)		3,560			(3,320	)
Gain on extinguishment of debt		4,025			—
Total consolidated income before income tax	$	359,660		$	391,828

LIQUIDITY AND CAPITAL RESOURCES

Our principal source of liquidity is cash generated from operations. Our principal liquidity requirements are for working capital for operations, licenses, milestone payments, capital expenditures and debt service payments. The Company continues to maintain a sufficient level of working capital, which was approximately $623.7 million at December 31, 2010 compared to $808.4 million and $797.2 million at December 31, 2009 and 2008, respectively. Historically, we have generated positive cash flow from operating activities and have had access to broad financial markets that provide liquidity. Cash, cash equivalents and current marketable securities were approximately $466.2 million at December 31, 2010 compared to $733.7 million and $782.2 million at December 31, 2009 and 2008, respectively. Cash and cash equivalents at December 31, 2010, December 31, 2009, and December 31, 2008 primarily consisted of bank deposits, time deposits and money market funds.

In 2011, we expect that sales of our currently marketed branded and generic products as well as our devices and services will allow us to continue to generate positive cash flow from operations. We expect cash generated from operations together with our cash, cash equivalents and current marketable securities to be sufficient to cover cash needs for working capital, general corporate expenses, the payment of contractual obligations, including scheduled principal and interest payments on our outstanding borrowings and any regulatory and/or sales milestones that may become due.

Beyond 2011, we expect cash generated from operations together with our cash, cash equivalents and marketable securities to continue to be sufficient to cover cash needs for working capital and general corporate purposes, certain acquisitions of other businesses, including the potential payments of up to approximately $336.5 million in contingent cash consideration payments related to our acquisitions of Indevus and Qualitest, products, product rights, or technologies, the payment of contractual obligations, including principal and interest payments on our indebtedness and our Revolving Credit Facility (defined below), and certain minimum royalties due to Novartis and the regulatory or sales milestones that may become due. At this time, we cannot accurately predict the effect of certain developments on the rate of sales growth, such as the degree of market acceptance, patent protection and exclusivity of our products, the impact of competition, the effectiveness of our sales and marketing efforts and the outcome of our current efforts to develop, receive approval for and successfully launch our near-term product candidates. Any of the above could adversely affect our future cash flows. We may need to obtain additional funding for future strategic transactions, to repay our outstanding indebtedness, or for our future operational needs, and we cannot be certain that funding will be available on terms acceptable to us, or at all.

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In October 2009, we established a $300 million, three-year senior secured revolving credit facility (the 2009 Credit Facility) with JP Morgan Chase Bank, Barclays Capital and certain other lenders. The 2009 Credit Facility was available for letters of credit, working capital and general corporate purposes. The 2009 Credit Facility also permitted up to $100 million of additional revolving or term loan commitments from one or more of the existing lenders or other lenders.

On November 30, 2010, we terminated our 2009 Credit Facility and established a $400 million, five-year senior secured term loan facility (the Term Loan Facility), and a $500 million, five-year senior secured revolving credit facility (the Revolving Credit Facility and, together with the Term Loan Facility, the 2010 Credit Facility) with JP Morgan Chase Bank, Royal Bank of Canada, and certain other lenders. The 2010 Credit Facility was established primarily to finance our acquisition of Qualitest and is available for working capital, general corporate purposes, up to $30 million of letters of credit, and up to $30 million of swing line loans (the Swing Line Loans) on same-day notice. The agreement governing the 2010 Credit Facility (the 2010 Credit Agreement) also permits up to $200 million of additional revolving or term loan commitments from one or more of the existing lenders or other lenders with the consent of JP Morgan Chase Bank, as Administrative Agent, without the need for consent from any of the existing lenders under the 2010 Credit Facility.

The obligations of the Company under the 2010 Credit Facility are guaranteed by certain of the Company’s domestic subsidiaries and are secured by substantially all of the assets of the Company and the subsidiary guarantors. The 2010 Credit Facility contains certain usual and customary covenants, including, but not limited to covenants to maintain a maximum leverage ratio and minimum interest coverage ratio as well as limitations on capital expenditures, asset sales, mergers and acquisitions, indebtedness, liens, dividends, investments and transactions with the Company’s affiliates. Borrowings under the 2010 Credit Facility will bear interest at an amount equal to a rate calculated based on the type of borrowing and the Company’s Leverage Ratio from time to time. For term loans and revolving loans (other than Swing Line Loans), the Company may elect to pay interest based on an adjusted LIBOR rate plus between 2.00% and 2.75% or an Alternate Base Rate (as defined in the 2010 Credit Agreement) plus between 1.00% and 1.75%. The Company will also pay a commitment fee of between 35 to 50 basis points, payable quarterly, on the average daily unused amount of the Revolving Credit Facility based on the Company’s Leverage Ratio from time to time.

On November 23, 2010, we entered into an indenture among the Company, the guarantors named therein and Wells Fargo Bank, National Association, as trustee, which governs the terms of the Company’s $400.0 million aggregate principal amount of 7.00% Senior Notes due 2020 (the Senior Notes).The Senior Notes were issued in a private offering exempt from the registration requirements of the Securities Act of 1933, as amended (the Securities Act) to qualified institutional buyers in accordance with Rule 144A and to persons outside of the United States pursuant to Regulation S under the Securities Act. The Senior Notes are senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by certain of the Company’s domestic subsidiaries. The Company used the net proceeds of the Senior Notes offering to partially finance the acquisition of Qualitest, and to pay related fees and expenses.

The Senior Notes bear interest at a rate of 7.00% per year, accruing from November 23, 2010. Interest on the Senior Notes is payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2011. The Senior Notes will mature on December 15, 2020, subject to earlier repurchase or redemption in accordance with the terms of the indenture governing the Senior Notes. The indenture governing the Senior Notes contains covenants that, among other things, restrict the Company’s ability and the ability of certain of its restricted subsidiaries to incur certain additional indebtedness and issue preferred stock; make certain dividends, distributions, investments and other restricted payments; sell certain assets; agree to any restrictions on the ability of restricted subsidiaries to make payments to the Company; create certain liens; enter into transactions with affiliates; designate subsidiaries as unrestricted subsidiaries; and consolidate, merge or sell substantially all of the Company’s assets. These covenants are subject to a number of important exceptions and qualifications, including the fall away or revision of certain of these covenants upon The Senior Notes receiving investment grade credit ratings.

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During the third quarter of 2010, Endo notified the holders of its intent to exercise its option to redeem the remaining $57 million of principal at 108% of the principal amount for approximately $62 million (amount excludes accrued and unpaid interest) on November 5, 2010. The notes were redeemed in November 2010.

Pursuant to our previously announced $750 million share repurchase plan, we may, from time to time, seek to repurchase our equity in open market purchases, privately-negotiated transactions, accelerated stock repurchase transactions or otherwise. This program does not obligate Endo to acquire any particular amount of common stock. Repurchase activity, if any, will depend on factors such as levels of cash generation from operations, cash requirements for investment in the Company’s business, timing and extent of future business development activity, repayment of future debt, if any, current stock price, market conditions and other factors. The share repurchase program may be suspended, modified or discontinued at any time. As a result of a two-year extension approved by the Board of Directors in February 2010, the share repurchase plan is set to expire in April 2012. Pursuant to the existing share repurchase program, we purchased approximately 2.5 million shares of our common stock during 2010 at a cost totaling $59.0 million. We did not purchase any shares of our common stock during the year ended December 31, 2009.

We may also elect to incur additional debt or issue equity or convertible securities to finance ongoing operations, acquisitions or to meet our other liquidity needs. Any issuances of equity securities or convertible securities could have a dilutive effect on the ownership interest of our current shareholders and may adversely impact earnings per share in future periods. An acquisition may be accretive or dilutive and by its nature, involve numerous risks and uncertainties.

Marketable Securities. Beginning in 2008 and continuing through 2010, the securities and credit markets have been experiencing severe volatility and disturbance, increasing risk with respect to certain of our financial assets. As a result of our auction-rate securities rights agreement with UBS (described in more detail below), we have been able to minimize our credit risk losses. On June 30, 2010, we were able to exercise our auction-rate securities rights (the Rights), described below, with UBS and liquidate our remaining UBS auction-rate security portfolio at par value. At December 31, 2010, $18.8 million of our marketable securities portfolio was invested in auction-rate debt securities with ratings of AAA. During 2008, the Board of Directors approved an amended investment policy which seeks to preserve the value of capital, consistent with maximizing return on the Company’s investment, while maintaining adequate liquidity and security. The amended investment policy specifically prohibits the investment in auction-rate securities as well as the investment in any security that is below investment grade. However, such restrictions were implemented on a prospective basis and did not impact the Company’s ability to continue to hold the auction-rate securities it was invested in when the amended investment policy was adopted.

The underlying assets of our auction-rate securities are student loans. Student loans are insured by the Federal Family Education Loan Program, or FFELP.

The Company determined that an income approach (present value technique) that maximizes the use of observable market inputs is the preferred approach to measuring the fair value of our securities. Specifically, the Company used the discount rate adjustment technique to determine an indication of fair value.

To calculate a price for our auction-rate securities, the Company calculates duration to maturity, coupon rates, market required rates of return (discount rate) and a discount for lack of liquidity in the following manner:

• The Company identifies the duration to maturity of the auction-rate securities as the time at which principal is available to the investor. This can occur because the auction-rate security is paying a coupon that is above the required rate of return, and the Company treats the security as being called. It can also occur because the market has returned to normal and the Company treats the auctions as having recommenced. Lastly, and most frequently, the Company treats the principal as being returned as prepayment occurs and at the maturity of the security. The life used for each remaining security, representing time to maturity is eight years.

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• The Company calculates coupon rates based on estimated relationships between the maximum coupon rate (the coupon rate in event of a failure) and market interest rates. The representative coupon rate on December 31, 2010 was 5.10% and ranged from 5.37% to 6.12% at December 31, 2009. The Company calculates appropriate discount rates for securities that include base interest rates, index spreads over the base rate, and security-specific spreads. These spreads include the possibility of changes in credit risk over time. The spreads over the base rate for our securities applied to our securities was 218 basis points at December 31, 2010 and ranged from 154 basis points to 410 basis points at December 31, 2009.

• The Company believes that a market participant would require an adjustment to the required rate of return to adjust for the lack of liquidity. We do not believe it is unreasonable to assume a 150 basis points adjustment to the required rate of return and a term of either three, four or five years to adjust for this lack of liquidity. The increase in the required rate of return decreases the prices of the securities. However, the assumption of a three, four or five-year term shortens the times to maturity and increases the prices of the securities. The Company has evaluated the impact of applying each term and the reasonableness of the range indicated by the results. The Company chose to use a four-year term to adjust for the lack of liquidity as we believe it is the point within the range that is most representative of fair value. The Company’s conclusion is based in part on the fact that the fair values indicated by the results are reasonable in relation to each other given the nature of the securities and current market conditions.

The following table sets forth the fair value of our long-term auction-rate securities by type of security and underlying credit rating as of December 31, 2010 and December 31, 2009 (in thousands):

	Underlying Credit Rating(1)
	AAA		A		B2		Ba2		Baa3		Total
As of December 31, 2010:
Underlying security:
Student loans	$	17,332	$	—	$	—	$	—	$	—	$	17,332
Total auction-rate securities included in long-term marketable securities	$	17,332	$	—	$	—	$	—	$	—	$	17,332

	Underlying Credit Rating(1)
	AAA		A		B2		Ba2		Baa3		Total
As of December 31, 2009:
Underlying security:
Student loans	$	130,861	$	51,781	$	9,934	$	7,201	$	7,557	$	207,334
Total auction-rate securities included in long-term marketable securities	$	130,861	$	51,781	$	9,934	$	7,201	$	7,557	$	207,334

(1) Our auction-rate securities maintain split ratings. For purposes of this table, securities are categorized according to their lowest rating.

During the year ended December 31, 2010, we sold $230.3 million of auction-rate securities at par value. During the year ended December 31, 2009, we sold $23.8 million of auction-rate securities at par value. Given the uncertainty in the auction-rate securities market, the Company cannot predict when future auctions related to our existing auction-rate securities portfolio will be successful. However, we do not employ an asset management strategy or tax planning strategy that would require us to sell any of our existing securities at a loss. Furthermore, there have been no adverse changes in our business or industry that could require us to sell the securities at a loss in order to meet working capital requirements.

In October 2008, UBS AG (UBS) made an offer (the UBS Offer) to the Company and other clients of UBS Securities LLC and UBS Financial Services Inc. (collectively, the UBS Entities), pursuant to which the Company received auction-rate securities rights to sell to UBS all auction-rate securities held by the Company as of

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February 13, 2008 in a UBS account (the Eligible Auction-Rate Securities). The Rights permitted us to require UBS to purchase the Eligible Auction-Rate Securities for a price equal to par value plus any accrued but unpaid dividends or interest beginning on June 30, 2010 and ending on July 2, 2012.

On November 10, 2008, the Company accepted the UBS Offer. As a result, the Company granted to the UBS Entities, the sole discretion and right to sell or otherwise dispose of, and/or enter orders in the auction process with respect to the Eligible Auction-Rate Securities on the Company’s behalf until the Expiration Date, without prior notification, so long as the Company receives a payment of par value plus any accrued but unpaid dividends or interest upon any sale or disposition. As of June 30, 2010, we exercised the Rights and, on July 1, 2010, received cash for our remaining UBS portfolio at par. Accordingly, as of June 30, 2010, our UBS auction-rate securities were reclassified into a current receivable. The remaining $18.8 million of our auction-rate securities portfolio, at par-value, is not held in a UBS account and therefore was not subject to the UBS Offer.

As of December 31, 2010, the yields on our long-term auction-rate securities ranged from 0.54% to 0.60%. As of December 31, 2009, the yields on our long-term auction-rate securities ranged from 0.42% to 0.88%. These yields represent the predetermined “maximum” reset rates that occur upon auction failures according to the specific terms within each security’s prospectus. As of December 31, 2010 and, 2009, the weighted average yields for our long-term auction-rate securities were 0.57% and 0.73%, respectively. Total interest recognized on our auction-rate securities during the years ended December 31, 2010, 2009 and 2008 was $0.7 million, $2.4 million, and $15.5 million, respectively. The issuers have been making interest payments promptly.

At December 31, 2010, the fair value of our auction-rate securities, as determined by applying the above described discount rate adjustment technique, was approximately $17.3 million, representing an eight percent (8%), or $1.5 million discount from their original purchase price or par value. This compares to approximately $232.6 million, representing a seven percent (7%), or $16.5 million discount from their original purchase price or par value at December 31, 2009. Had the Company chosen to apply a three or five year term with respect to the liquidity adjustment at December 31, 2010, the resultant discount to the original purchase price or par value would have been $1.1 million and $1.8 million, respectively. We believe we have appropriately reflected our best estimate of the assumptions that market participants would use in pricing the assets in a current transaction to sell the asset at the measurement date.

Working Capital. Working capital decreased to $623.7 million as of December 31, 2010 from $808.4 million as of December 31, 2009. The components of our working capital for the years ended December 31, are below (in thousands):

	2010			2009			2008
Total current assets	$	1,359,534		$	1,280,581		$	1,183,694
Less: Total current liabilities		(735,828	)		(472,180	)		(386,473	)
Working capital	$	623,706		$	808,401		$	797,221

Working capital decreased from 2009 to 2010 primarily as a result of expenditures for our acquisitions of HealthTronics, Penwest, and Qualitest. The acquisitions were further offset by the operating results of HealthTronics, Penwest, and Qualitest, and the sale of $230.3 million of auction-rate debt securities, $205.0 million of which were non-current assets as of December 31, 2009.

Working capital increased slightly from 2008 to 2009 primarily as a result of our first quarter acquisition of Indevus, including the increase in accounts receivable associated with the new Indevus products as well as our deferred tax assets associated with the income tax loss carryforwards and the inclusion of short-term marketable securities and auction-rate securities rights that were classified as long-term assets at December 31, 2008. These amounts were partially offset by the payment of the initial upfront cash consideration for the Indevus transaction, net of cash acquired, of $250 million.

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The following table summarizes our statement of cash flows and liquidity (dollars in thousands):

	2010			2009			2008
Net cash flow provided by (used in):
Operating activities	$	453,646		$	295,406		$	355,627
Investing activities		(896,323	)		(245,509	)		179,807
Financing activities		200,429			(117,128	)		(110,066	)
Net (decrease) increase in cash and cash equivalents		(242,248	)		(67,231	)		425,368
Cash and cash equivalents, beginning of period		708,462			775,693			350,325
Cash and cash equivalents, end of period	$	466,214		$	708,462		$	775,693
Current ratio		1.8:1			2.7:1			3.1:1
Days sales outstanding		46			43			40

Net Cash Provided by Operating Activities. Net cash provided by operating activities was $453.6 million for the year ended December 31, 2010, a 54% increase from the comparable 2009 period. Net cash provided by operating activities was $295.4 million for the year ended December 31, 2009, a 17% decrease from the comparable 2008 period. Significant components of our operating cash flows for the years ended December 31, are as follows (in thousands):

	2010			2009			2008
Cash Flow Data-Operating Activities:
Net income	$	287,020		$	266,336		$	255,336
Depreciation and amortization		108,404			80,381			46,445
Stock-based compensation		22,909			19,593			16,934
Change in fair value of acquisition-related contingent consideration		(51,420	)		(128,090	)		—
Impairment of long-lived assets		35,000			69,000			12,680
Loss (gain) on auction-rate securities rights		15,659			11,662			(27,321	)
(Gain) loss on trading securities		(15,420	)		(15,222	)		4,225
Other-than-temporary impairment of available-for-sale securities		—			—			26,417
Purchased in-process research and development		—			—			(530	)
Changes in assets and liabilities which provided cash		43,672			12,428			4,198
Other, net		7,822			(20,682	)		17,243
Net cash provided by operating activities	$	453,646		$	295,406		$	355,627

For the year ended December 31, 2010, changes in net cash provided by operating activities from the year ended December 31, 2009 were primarily driven by increases in net income as a result of increased total revenues, as well as increases (decreases) in non-cash expenses (income) including a $76.7 million decrease in gains resulting from changes in the fair value of contingent consideration and a $28.0 million increase in depreciation and amortization.

For the year ended December 31, 2009, significant changes in net cash provided by operating activities from the year ended December 31, 2008 were primarily driven by a $66.0 million decrease in the cash flow impact of accounts receivable due to a combination of increased revenues and an increase to our average days sales outstanding reflecting the standard payments terms of our UEO products.

Net Cash (Used in) Provided by Investing Activities. Net cash used in investing activities was $896.3 million for the year ended December 31, 2010 compared to $245.5 million used in and $179.8 million provided by for the years ended December 31, 2009 and 2008, respectively.

The increase in cash used in investing actives in 2010 compared to 2009 is primarily related to cash consideration paid for the acquisitions of HealthTronics, Penwest, and Qualitest of $1,105.0 million, net of cash acquired, compared to $250.4 million of cash used for the Indevus transaction in 2009. The 2010 amounts were offset slightly due to the proceeds received of $231.1 million for sales of our auction-rate and available for sale securities compared to $23.8 million in 2009.

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For the year ended December 31, 2009, the Company completed its acquisition of Indevus and paid cash consideration of $250.4 million, net of cash acquired. In addition, the Company sold $23.8 million in auction-rate securities and purchased $12.4 million of capital assets, including property and equipment and licensing rights.

During the year ended December 31, 2008, we collected $3.3 million in principal payments from Vernalis on our note receivable and $447.1 million from the sale of available-for-sale securities. These cash inflows were partially offset by the purchase of $134.2 million of available-for-sale securities, an $85 million upfront payment to Novartis to obtain the exclusive U.S. marketing rights for the prescription medicine Voltaren^® Gel, a $20 million investment in a privately-held company that is focused on the development of an innovative treatment for certain types of cancer, and $17.4 million for capital expenditures. Also during 2008, the first dosage of EN 3285 was administered to a patient enrolled in a clinical phase III trial. Accordingly, in March 2008, we paid $15 million in additional contingent purchase price consideration to the former shareholders of RxKinetix.

Net Cash Provided by (Used in) Financing Activities. Net cash provided by financing activities was $200.4 million for the year ended December 31, 2010 compared to $117.1 million and $110.1 million used in financing activities for the years ended December 31, 2009 and 2008, respectively.

The change from 2009 to 2010 is primarily a result of the Company’s issuance of $786.6 million of new indebtedness, net of debt issuance and transactions costs. The 2010 cash inflow was partially offset by $59.0 million related to share repurchases, $61.6 million in payments to redeem the remaining Non-recourse notes, a $40.2 million payment in July of 2010 to retire the HealthTronics senior credit facility, and a $406.8 million payment in November 2010 to retire Qualitest’s debt then outstanding under its senior credit facility as well as the associated interest rate swap. Additionally, during 2010, the exercise of equity awards provided $20.9 million of cash flows from financing activities compared to $8.0 million in 2009.

For the year ended December 31, 2009, as a result of our acquisition of Indevus, the Company assumed The Indevus Notes as well as the Non-recourse notes. In 2009, the Company paid approximately $72 million in outstanding principal to satisfy the Indevus Notes in their entirety and purchased $48 million of the outstanding Non-recourse notes pursuant to a tender offer.

For the year ended December 31, 2008, in connection with the April 2008 issuance of our Convertible Notes, we received proceeds of approximately $370.7 million, net of the original purchaser’s discount as well as certain other costs of the offering. Concurrently with the issuance of the Convertible Notes, we entered into a privately-negotiated convertible note hedge transaction with affiliates of the initial purchasers. The cost of the call option was approximately $107.6 million. In addition, we sold warrants to affiliates of certain of the initial purchasers whereby they have the option to purchase up to approximately 13.0 million shares of our common stock at an initial strike price of $40.00 per share. We received approximately $50.4 million in cash proceeds from the sale of these warrants. In addition to entering into the convertible note hedge transaction and the warrant transaction, we entered into a privately-negotiated accelerated share repurchase agreement with the same counterparty, as part of our broader share repurchase program. We used approximately $57 million representing a portion of the net proceeds from the Convertible Notes offering to pay the cost of the convertible note hedge transaction, taking into account the proceeds from the warrant transaction, and used the balance of the net proceeds or approximately $314 million, together with approximately $11 million of cash on hand, to repurchase a variable number of shares of our common stock pursuant to the accelerated share repurchase agreement entered into as part of our broader share repurchase program. Pursuant to the accelerated share repurchase agreement, the counterparty delivered 11.9 million shares of our common stock to the Company on the day that the note offering closed, April 15, 2008. On August 14, 2008, we received approximately 1.4 million additional shares of our common stock based on the volume weighted average price of our common stock during a specified averaging period set forth by the accelerated share repurchase agreement. In addition to the accelerated share repurchase, beginning in April 2008 we made open market purchases of our common stock as part of our broader share repurchase program. As of December 31, 2008, we purchased approximately 4.5 million shares of our common stock on the open market for a total purchase price of approximately $99.8 million.

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Research and Development. Over the past few years, we have incurred significant expenditures related to conducting clinical studies to develop new pharmaceutical products and exploring the value of our existing products in treating disorders beyond those currently approved in their respective labels. We may seek to mitigate the risk in, and expense of, our research and development programs by entering into collaborative arrangements with third parties. However, we intend to retain a portion of the commercial rights to these programs and, as a result, we still expect to spend significant funds on our share of the cost of these programs, including the costs of research, preclinical development, clinical research and manufacturing.

We expect to continue to incur significant levels of research and development expenditures as we focus on the development and advancement of our product pipeline. There can be no assurance that results of any ongoing or future pre-clinical or clinical trials related to these projects will be successful, that additional trials will not be required, that any drug or product under development will receive FDA approval in a timely manner or at all, or that such drug or product could be successfully manufactured in accordance with U.S. current Good Manufacturing Practices or successfully marketed in a timely manner, or at all, or that we will have sufficient funds to develop or commercialize any of our products.

Manufacturing, Supply and Other Service Agreements. We contract with various third-party manufacturers and suppliers to provide us with raw materials used in our products, finished goods and certain services. Our most significant agreements are with Novartis Consumer Health, Inc., Novartis AG, Teikoku Seiyaku Co., Ltd., Mallinckrodt Inc., Noramco, Inc., Sharp Corporation, and Ventiv Commercial Services, LLC. If, for any reason, we are unable to obtain sufficient quantities of any of the finished goods or raw materials or components required for our products, it could have a material adverse effect on our business, financial condition, results of operations and cash flows. For a complete description of commitments under manufacturing, supply and other service agreements, see Note 14 of the Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

License and Collaboration Agreements. We have agreed to certain contingent payments in certain of our license, collaboration and other agreements. Payments under these agreements generally become due and payable only upon the achievement of certain developmental, regulatory, commercial and/or other milestones. Due to the fact that it is uncertain if and when these milestones will be achieved, such contingencies have not been recorded in our Consolidated Balance Sheets and are not reflected in the expected cash requirements for Contractual Obligations table below. In addition, under certain arrangements, we may have to make royalty payments based on a percentage of future sales of the products in the event regulatory approval for marketing is obtained. From a business perspective, we view these payments favorably as they signify that the products are moving successfully through the development phase toward commercialization. For a complete description of our contingent payments involving our license and collaboration agreements, see Note 7 and Note 14 of the Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Acquisitions. As part of our business strategy, we plan to consider and, as appropriate, make acquisitions of other businesses, products, product rights or technologies. Our cash reserves and other liquid assets may be inadequate to consummate such acquisitions and it may be necessary for us to issue stock or raise substantial additional funds in the future to complete future transactions. In addition, as a result of our acquisition efforts, we are likely to experience significant charges to earnings for merger and related expenses (whether or not our efforts are successful) that may include transaction costs, closure costs or costs of restructuring activities.

Indevus Acquisition. On February 23, 2009, which we refer to as the Indevus Acquisition Date, the Company completed its initial tender offer for all outstanding shares of common stock of Indevus. Through purchases in subsequent offering periods, the exercise of a top-up option and a subsequent merger (the Indevus Merger), the Company completed its acquisition of Indevus on March 23, 2009, at which time Indevus became a wholly-owned subsidiary of the Company.

The Indevus shares were purchased at a price of $4.50 per share, net to the seller in cash, plus contractual rights to receive up to an additional $3.00 per share in contingent cash consideration payments, pursuant to the

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terms of the Indevus Agreement and Plan of Merger, dated as of January 5, 2009 (the Indevus Merger Agreement). Accordingly, the Company paid approximately $368 million in aggregate initial cash consideration for the Indevus shares and entered into the Aveed^TM Contingent Cash Consideration Agreement and the Octreotide Contingent Cash Consideration Agreement (each as defined in the Indevus Merger Agreement), providing for the payment of up to an additional $3.00 per share in contingent cash consideration payments, in accordance with the terms of the initial tender offer.

The total cost to acquire all outstanding Indevus shares pursuant to the initial tender offer and the Indevus Merger Agreement could be up to an additional approximately $267.0 million, if Endo is obligated to pay the maximum amounts under the Aveed^TM Contingent Cash Consideration Agreement and the Octreotide Contingent Cash Consideration Agreement. The fair value of those potential obligations is $7.1 million at December 31, 2010.

Indevus was a specialty pharmaceutical company engaged in the acquisition, development, and commercialization of products to treat conditions in urology, endocrinology and oncology. Following the completion of the Indevus Merger, Indevus was renamed Endo Pharmaceuticals Solutions Inc.

Approved products assumed in the acquisition included Sanctura^® (trospium chloride) and Sanctura XR^® (trospium chloride extended release capsules) for the treatment of overactive bladder (OAB); Supprelin^® LA (histrelin acetate) for treating central precocious puberty (CPP); Vantas^® (histrelin) for the palliative treatment of advanced prostate cancer; Delatestryl^® (testosterone enanthate) for the treatment of male hypogonadism; Hydron^® Implant, which is used as a drug delivery device and provides for a sustained release of a broad spectrum of drugs continuously; and Valstar^® (valrubicin) for therapy of bacillus Calmette-Guerin (BCG)-refractory carcinoma in situ (as CIS) of the bladder.

As of December 31, 2010, primary development products included the following from the Indevus acquistion:

• Aveed^TM (testosterone undecanoate) is expected to be the first long-acting injectable testosterone preparation available in the United States for the treatment of male hypogonadism in the growing market for testosterone replacement therapies. Aveed^TM had historically been referred to as Nebido^®. On May 6, 2009, we received notice from the FDA that Nebido^® was unacceptable as a proprietary name for testosterone undecanoate. In August 2009, we received approval from FDA to use the name Aveed^TM. On May 18, 2010, a new patent covering Aveed ^TM was issued by the U.S. Patent and Trademark Office. The patent’s expiration date is March 14, 2027. The Company acquired U.S. rights to Aveed^TM from Schering AG, Germany, in July 2005. In June 2008, we received an approvable letter from the FDA indicating that the NDA may be approved if the Company is able to adequately respond to certain clinical deficiencies related to the product. In September 2008, agreement was reached with the FDA with regard to the additional data and risk management strategy. In March 2009, the FDA accepted for review the complete response submission to the new drug application for Aveed^TM intramuscular injection. On December 2, 2009, we received a complete response letter from the FDA regarding Aveed^TM in response to our March 2009 complete response submission. In the complete response letter, the FDA has requested information from Endo to address the agency’s concerns regarding very rare but serious adverse events, including post-injection anaphylactic reaction and pulmonary oily microembolism. The letter also specified that the proposed Risk Evaluation and Mitigation Strategy (REMS) is not sufficient. In 2010, we met with the FDA to discuss the existing clinical data provided to the FDA as well as the potential path-forward. The Company is evaluating how best to address the concerns of the FDA and intends to have future dialogue with the agency regarding a possible regulatory pathway. The outcome of future communications with the FDA could have a material impact on (1) management’s assessment of the overall probability of approval, (2) the timing of such approval, (3) the targeted indication or patient population and (4) the likelihood of additional clinical trials.

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• Octreotide, currently in Phase III clinical trials for the treatment of acromegaly, utilizes our patented Hydron^® Polymer Technology to deliver six months of octreotide, a long-acting octapeptide that mimics the natural hormone somatostatin to block production of growth hormone (GH). Octreotide is also approved to treat symptoms associated with metastatic carcinoid tumors and vasoactive intestinal peptide secreting adenomas, which are gastrointestinal tumors. In February 2011, the FDA requested additional pre-clinical studies, including a carcinogenicity study, be completed prior to the submission of the NDA for the octreotide implant for the treatment of acromegaly. Although this development causes a delay of up to four years in the timing associated with regulatory approval, the Company intends to continue the development of this product and is encouraged by recent preliminary results from its Phase III study. In addition, the Company recently assessed all of its in-process research and development assets and concluded, separately, to discontinue development of its octreotide implant for the treatment of carcinoid syndrome due to recent market research that indicates certain commercial challenges, including the expected rate of physician acceptance and the expected rate of existing patients willing to switch therapies.

Management believes the Company’s acquisition of Indevus is particularly significant because it reflects our commitment to expand our business beyond pain management into complementary medical areas where we believe we can be innovative and competitive. The combined company markets products through its differentially deployed field sales forces and has the capability to develop innovative new therapies using a novel drug delivery technology.

The operating results of Indevus from February 23, 2009 are included in the accompanying Consolidated Statements of Operations. The Consolidated Balance Sheet as of December 31, 2009 reflects the acquisition of Indevus, effective February 23, 2009, the date the Company obtained control of Indevus. The acquisition date fair value of the total consideration transferred was $540.9 million, which consisted of the following (in thousands):

	Fair Value of Consideration Transferred
Cash	$	368,034
Contingent consideration		172,860
Total	$	540,894

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the Indevus Acquisition Date (in thousands):

	February 23, 2009
Cash and cash equivalents	$	117,675
Accounts receivable		14,591
Inventories		17,157
Prepaid and other current assets		8,322
Property, plant and equipment		8,856
Other intangible assets		532,900
Deferred tax assets		167,749
Other non-current assets		1,331
Total identifiable assets	$	868,581
Accounts payable	$	(5,116	)
Accrued expenses		(26,725	)
Convertible notes		(72,512	)
Non-recourse notes		(115,235	)
Deferred tax liabilities		(210,647	)
Other non-current liabilities		(18,907	)
Total liabilities assumed		(449,142	)
Net identifiable assets acquired	$	419,439
Goodwill	$	121,455
Net assets acquired	$	540,894

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The above estimated fair values of assets acquired and liabilities assumed are based on the information that was available as of the Indevus Acquisition Date. As of December 31, 2009, our measurement period adjustments were complete.

Of the $532.9 million of acquired intangible assets, $255.9 million was assigned to in-process research and development. The remaining $277.0 million has been assigned to license rights and is subject to a weighted average useful life of approximately 11 years.

The valuation of the intangible assets acquired and related amortization periods are as follows:

	Valuation (in millions)		Amortization Period (in years)
In Process Research & Development:
Valstar®(1)	$	88.0		n/a
AveedTM(2)		100.0		n/a
Octreotide(3)		31.0		n/a
Pagoclone(4)		21.0		n/a
Pro2000(5)		4.0		n/a
Other		11.9		n/a
Total	$	255.9		n/a
License Rights:
Hydron® Polymer	$	22.0		10
Vantas®		36.0		10
Sanctura® Franchise		94.0		12
Supprelin® LA		124.0		10
Other		1.0		4
Total	$	277.0		11
Total other intangible assets	$	532.9

(1) The FDA approved the sNDA for Valstar^® subsequent to the Indevus Acquisition Date. Therefore, Valstar^® was initially classified as in-process research and development and subsequently transferred to License Rights upon obtaining FDA approval and is being amortized over a 15 year useful life.

(2) As a result of the FDA’s complete response letter related to our filed NDA, we performed an impairment analysis during the fourth quarter ended December 31, 2009. We concluded there was a decline in the fair value of the indefinite-lived intangible. Accordingly, we recorded a $65.0 million impairment charge.

(3) As part of our annual review of all in-process research and development assets, we conducted an in-depth review of both octreotide indications. This review covered a number of factors including the market potential of each product given its stage of development, taking into account, among other things, issues of safety and efficacy, product profile, competitiveness of the marketplace, the proprietary position of the product and its potential profitability. Our review resulted in no impact to the carrying value of our octreotide – acromegaly intangible asset. However, the analysis identified certain commercial challenges with respect to the octreotide – carcinoid syndrome intangible asset including the expected rate of physician acceptance and the expected rate of existing patients willing to switch therapies. Upon analyzing the Company’s R&D priorities, available resources for current and future projects, and the commercial potential for octreotide – carcinoid syndrome, the Company has decided to discontinue development of octreotide for the treatment of carcinoid syndrome. As a result of the above developments, the Company recorded a pre-tax non-cash impairment charge of $22.0 million for the year ended December 31, 2010, to write-off, in its entirety, the octreotide – carcinoid syndrome intangible asset.

(4) In May 2010, Teva terminated the development and licensing arrangement with us upon the completion of the Phase IIb study. We concluded there was a decline in the fair value of the indefinite-lived intangible asset. Accordingly, we recorded a $13.0 million impairment charge.

(5) In December 2009, our Phase III clinical trials for Pro2000 provided conclusive results that the drug was not effective. We concluded there was no further value or alternative future uses associated with this indefinite-lived asset. Accordingly, we recorded a $4.0 million impairment charge to write-off the Pro2000 intangible asset in its entirety.

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The fair value of the in-process research and development assets and License Rights assets, with the exception of the Hydron^® Polymer Technology, were estimated using an income approach. Under this method, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. To calculate fair value, the Company used probability-weighted cash flows discounted at rates considered appropriate given the inherent risks associated with each type of asset. The Company believes that the level and timing of cash flows appropriately reflect market participant assumptions. Cash flows were generally assumed to extend either through or beyond the patent life of each product, depending on the circumstances particular to each product. The fair value of the Hydron^® Polymer Technology was estimated using an income approach, specifically known as the relief from royalty method. The relief from royalty method is based on a hypothetical royalty stream that would be received if the Company were to license the technology. The Hydron^® Polymer Technology is currently used in the following products: Vantas^®, Supprelin^® LA and octreotide. Thus, we derived the hypothetical royalty income from the projected revenues of those drugs. The fair value of the Hydron^® Polymer Technology also includes an existing royalty payable by the Company to the certain third party partners based on the net sales derived from drugs that use the Hydron^® Polymer Technology. Discount rates applied to the estimated cash flows for all intangible assets acquired ranged from 13% to 20%, depending on the current stage of development, the overall risk associated with the particular project or product and other market factors. We believe the discount rates used are consistent with those that a market participant would use.

The $121.5 million of goodwill was assigned to our Branded Pharmaceuticals segment. The goodwill recognized is attributable primarily to the potential additional applications for the Hydron^® Polymer Technology, expected corporate synergies, the assembled workforce of Indevus and other factors. None of the goodwill is expected to be deductible for income tax purposes.

The deferred tax assets of $167.7 million are related primarily to federal net operating loss and credit carryforwards of Indevus and its subsidiaries. The deferred tax liabilities of $210.6 million are related primarily to the difference between the book basis and tax basis of identifiable intangible assets.

HealthTronics Acquisition. On July 2, 2010 (the HealthTronics Acquisition Date), the Company completed its initial tender offer for all outstanding shares of common stock of HealthTronics. On July 12, 2010, Endo completed its acquisition of HealthTronics for approximately $214.8 million in aggregate cash consideration for 100% of the outstanding shares, at which time HealthTronics became a wholly-owned subsidiary of the Company. The HealthTronics shares were purchased at a price of $4.85 per share. In addition, Endo paid $40 million to retire HealthTronics debt that had been outstanding under its senior credit facility. As a result of the acquisition, the HealthTronics senior credit facility was terminated.

HealthTronics is a provider of healthcare services and manufacturer of medical devices, primarily for the urology community. The HealthTronics business and applicable services include:

Lithotripsy services.

HealthTronics provides lithotripsy services, which is a medical procedure where a device called a lithotripter transmits high energy shockwaves through the body to break up kidney stones. Lithotripsy services are provided principally through limited partnerships and other entities that HealthTronics manages, which use lithotripters. In 2009, physician partners used our lithotripters to perform approximately 50,000 procedures in the U.S. While the physicians render medical services, HealthTronics does not. As the general partner of limited partnerships or the manager of other types of entities, HealthTronics also provide services relating to operating its lithotripters, including scheduling, staffing, training, quality assurance, regulatory compliance, and contracting with payors, hospitals, and surgery centers.

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Prostate treatment services.

HealthTronics provides treatments for benign and cancerous conditions of the prostate. In treating benign prostate disease, HealthTronics deploys three technologies in a number of its partnerships above: (1) photo-selective vaporization of the prostate (PVP), (2) trans-urethral needle ablation (TUNA), and (3) trans-urethral microwave therapy (TUMT). All three technologies apply an energy source which reduces the size of the prostate gland. For treating prostate and other cancers, HealthTronics uses a procedure called cryosurgery, a process which uses lethal ice to destroy tissue such as tumors for therapeutic purposes. In April 2008, HealthTronics acquired Advanced Medical Partners, Inc., which significantly expanded its cryosurgery partnership base. In July 2009, HealthTronics acquired Endocare, Inc., which manufactures both the medical devices and related consumables utilized by its cryosurgery operations and also provides cryosurgery treatments. The prostate treatment services are provided principally by using equipment that HealthTronics leases from limited partnerships and other entities that HealthTronics manages. Benign prostate disease and cryosurgery cancer treatment services are billed in the same manner as its lithotripsy services under either retail or wholesale contracts. HealthTronics also provides services relating to operating the equipment, including scheduling, staffing, training, quality assurance, regulatory compliance, and contracting.

Radiation therapy services.

HealthTronics provides image guided radiation therapy (IGRT) technical services for cancer treatment centers. Its IGRT technical services may relate to providing the technical (non-physician) personnel to operate a physician practice group’s IGRT equipment, leasing IGRT equipment to a physician practice group, providing services related to helping a physician practice group establish an IGRT treatment center, or managing an IGRT treatment center.

Anatomical pathology services.

HealthTronics provides anatomical pathology services primarily to the urology community. HealthTronics has one pathology lab located in Georgia, which provides laboratory detection and diagnosis services to urologists throughout the United States. In addition, in July 2008, HealthTronics acquired Uropath LLC, now referred to as HealthTronics Laboratory Solutions, which managed pathology laboratories located at Uropath sites for physician practice groups located in Texas, Florida and Pennsylvania. Through HealthTronics Laboratory Solutions, HealthTronics continues to provide administrative services to in-office pathology labs for practice groups and pathology services to physicians and practice groups with its lab equipment and personnel at the HealthTronics Laboratory Solutions laboratory sites.

Medical products manufacturing, sales and maintenance.

HealthTronics manufactures and sells medical devices focused on minimally invasive technologies for tissue and tumor ablation through cryoablation, which is the use of lethal ice to destroy tissue, such as tumors, for therapeutic purposes. HealthTronics develops and manufactures these devices for the treatment of prostate and renal cancers and our proprietary technologies also have applications across a number of additional markets, including the ablation of tumors in the lung, liver metastases and palliative intervention (treatment of pain associated with metastases). HealthTronics manufactures the related spare parts and consumables for these devices. HealthTronics also sells and maintains lithotripters and related spare parts and consumables.

The acquisition of HealthTronics reflects Endo’s desire to continue expanding our business beyond pain management into complementary medical areas where HealthTronics can be innovative and competitive. We believe this expansion will enable us to be a provider of multiple healthcare solutions and services that fill critical gaps in patient care.

The operating results of HealthTronics from July 2, 2010 are included in the accompanying Consolidated Statements of Operations. The Consolidated Balance Sheet as of December 31, 2010 reflects the acquisition of HealthTronics, effective July 2, 2010, the date the Company obtained control of HealthTronics.

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The following table summarizes the fair values of the assets acquired and liabilities assumed at the HealthTronics Acquisition Date (in thousands):

	July 2, 2010 (As initially reported)			Measurement period adjustments			July 2, 2010 (As Adjusted)
Cash and cash equivalents	$	6,769		$	—		$	6,769
Accounts receivable		33,111			677			33,788
Other receivables		1,006			—			1,006
Inventories		12,399			—			12,399
Prepaid expenses and other current assets		5,204			—			5,204
Deferred income taxes		43,737			3,676			47,413
Property and equipment		30,687			—			30,687
Other intangible assets		65,866			8,458			74,324
Other assets		5,210			—			5,210
Total identifiable assets	$	203,989		$	12,811		$	216,800
Accounts payable	$	(3,084	)	$	—		$	(3,084	)
Accrued expenses		(11,551	)		(8,659	)		(20,210	)
Deferred income taxes		(20,377	)		(3,188	)		(23,565	)
Long-term debt		(44,751	)		1,291			(43,460	)
Other liabilities		(1,434	)		(351	)		(1,785	)
Total liabilities assumed	$	(81,197	)	$	(10,907	)	$	(92,104	)
Net identifiable assets acquired	$	122,792		$	1,904		$	124,696
Noncontrolling interests	$	(60,119	)	$	(3,108	)	$	(63,227	)
Goodwill	$	152,170		$	1,204		$	153,374
Net assets acquired	$	214,843		$	—		$	214,843

The above estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the HealthTronics Acquisition Date to estimate the fair value of assets acquired and liabilities assumed. The Company believes that information provides a reasonable basis for estimating the fair values but the Company is waiting for additional information necessary to finalize those amounts, particularly with respect to the estimated fair value of noncontrolling interests and deferred income taxes. Thus, the provisional measurements of fair value reflected are subject to change. Such changes could be significant. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the HealthTronics Acquisition Date.

The valuation of the intangible assets acquired and related amortization periods are as follows:

	Valuation (in millions)		Amortization Period (in years)
Endocare Developed Technology	$	46.3		10
HealthTronics Tradename		14.6		15
Service Contract		13.4		n/a
Total	$	74.3		n/a

The fair value of the developed technology assets were estimated using an income approach. Under this method, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. To calculate fair value, the Company used probability-weighted cash flows discounted at rates considered appropriate given the inherent risks associated with each type of asset. The Company believes that the level and timing of cash flows

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appropriately reflect market participant assumptions. Cash flows were assumed to extend through the patent life of the purchased technology. The fair value of the HealthTronics Tradename was estimated using an income approach, specifically known as the relief from royalty method. The relief from royalty method is based on a hypothetical royalty stream that would be received if the Company were to license the HealthTronics Tradename. Thus, we derived the hypothetical royalty income from the projected revenues of HealthTronics’ services.

HealthTronics has investments in partnerships and limited liability companies (LLCs) where we, as the general partner or managing member, exercise effective control. Accordingly, we consolidate various entities where we do not own 100% of the entity in accordance with the accounting consolidation principles. As a result, we are required to fair value the noncontrolling interests as part of our purchase price allocation. To calculate fair value, the Company used historical transactions which represented level 2 data points within the fair value hierarchy to calculate applicable multiples of each respective noncontrolling interest in the partnerships and LLCs.

The $153.4 million of goodwill was assigned to our Devices and Services segment, which was established in July 2010 pursuant to our acquisition of HealthTronics. The goodwill recognized is attributable primarily to strategic and synergistic opportunities across the HealthTronics network of urology partnerships, expected corporate synergies, the assembled workforce of HealthTronics and other factors. Approximately $33.6 million of goodwill is expected to be deductible for income tax purposes.

The deferred tax assets of $47.4 million are related primarily to federal net operating loss and credit carryforwards of HealthTronics and its subsidiaries. The deferred tax liabilities of $23.6 million are related primarily to the difference between the book basis and tax basis of identifiable intangible assets.

The Company recognized $21.4 million of HealthTronics acquisition-related costs that were expensed for the twelve months ended December 31, 2010. These costs are included in the line item entitled “Acquisition-related items” in the accompanying Consolidated Statements of Operations and are comprised of the following items (in thousands):

	Acquisition- related Costs
	Twelve Months Ended December 31, 2010
Investment bank fees, includes Endo and HealthTronics	$	2,017
Acceleration of outstanding HealthTronics stock-based compensation		7,924
Legal, separation, integration, and other costs		10,988
Total	$	20,929

The amounts of revenue and net loss of HealthTronics included in the Company’s Consolidated Statements of Operations from the HealthTronics Acquisition date to December 31, 2010 are as follows (in thousands, except per share data):

	Revenue and Losses included in the Consolidated Statements  of Operations from July 2, 2010 to December 31, 2010
Revenue	$	102,144
Net loss attributable to Endo Pharmaceuticals Holdings Inc.	$	(8,098	)
Basic and diluted loss per share	$	(0.07	)

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The following supplemental pro forma information presents the financial results as if the acquisition of HealthTronics had occurred on January 1, 2010 for the year ended December 31, 2010 and January 1, 2009 for the year ended December 31, 2009. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition been made on January 1, 2010 or January 1, 2009, nor are they indicative of any future results.

	Twelve Months Ended December 31,
	2010		2009
Pro forma consolidated results (in thousands, except per share data):
Revenue	$	1,814,918	$	1,646,171
Net income attributable to Endo Pharmaceuticals Holdings Inc	$	264,165	$	265,282
Basic earnings per share	$	2.27	$	2.27
Diluted earnings per share	$	2.24	$	2.26

These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of HealthTronics to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments primarily to property, plant and equipment, and intangible assets, had been applied on January 1, 2010 and 2009, as applicable, together with the consequential tax effects.

Penwest Acquisition. On September 20, 2010 (the Penwest Acquisition Date), the Company completed its tender offer for the outstanding shares of common stock of Penwest, at which time Penwest became a majority-owned subsidiary of the Company. On November 4, 2010, we closed this acquisition immediately following a special meeting of shareholders of Penwest at which they approved the merger. We paid approximately $171.8 million in aggregate cash consideration. Penwest is now our wholly-owned subsidiary.

This transaction contributes to Endo’s core pain management franchise and permits us to maximize the value of our oxymorphone franchise.

The operating results of Penwest from September 20, 2010 are included in the accompanying Consolidated Statements of Operations. The Consolidated Balance Sheet as of December 31, 2010 reflects the acquisition of Penwest, effective September 20, 2010, the date the Company obtained control of Penwest.

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The following table summarizes the fair values of the assets acquired and liabilities assumed at the Penwest Acquisition Date (in thousands):

	September 20, 2010 (As initially reported)			Measurement period adjustments			September 20, 2010 (As adjusted)
Cash and cash equivalents	$	22,343		$	—		$	22,343
Marketable securities		800			—			800
Accounts receivable		10,885			(19	)		10,866
Other receivables		132			(1	)		131
Inventories		396			11			407
Prepaid expenses and other current assets		716			(223	)		493
Deferred income taxes		27,175			3,003			30,178
Property and equipment		1,115			(200	)		915
Other intangible assets		111,200			—			111,200
Other assets		2,104			—			2,104
Total identifiable assets	$	176,866		$	2,571		$	179,437
Accounts payable	$	(229	)	$	—		$	(229	)
Income taxes payable		(347	)		187			(160	)
Penwest shareholder liability		(20,815	)		20,815			—
Accrued expenses		(1,455	)		(87	)		(1,542	)
Deferred income taxes		(39,951	)		(379	)		(40,330	)
Other liabilities		(4,403	)		(118	)		(4,521	)
Total liabilities assumed	$	(67,200	)	$	20,418		$	(46,782	)
Net identifiable assets acquired	$	109,666		$	22,989		$	132,655
Goodwill	$	37,952		$	1,159		$	39,111
Net assets acquired	$	147,618		$	24,148		$	171,766

The above estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the Penwest Acquisition Date to estimate the fair value of assets acquired and liabilities assumed. The Company believes that information provides a reasonable basis for estimating the fair values but the Company is waiting for additional information necessary to finalize those amounts, particularly with respect to intangible assets and deferred taxes. Thus, the provisional measurements of fair value reflected are subject to change. Such changes could be significant. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the Penwest Acquisition Date.

The valuation of the intangible assets acquired and related amortization periods are as follows (in millions):

	Valuation		Amortization Period (in years)
In Process Research & Development:
Otsuka	$	5.5		n/a
A0001		1.6		n/a
Total	$	7.1		n/a
Developed Technology:
Opana® ER	$	104.1		10
Total	$	104.1		10
Total other intangible assets	$	111.2		n/a

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The fair values of the other intangible assets were estimated using an income approach. Under this method, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. To calculate fair value, the Company used probability-weighted cash flows discounted at rates considered appropriate given the inherent risks associated with the asset. The Company believes that the level and timing of cash flows appropriately reflect market participant assumptions. Cash flows were assumed to extend through the patent life of our purchased technology.

The $39.1 million of goodwill was assigned to our Branded Pharmaceuticals segment. The goodwill recognized is attributable primarily to the control premium associated with our oxymorphone franchise and other factors. None of the goodwill is expected to be deductible for income tax purposes.

The deferred tax assets of $30.2 million are related primarily to federal net operating loss and credit carryforwards of Penwest. The deferred tax liabilities of $40.3 million are related primarily to the difference between the book basis and tax basis of the identifiable intangible assets.

The Company recognized $10.7 million of Penwest acquisition-related costs that were expensed for the twelve months ended December 31, 2010. These costs are included in the line item entitled “Acquisition-related items” in the accompanying Consolidated Statements of Operations and are comprised of the following items (in thousands):

	Acquisition-related Costs
	Twelve Months Ended December 31, 2010
Investment bank fees, includes Endo and Penwest	$	3,865
Legal, integration, and other costs		6,815
Total	$	10,680

Due to the pro forma impacts of eliminating the pre-existing intercompany royalties between Penwest and Endo, which were determined to be at fair value, we have not provided supplemental pro forma information as amounts are not material to the Consolidated Statements of Operations. We have also considered the impacts of Penwest, since the date we obtained a majority interest, on our Consolidated Statement of Operations and concluded amounts were not material.

Qualitest Acquisition.

On November 30, 2010 (the Qualitest Acquisition Date), Endo completed its acquisition of all of the issued and outstanding capital stock of Generics International (US Parent), Inc (Qualitest) from an affiliate of Apax Partners, L.P. (Apax) for approximately $769.4 million. In addition, Endo paid $406.8 million to retire Qualitest’s outstanding debt and related interest rate swap on November 30, 2010. In connection with the Qualitest acquisition, $108 million of the purchase price was placed into escrow. One of the escrow amounts is for $8 million and will be used to fund any working capital adjustments, as defined in the Qualitest Stock Purchase Agreement. We expect this escrow to be settled in 2011. There is also a $100 million escrow account that will be used to fund all claims arising out of or related to the Qualitest acquisition.

In connection with the $100 million escrow account, to the extent that we are able to realize tax benefits for costs that are funded by the escrow account, we will be required to share these tax benefits with Apax.

Qualitest is a manufacturer and distributor of generic drugs and over-the-counter pharmaceuticals throughout the United States. Qualitest’s product portfolio is comprised of 175 product families in various forms including tablets, capsules, creams, ointments, suppositories, and liquids. This acquisition will enable us to gain critical mass in our generics business while strengthening our pain portfolio through a larger breadth of product offerings.

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The operating results of Qualitest from November 30, 2010 to December 31, 2010 are included in the accompanying Consolidated Statements of Operations. The Consolidated Balance Sheet as of December 31, 2010 reflects the acquisition of Qualitest, effective November 30, 2010, the date the Company obtained control of Qualitest.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the Qualitest Acquisition Date (in thousands):

	November 30, 2010
Cash and cash equivalents	$	21,828
Accounts receivable		93,228
Other receivables		1,483
Inventories		95,000
Prepaid expenses and other current assets		2,023
Deferred income taxes		63,509
Property and equipment		135,807
Other intangible assets		843,000
Total identifiable assets	$	1,255,878
Accounts payable	$	(27,422	)
Accrued expenses		(55,210	)
Deferred income taxes		(207,733	)
Long-term debt		(406,758	)
Other liabilities		(9,370	)
Total liabilities assumed	$	(706,493	)
Net identifiable assets acquired	$	549,385
Goodwill	$	219,986
Net assets acquired	$	769,371

The above estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the Qualitest Acquisition Date to estimate the fair value of assets acquired and liabilities assumed. The Company believes that information provides a reasonable basis for estimating the fair values but the Company is waiting for additional information necessary to finalize those amounts. Thus, the provisional measurements of fair value reflected are subject to change. Such changes could be significant. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the Qualitest Acquisition Date.

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The valuation of the intangible assets acquired and related amortization periods are as follows:

	Valuation (in millions)		Amortization Period (in years)
Developed Technology:
Hydrocodone and acetaminophen	$	119.0		17
Oxycodone and acetaminophen		30.0		17
Promethazine		46.0		16
Isosorbide Mononitrate ER		42.0		16
Multi Vitamins		38.0		16
Trazodone		17.0		16
Butalbital, acetaminophen, and caffeine		25.0		16
Triprevifem		16.0		13
Spironolactone		13.0		17
Hydrocortisone		34.0		16
Hydrochlorothiazide		16.0		16
Controlled Substances		52.0		16
Oral Contraceptives		8.0		13
Others		162.0		17
Total	$	618.0		16
In Process Research & Development:
Generics portfolio with anticipated 2011 launch	$	63.0		n/a
Generics portfolio with anticipated 2012 launch		30.0		n/a
Generics portfolio with anticipated 2013 launch		17.0		n/a
Generics portfolio with anticipated 2014 launch		88.0		n/a
Total	$	198.0		n/a
Tradename:
Qualitest tradename	$	27.0		n/a
Total	$	27.0		n/a
Total other intangible assets	$	843.0		n/a

The fair value of the developed technology assets and in-process research and development assets were estimated using an income approach. Under this method, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. To calculate fair value, the Company used probability-weighted cash flows discounted at rates considered appropriate given the inherent risks associated with each type of asset. The Company believes that the level and timing of cash flows appropriately reflect market participant assumptions. Cash flows were assumed to extend through the patent life of the purchased technology. The fair value of the Qualitest Tradename was estimated using an income approach, specifically known as the relief from royalty method. The relief from royalty method is based on a hypothetical royalty stream that would be received if the Company were to license the Qualitest Tradename. Thus, we derived the hypothetical royalty income from the projected revenues of Qualitest.

The $220.0 million of goodwill was assigned to our Generics segment, which was established in November 2010 pursuant to our acquisition of Qualitest. The goodwill recognized is attributable primarily to expected purchasing, manufacturing and distribution synergies as well as their assembled workforce. Approximately $170.4 million of goodwill is expected to be deductible for income tax purposes.

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The deferred tax assets of $63.5 million are related primarily to federal and state net operating loss and credit carryforwards of Qualitest and its subsidiaries. The deferred tax liabilities of $207.7 million are related primarily to the difference between the book basis and tax basis of identifiable intangible assets.

The Company recognized $38.8 million of Qualitest acquisition-related costs that were expensed for the twelve months ended December 31, 2010. These costs are included in the line item entitled “Acquisition-related items” in the accompanying Consolidated Statements of Operations and are comprised of the following items (in thousands):

	Acquisition-related Costs
	Twelve Months Ended December 31, 2010
Investment bank fees, includes Endo and Qualitest	$	14,215
Legal, separation, integration, and other costs		24,572
Total	$	38,787

The amounts of revenue and net loss of Qualitest included in the Company’s Consolidated Statements of Operations from the Qualitest Acquisition date to December 31, 2010 are as follows (in thousands, except per share data):

	Revenue and Net Loss included in the Consolidated Statements  of Operations from November 30, 2010 to December 31, 2010
Revenue	$	30,323
Net loss attributable to Endo Pharmaceuticals Holdings Inc.	$	(3,056	)
Basic and diluted net loss per share	$	(0.03	)

The following supplemental pro forma information presents the financial results as if the acquisition of Qualitest had occurred on January 1, 2010 for the year ended December 31, 2010 and January 1, 2009 for the year ended December 31, 2009. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition been made on January 1, 2010 or January 1, 2009, nor are they indicative of any future results.

	Twelve Months Ended December 31,
	2010		2009
Pro forma consolidated results (in thousands, except per share data):
Revenue	$	2,038,761	$	1,767,873
Net income attributable to Endo Pharmaceuticals Holdings Inc	$	243,710	$	257,511
Basic earnings per share	$	2.10	$	2.20
Diluted earnings per share	$	2.07	$	2.19

These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Qualitest to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments primarily to property, plant and equipment, and intangible assets, had been applied on January 1, 2010 and 2009, as applicable, together with the consequential tax effects.

Convertible Senior Subordinated Notes due 2015. As discussed in Note 18 to the Consolidated Financial Statements in Part IV, Item 15 of this Report, in April 2008, we issued $379.5 million in aggregate principal

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amount of 1.75% Convertible Senior Subordinated Notes due April 15, 2015, which we refer to as the Convertible Notes, in a private offering for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

We received proceeds of approximately $370.7 million from the issuance, net of the initial purchaser’s discount and certain other costs of the offering. Interest is payable semi-annually in arrears on each April 15 and October 15 with the first interest payment having been made on October 15, 2008. The Convertible Notes will mature on April 15, 2015, unless earlier converted or repurchased by us.

Holders of the Convertible Notes may convert their notes based on a conversion rate of 34.2466 shares of our common stock per $1,000 principal amount of notes (the equivalent of $29.20 per share), subject to adjustment upon certain events, only under the following circumstances as described in the Indenture for the Convertible Notes (the Convertible Notes Indenture): (1) during specified periods, if the price of our common stock reaches specified thresholds; (2) if the trading price of the Convertible Notes is below a specified threshold; (3) at any time after October 15, 2014; or (4) upon the occurrence of certain corporate transactions. We will be permitted to deliver cash, shares of Endo common stock or a combination of cash and shares, at our election, to satisfy any future conversions of the Convertible Notes. It is our current intention to settle the principal amount of any conversion consideration in cash.

Non-recourse Notes. As discussed in Note 18 to the Consolidated Financial Statements in Part IV, Item 15 of this Report, on August 26, 2008, Indevus closed a private placement to institutional investors of $105.0 million in aggregate principal amount of 16% non-convertible, non-recourse, secured promissory notes due 2024 (Non-recourse notes). The Non-recourse notes were issued by Ledgemont Royalty Sub LLC (Royalty Sub), which was a wholly-owned subsidiary of Indevus at the time of the Non-recourse note issuance and subsequently became a wholly-owned subsidiary of the Company upon our acquisition of Indevus. As of the Indevus Acquisition Date, the Company recorded these notes at their fair value of approximately $115.2 million and began amortizing these notes to their face value of $105.0 million at maturity in 2024.

In August 2009, the Company commenced a cash tender offer for any and all outstanding Non-recourse notes. The purpose of the tender offer was to acquire any and all Non-recourse notes to reduce our consolidated interest expense. The tender offer included an early tender deadline, whereby holders of the Non-recourse notes could early tender and receive the total early consideration of $1,000 per $1,000 principal amount of the Non-recourse notes. Holders who tendered their Non-recourse notes after such time and at or prior to the expiration of the tender offer period were eligible to receive the tender offer consideration of $950 per $1,000 principal amount of Non-recourse notes, which was the total early consideration less the early tender payment. The tender offer expired on September 24, 2009, at 5:00 p.m., New York City time (the Expiration Time). As of the Expiration Time, $48 million of Non-recourse notes had been validly tendered and not withdrawn. The Company accepted for payment and purchased these Non-recourse notes at a purchase price of $1,000 per $1,000 principal amount, for a total amount of approximately $48 million (excluding accrued and unpaid interest up to, but not including, the payment date for the Non-recourse notes, fees and other expenses in connection with the tender offer). The aggregate principal amount of Non-recourse notes purchased represents approximately 46% of the $105 million aggregate principal amount of Non-recourse notes that were outstanding prior to the Expiration Time. Accordingly, the Company recorded a $4 million gain on the extinguishment of debt, net of transaction costs. The gain was calculated as the difference between the aggregate amount paid to purchase the Non-recourse notes and their carrying amount.

During the third quarter of 2010, Endo notified the holders of its intent to exercise its option to redeem the remaining $57 million of principal at 108% of the principal amount for approximately $62 million (amount excludes accrued and unpaid interest) on November 5, 2010. The notes were redeemed in November 2010.

Legal Proceedings. We are subject to various patent, product liability, government investigations and other legal proceedings in the ordinary course of business. Contingent accruals are recorded when we determine that a

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loss related to a litigation matter is both probable and reasonably estimable. Due to the fact that legal proceedings and other contingencies are inherently unpredictable, our assessments involve significant judgments regarding future events.

For a complete description of legal proceedings, see Note 14 of the Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Expected Cash Requirements for Contractual Obligations. The following table presents our expected cash requirements for contractual obligations for each of the following years subsequent to December 31, 2010 (in thousands):

	Payment Due by Period
Contractual Obligations	Total		2011		2012		2013		2014		2015		Thereafter
Lease obligations	$	43,811	$	12,623	$	8,116	$	7,124	$	6,773	$	3,480	$	5,695
Debt related payments(1)		1,549,119		75,079		80,734		85,886		89,682		677,351		540,387
Minimum purchase commitments to Novartis(2)		44,333		14,000		14,000		14,000		2,333		—		—
Minimum purchase commitments to Teikoku(3)		64,000		32,000		32,000		—		—		—		—
Minimum Voltaren® royalty obligations due to Novartis(4)		60,000		15,000		30,000		15,000		—		—		—
Minimum advertising and promotion spend(5)		6,909		6,909		—		—		—		—		—
Shire minimum payments(6)		1,500		1,500		—		—		—		—		—
Other obligations(7)		5,921		3,562		291		291		291		291		1,195
Total	$	1,775,593	$	160,673	$	165,141	$	122,301	$	99,079	$	681,122	$	547,277

(1) Includes minimum cash payments related to principal and interest, including commitment fees, associated with our 2010 Credit Facility, Senior Notes, Convertible Notes, and other indebtedness. Since future interest rates on our variable rate borrowings are unknown, for purposes of this contractual obligations table, amounts scheduled above were calculated using the contractual interest rate spread corresponding to our current leverage ratios.

(2) We are party to a long-term manufacturing and development agreement with Novartis Consumer Health, Inc. (Novartis) whereby Novartis has agreed to manufacture certain of our commercial products and products in development. We are required to purchase, on an annual basis or pro rata portion thereof, a minimum amount of product from Novartis until the termination of the agreement in February 2014. The purchase price per product is equal to a predetermined amount per unit, subject to periodic adjustments. Since future price changes are unknown, for purposes of this contractual obligations table, all amounts scheduled above represent the minimum purchase quantities at the price currently existing under the agreement with Novartis.

(3) On April 24, 2007, we amended our Supply and Manufacturing Agreement with Teikoku Seiyaku Co., Ltd. / Teikoku Pharma USA, Inc. (collectively, Teikoku) dated as of November 23, 1998, pursuant to which Teikoku manufactures and supplies Lidoderm^® (lidocaine patch 5%) (the Product) to Endo. This amendment is referred to as the Amended Agreement. Under the terms of the Amended Agreement, Endo has agreed to purchase a minimum number of Lidoderm^® patches per year through 2012, representing the noncancelable portion of the Amended Agreement. The minimum purchase requirement shall remain in effect subsequent to 2012, except that Endo has the right to terminate the Amended Agreement after 2012, if we fail to meet the annual minimum requirement. Teikoku has agreed to fix the supply price of Lidoderm^® for a specified period of time after which the price will be adjusted at future dates certain based on a price index defined in the Amended Agreement. Since future price changes are unknown, for purposes of this contractual obligations table, all amounts scheduled above represent the minimum patch quantities at the price currently existing under the Amended Agreement. Effective November 1, 2010, the parties amended

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the Amended Agreement. Pursuant to this amendment, Teikoku has agreed to supply additional Product at no cost to Endo in each of 2011, 2012 and 2013 in the event Endo’s firm orders of Product exceed certain thresholds in those years. We will update the Teikoku purchase commitments upon future price changes made in accordance with the Amended Agreement.

(4) Under the terms of the five-year Voltaren^® Gel Agreement, Endo made an up-front cash payment of $85 million. Endo has agreed to pay royalties to Novartis on annual Net Sales of the Licensed Product, subject to certain thresholds all as defined in the Voltaren^® Gel Agreement. In addition, Endo has agreed to make certain guaranteed minimum annual royalty payments beginning in the fourth year of the Voltaren^® Gel Agreement, subject to certain limitations as defined in the Voltaren^® Gel Agreement. These guaranteed minimum royalties will be creditable against royalty payments on a Voltaren^® Gel Agreement year basis such that Endo’s obligation with respect to each Voltaren^® Gel Agreement year is to pay the greater of (i) royalties payable based on annual net sales of the Licensed Product or (ii) the guaranteed minimum royalty for such Agreement year.

(5) Under the terms of the five-year Voltaren^® Gel Agreement, Endo has agreed to certain minimum advertising and promotional spending, subject to certain thresholds as defined in the Voltaren^® Gel Agreement. Subsequent to June 30, 2010, the minimum advertising and promotional spending are determined based on a percentage of net sales of the licensed product.

(6) In April 2008, Indevus entered into an agreement to terminate its manufacturing and supply agreement with Shire Pharmaceuticals Group plc (Shire) related to Vantas^®. Under this termination agreement, Shire relinquished its right to receive royalties on net sales of Vantas^® or a percentage of royalties and other consideration received in connection with a sublicense of Vantas^® selling and marketing rights granted by Shire. The termination agreement provided for Indevus to pay Shire a total of $5.0 million. The final payment to be made to Shire of $1.5 million was paid in January 2011.

(7) This amount is comprised of obligations assumed in connection with our acquisition of Penwest, including costs associated with Penwest’s collaborative discovery agreements and certain severance obligations.

In addition, we have agreed to certain contingent payments in certain of our acquisition, license, collaboration and other agreements. Payments under these agreements generally become due and payable only upon the achievement of certain developmental, regulatory, commercial and/or other milestones. Due to the fact that it is uncertain if and when these milestones will be achieved, such contingencies have not been recorded in our Consolidated Balance Sheet and are not reflected in the table above. In addition, under certain arrangements, we may have to make royalty payments based on a percentage of future sales of the products in the event regulatory approval for marketing is obtained. From a business perspective, we view these payments favorably as they signify that the products are moving successfully through the development phase toward commercialization.

As more fully described in Note 12 to the Consolidated Financial Statements in Part IV, Item 15 of this Report, on January 1, 2007, we adopted the provisions for accounting for uncertain tax provisions and recorded a $7.7 million non-current liability representing the Company’s unrecognized tax benefits with respect to our uncertain tax positions. As of December 31, 2010, our liability for unrecognized tax benefits amounted to $47.4 million (including interest and penalties). Due to the nature and timing of the ultimate outcome of these uncertain tax positions, we cannot make a reasonably reliable estimate of the amount and period of related future payments. Therefore, our liability has been excluded from the above contractual obligations table.

Fluctuations. Our quarterly results have fluctuated in the past, and may continue to fluctuate. These fluctuations may be due to the timing of new product launches, purchasing patterns of our customers, market acceptance of our products, the impact of competitive products and pricing, impairment of intangible assets, separation benefits, business combination transaction costs, upfront, milestone and certain other payments made or accrued pursuant to licensing agreements and changes in the fair value of financial instruments and contingent assets and liabilities recorded as part of a business combination. Further, a substantial portion of our net sales are through three wholesale drug distributors who in turn supply our products to pharmacies, hospitals and physicians. Accordingly, we are potentially subject to a concentration of credit risk with respect to our trade receivables.

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Growth Opportunities. We continue to evaluate growth opportunities including strategic investments, licensing arrangements, acquisitions of businesses, product rights or technologies, and strategic alliances and promotional arrangements which could require significant capital resources. We intend to continue to focus our business development activities on further diversifying our revenue base through product licensing and company acquisitions, as well as other opportunities to enhance stockholder value. Through execution of our business strategy we intend to focus on developing new products through both an internal and a virtual research and development organization with greater scientific and clinical capabilities; expanding the Company’s product line by acquiring new products and technologies in existing therapeutic and complementary areas; increasing revenues and earnings through sales and marketing programs for our innovative product offerings and effectively using the Company’s resources; and providing additional resources to support our generics business.

Non-U.S. Operations. We currently have no material operations outside of the United States. As a result, fluctuations in foreign currency exchange rates do not have a material effect on our financial statements.

Inflation. We do not believe that inflation had a material adverse effect on our financial statements for the periods presented.

Off-Balance Sheet Arrangements. We have no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

CRITICAL ACCOUNTING ESTIMATES

To understand our financial statements, it is important to understand our critical accounting estimates. The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are required in the determination of revenue recognition and sales deductions for estimated chargebacks, rebates, sales incentives and allowances, certain royalties, distribution service fees, returns and allowances. Significant estimates and assumptions are also required when determining the fair value of marketable securities and other financial instruments, the valuation of long-lived assets, income taxes, contingencies and stock-based compensation. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates. For any given individual estimate or assumption made by us, there may also be other estimates or assumptions that are reasonable. Although we believe that our estimates and assumptions are reasonable, they are based upon information available at the time the estimates and assumptions were made. Actual results may differ significantly from our estimates.

We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition results of operations or cash flows. Our most critical accounting estimates are described below:

Revenue recognition

Pharmaceutical products

Our pharmaceutical products revenues consist of revenues from sales of our products, less estimates for chargebacks, rebates, sales incentives and allowances, certain royalties, distribution service fees, returns and allowances. We recognize revenue for product sales when title and risk of loss has passed to the customer, which is typically upon delivery to the customer, when estimated provisions for chargebacks, rebates, sales incentives and allowances, certain royalties, distribution service fees, returns and allowances are reasonably determinable, and when collectability is reasonably assured. Revenue from the launch of a new or significantly unique product,

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for which we are unable to develop the requisite historical data on which to base estimates of returns and allowances, due to the uniqueness of the therapeutic area or delivery technology as compared to other products in our portfolio and in the industry, may be deferred until such time that an estimate can be determined and all of the conditions above are met and when the product has achieved market acceptance, which is typically based on dispensed prescription data and other information obtained during the period following launch.

Decisions made by wholesaler customers and large retail chain customers regarding the levels of inventory they hold (and thus the amount of product they purchase from us) can materially affect the level of our sales in any particular period and thus may not correlate to the number of prescriptions written for our products based on external third-party data. We believe that speculative buying of product, particularly in anticipation of possible price increases, has been the historic practice of many pharmaceutical wholesalers. Over the past three years, our wholesaler customers, as well as others in the industry, began modifying their business models from arrangements where they derive profits from price arbitrage, to arrangements where they charge a fee for their services. Accordingly, we have entered into Distribution Service Agreements (DSAs) with five of our wholesaler customers. These agreements, which pertain to branded products only, obligate the wholesalers to provide us with specific services, including the provision of periodic retail demand information and current inventory levels for our branded products held at their warehouse locations; additionally, under these DSAs, the wholesalers have agreed to manage the variability of their purchases and inventory levels within specified limits based on product demand.

Under the DSAs, we received information from our five wholesaler customers about the levels of inventory they held for our branded products as of December 31, 2010. Based on this information, which we have not independently verified, we believe that total branded inventory held at these wholesalers is within normal levels. In addition, we also evaluate market conditions for products primarily through the analysis of wholesaler and other third party sell-through and market research data, as well as internally-generated information.

Devices and services

Our devices and services revenues consist primarily of revenues from sales of our devices and services acquired from HealthTronics. Revenue is recognized for these sales based on the type of product or service sold, as follows:

• Fees for urology treatments. A substantial majority of our devices and services revenues are derived from fees related to lithotripsy treatments performed using our lithotripters. For lithotripsy and prostate treatment services, we, through our partnerships and other entities, facilitate the use of our equipment and provide other support services in connection with these treatments at hospitals and other health care facilities. The professional fee payable to the physician performing the procedure is generally billed and collected by the physician. We recognize revenue for these services when the services are provided. IGRT technical services are billed monthly and the related revenues are recognized as the related services are provided.

• Fees for managing the operation of our lithotripters and prostate treatment devices. Through our partnerships and otherwise directly by us, we provide services related to operating our lithotripters and prostate treatment equipment and receive a management fee for performing these services. We recognize revenue for these services as the services are provided.

• Fees for maintenance services. We provide equipment maintenance services to our partnerships as well as outside parties. These services are billed either on a time and material basis or at a fixed contractual rate, payable monthly, quarterly, or annually. Revenues from these services are recorded when the related maintenance services are performed.

• Fees for equipment sales, consumable sales and licensing applications. We manufacture and sell medical devices focused on minimally invasive technologies for tissue and tumor ablation through cryosurgery, and their related consumables. We also sell and maintain lithotripters and manufacture

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and sell consumables related to the lithotripters. We distribute the Revolix laser and consumables related to the laser. With respect to some lithotripter sales, in addition to the original sales price, we receive a licensing fee from the buyer of the lithotripter for each patient treated with such lithotripter. In exchange for this licensing fee, we provide the buyer of the lithotripter with certain consumables. All the sales for equipment and consumables are recognized when the related items are delivered. Revenues from licensing fees are recorded when the patient is treated. In some cases, we lease certain equipment to our partnerships as well as third parties. Revenues from these leases are recognized on a monthly basis or as procedures are performed.

• Fees for anatomical pathology services. We provide anatomical pathology services primarily to the urology community. Revenues from these services are recorded when the related laboratory procedures are performed.

Sales deductions

When we recognize revenue from the sale of our products, we simultaneously record an adjustment to revenue for estimated chargebacks, rebates, sales incentives and allowances, certain royalties, DSA fees, returns and allowances. These provisions, as described in greater detail below, are estimated based on historical experience, estimated future trends, estimated customer inventory levels, current contract sales terms with our wholesale and indirect customers and other competitive factors. If the assumptions we used to calculate these adjustments do not appropriately reflect future activity, our financial position, results of operations and cash flows could be materially impacted.

The following table presents the activity and ending balances for our product sales provisions for the last three years (in thousands):

	Returns and Allowances			Rebates			Chargebacks			Other Sales Deductions			Total
Balance at January 1, 2008	$	31,198		$	81,233		$	34,575		$	5,157		$	152,163
Current year provision		15,596			291,580			345,378			40,641			693,195
Prior year provision		200			(5,763	)		(948	)		—			(6,511	)
Payments or credits		(8,012	)		(262,383	)		(343,023	)		(40,656	)		(654,074	)
Balance at December 31, 2008	$	38,982		$	104,667		$	35,982		$	5,142		$	184,773
Current year provision		20,220			396,599			495,721			49,368			961,908
Prior year provision		(1,287	)		(5,749	)		1,164			—			(5,872	)
Payments or credits		(9,641	)		(371,074	)		(480,963	)		(48,450	)		(910,128	)
Balance at December 31, 2009	$	48,274		$	124,443		$	51,904		$	6,060		$	230,681
Additions related to acquisitions		11,000			11,175			9,703			7,833			39,711
Current year provision		20,019			632,034			519,537			54,969			1,226,559
Prior year provision		(2,520	)		(1,791	)		21			—			(4,290	)
Payments or credits		(11,752	)		(562,636	)		(493,345	)		(53,542	)		(1,121,275	)
Balance at December 31, 2010	$	65,021		$	203,225		$	87,820		$	15,320		$	371,386

Returns and Allowances

Our provision for returns and allowances consists of our estimates of future product returns, pricing adjustments and delivery errors. Consistent with industry practice, we maintain a return policy that allows our customers to return product within a specified period of time both prior and subsequent to the product’s

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expiration date. Our return policy allows customers to receive credit for expired products within six months prior to expiration and within one year after expiration. The primary factors we consider in estimating our potential product returns include:

• the shelf life or expiration date of each product;

• historical levels of expired product returns;

• external data with respect to inventory levels in the wholesale distribution channel;

• external data with respect to prescription demand for our products; and

• estimated returns liability to be processed by year of sale based on analysis of lot information related to actual historical returns.

In determining our estimates for returns and allowances, we are required to make certain assumptions regarding the timing of the introduction of new products and the potential of these products to capture market share. In addition, we make certain assumptions with respect to the extent and pattern of decline associated with generic competition. To make these assessments we utilize market data for similar products as analogs for our estimations. We use our best judgment to formulate these assumptions based on past experience and information available to us at the time. We continually reassess and make the appropriate changes to our estimates and assumptions as new information becomes available to us.

Our estimate for returns and allowances may be impacted by a number of factors, but the principal factor relates to the level of inventory in the distribution channel. When we are aware of an increase in the level of inventory of our products in the distribution channel, we consider the reasons for the increase to determine if the increase may be temporary or other-than-temporary. Increases in inventory levels assessed as temporary will not result in an adjustment to our provision for returns and allowances. Other-than-temporary increases in inventory levels, however, may be an indication that future product returns could be higher than originally anticipated and, accordingly, we may need to adjust our estimate for returns and allowances. Some of the factors that may be an indication that an increase in inventory levels will be temporary include:

• recently implemented or announced price increases for our products; and

• new product launches or expanded indications for our existing products.

Conversely, factors that may be an indication that an increase in inventory levels will be other-than-temporary include:

• declining sales trends based on prescription demand;

• recent regulatory approvals to extend the shelf life of our products, which could result in a period of higher returns related to older product with the shorter shelf life;

• introduction of new product or generic competition;

• increasing price competition from generic competitors; and

• recent changes to the National Drug Codes (NDCs) of our products, which could result in a period of higher returns related to product with the old NDC, as our customers generally permit only one NDC per product for identification and tracking within their inventory systems.

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Rebates

We establish contracts with wholesalers, chain stores and indirect customers that provide for rebates, sales incentives, DSA fees, and other allowances. Some customers receive rebates upon attaining established sales volumes. We estimate rebates, sales incentives and other allowances based upon the terms of the contracts with our customers, historical experience, estimated inventory levels of our customers and estimated future trends. Our rebate programs can generally be categorized into the following four types:

• direct rebates;

• indirect rebates;

• managed care rebates; and

• Medicaid and Medicare Part D rebates.

Direct rebates are generally rebates paid to direct purchasing customers based on a percentage applied to a direct customer’s purchases from us, including DSA fees paid to wholesalers under our DSA agreements, as described above. Indirect rebates are rebates paid to “indirect customers” which have purchased our products from a wholesaler under a contract with us.

We are subject to rebates on sales made under governmental and managed-care pricing programs. In estimating our provisions for these types of rebates, we consider relevant statutes with respect to governmental pricing programs and contractual sales terms with managed-care providers and group purchasing organizations. We estimate an accrual for managed-care, Medicaid and Medicare Part D rebates as a reduction of revenue at the time product sales are recorded. These rebate reserves are estimated based upon the historical utilization levels, historical payment experience, historical relationship to revenues and estimated future trends. Changes in the level of utilization of our products through private or public benefit plans and group purchasing organizations will affect the amount of rebates that we owe.

We participate in state government-managed Medicaid programs, as well as certain other qualifying federal and state government programs whereby discounts and rebates are provided to participating government entities. Medicaid rebates are amounts owed based upon contractual agreements or legal requirements with public sector (Medicaid) benefit providers, after the final dispensing of the product by a pharmacy to a benefit plan participant. Medicaid reserves are based on expected payments, which are driven by patient usage, contract performance, as well as field inventory that will be subject to a Medicaid rebate. Medicaid rebates are typically billed up to 180 days after the product is shipped, but can be as much as 270 days after the quarter in which the product is dispensed to the Medicaid participant. As a result, our Medicaid rebate provision includes an estimate of outstanding claims for end-customer sales that occurred but for which the related claim has not been billed, and an estimate for future claims that will be made when inventory in the distribution channel is sold through to plan participants. Our calculation also requires other estimates, such as estimates of sales mix, to determine which sales are subject to rebates and the amount of such rebates. Periodically, we adjust the Medicaid rebate provision based on actual claims paid. Due to the delay in billing, adjustments to actual claims paid may incorporate revisions of this provision for several periods. Medicaid pricing programs involve particularly difficult interpretations of statutes and regulatory guidance, which are complex and thus our estimates could differ from actual experience.

We continually update these factors based on new contractual or statutory requirements, and significant changes in sales trends that may impact the percentage of our products subject to rebates.

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Chargebacks

The provision for chargebacks is one of the most significant and the most complex estimate used in the recognition of our revenue. We market and sell products directly to wholesalers, distributors, warehousing pharmacy chains, and other direct purchasing groups. We also market products indirectly to independent pharmacies, non-warehousing chains, managed care organizations, and group purchasing organizations, collectively referred to as “indirect customers.” We enter into agreements with some indirect customers to establish contract pricing for certain products. These indirect customers then independently select a wholesaler from which to purchase the products at these contracted prices. Alternatively, we may pre-authorize wholesalers to offer specified contract pricing to other indirect customers. Under either arrangement, we provide credit to the wholesaler for any difference between the contracted price with the indirect customer and the wholesaler’s invoice price. Such credit is called a chargeback. The primary factors we consider in developing and evaluating our provision for chargebacks include:

• the average historical chargeback credits;

• estimated future sales trends; and

• an estimate of the inventory held by our wholesalers, based on internal analysis of a wholesaler’s historical purchases and contract sales.

Other sales deductions

We offer our customers 2.0% prompt pay cash discounts. Provisions for prompt pay discounts are estimated and recorded at the time of sale. We estimate provisions for cash discounts based on contractual sales terms with customers, an analysis of unpaid invoices and historical payment experience. Estimated cash discounts have historically been predictable and less subjective, due to the limited number of assumptions involved, the consistency of historical experience and the fact that we generally settle these amounts within thirty to sixty days.

Shelf-stock adjustments are credits issued to our customers to reflect decreases in the selling prices of our products. These credits are customary in the industry and are intended to reduce a customer’s inventory cost to better reflect current market prices. The determination to grant a shelf-stock credit to a customer following a price decrease is at our discretion rather than contractually required. The primary factors we consider when deciding whether to record a reserve for a shelf-stock adjustment include:

• the estimated number of competing products being launched as well as the expected launch date, which we determine based on market intelligence;

• the estimated decline in the market price of our product, which we determine based on historical experience and input from customers; and

• the estimated levels of inventory held by our customers at the time of the anticipated decrease in market price, which we determine based upon historical experience and customer input.

Valuation of long-lived assets

Long-lived assets, including property, plant and equipment, licenses, developed technology, and patents are assessed for impairment, whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Recoverability of assets that will continue to be used in our operations is measured by comparing the carrying amount of the asset to the forecasted undiscounted future cash flows of the product. In the event the carrying value of the asset exceeds the undiscounted future cash flows of the product and the carrying value is not considered recoverable, impairment exists. An impairment loss is measured as the excess of the asset’s carrying value over its fair value, generally based on a discounted future cash flow method, independent appraisals or preliminary offers from prospective buyers. An impairment loss would be recognized in net income in the period that the impairment occurs. As a result of the significance of our amortizable intangibles, any recognized impairment loss could have a material adverse impact on our financial position and/or results of operations.

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Events giving rise to impairment are an inherent risk in the pharmaceutical industry and cannot be predicted. Factors that we consider in deciding when to perform an impairment review include significant under-performance of a product line in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in our use of the assets.

During 2010 and 2009, we did not recognize an impairment charge as a result of our review of long-lived assets.

During the year ended December 31, 2008, as a result of our decision to discontinue the development of Rapinyl^TM, we recorded an impairment charge of $8.1 million related to the remaining unamortized portion of our Rapinyl^TM intangible asset, and $3.1 million to write off certain other assets related to the development of Rapinyl^TM. In addition, during the year ended December 31, 2008, we recorded impairment charges totaling $1.5 million related to the abandonment of certain long-lived assets.

The cost of licenses are either expensed immediately or, if capitalized, are stated at cost, less accumulated amortization and are amortized using the straight-line method over their estimated useful lives ranging from two to twenty years, with a weighted average useful life of approximately 10 years. We determine amortization periods for licenses based on our assessment of various factors impacting estimated useful lives and cash flows of the acquired rights. Such factors include the expected launch date of the product, the strength of the intellectual property protection of the product and various other competitive, developmental and regulatory issues, and contractual terms. Significant changes to any of these factors may result in a reduction in the useful life of the license and an acceleration of related amortization expense, which could cause our operating income, net income and earnings per share to decrease. The value of these licenses is subject to continuing scientific, medical and marketplace uncertainty.

Acquired developed technology is recorded at fair value upon acquisition and amortized using estimated useful lives ranging from ten to twenty years, with a weighted average useful life of approximately 15 years. We determine amortization periods for developed technology based on our assessment of various factors impacting estimated useful lives and cash flows of the acquired assets. Such factors include the strength of the intellectual property protection of the product and various other competitive and regulatory issues, and contractual terms. Significant changes to any of these factors may result in a reduction in the useful life of the asset and an acceleration of related amortization expense, which could cause our operating income, net income and earnings per share to decrease. The value of these assets is subject to continuing scientific, medical and marketplace uncertainty.

Goodwill and indefinite-lived intangible assets

Endo tests goodwill and indefinite-lived intangible assets for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Our annual assessment is performed as of January 1^st . The goodwill test consists of a Step I analysis that requires a comparison between the respective reporting unit’s fair value and carrying value. A Step II analysis would be required if the fair value of the reporting unit is lower than its carrying value. If the fair value of the reporting unit exceeds its carrying value, an impairment does not exist and no further analysis is required. The indefinite-lived intangible asset impairment test consists of a one step analysis that compares the fair value of the intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. Although the Company has three operating segments, Branded Pharmaceuticals, Generics, and Devices and Services, we have determined that the Company has six reporting units; (1) Pain, (2) Generics, (3) Urology, Endocrinology and Oncology (UEO), (4) Anatomical Pathology Services, (5) Urology Services, and (6) Radiation Therapy.

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As of January 1, 2011, our annual assessment date, we completed our annual recoverability review. The results of our analyses showed that the fair value of each of our reporting units significantly exceeded their respective carrying values, except for the Urology Services reporting unit, since this was recently acquired in July 2010 as part of the Healthtronics acquisition, and thus no goodwill impairment exists.

Based upon recent market conditions, and a lack of comparable market transactions for similar assets, Endo determined that an income approach using a discounted cash flow model was an appropriate valuation methodology to determine each reporting units’ fair value. The income approach converts future amounts to a single present value amount (discounted cash flow model). Our discounted cash flow models are highly reliant on various assumptions, including estimates of future cash flow (including long-term growth rates), discount rate, and expectations about variations in the amount and timing of cash flows and the probability of achieving the estimated cash flows. We believe we have appropriately reflected our best estimates of the assumptions that market participants would use in determining the fair value of our reporting units at the measurement dates.

In December 2009, the Company’s Phase III clinical trials for Pro2000 provided conclusive results that the drug was not effective. In December 2009, the Company concluded there was no further value or alternative future uses associated with this indefinite-lived asset. Accordingly, we recorded a $4.0 million pre-tax impairment charge to write-off the Pro2000 intangible asset in its entirety. Additionally, as a result of the FDA’s Complete Response letter related to our NDA for Aveed^TM, the Company performed an impairment review as of December 2, 2009 for the Aveed^TM indefinite-lived intangible asset.

Although the Company is continuing to evaluate the FDA’s findings to better understand the agency’s concerns, we were required to estimate the fair value of our Aveed^TM indefinite-lived intangible asset as of the date we received the Complete Response letter. To estimate fair value we assessed the possible changes to the product’s indication and targeted population of eligible recipients, the future probability of regulatory approval, relative timing of commercialization, and estimates of the amount and timing of future cash flows. In January 2010, the Company was notified that the U.S. patent office had issued a Notice of Allowance on a patent covering the Aveed^TM formulation. Therefore, management considered the likely benefit of patent exclusivity when estimating these future cash flows. To calculate the fair value of the Aveed^TM intangible asset, the Company used an income approach using a discounted cash flow model considering management’s current evaluation of the above mentioned factors. The Company utilized probability-weighted cash flow models using a present value discount factor of 15% which we believe to be commensurate with the overall risk associated with this particular product. The cash flow models included our best estimates of future FDA approval associated with each potential indication and population of eligible recipients. The Company believes that the level and timing of cash flows assumed, discount rate, and probabilities of success appropriately reflect market participant assumptions.

The fair value of the Aveed^TM intangible asset was determined to be $35 million. Accordingly, the Company recorded a pre-tax non-cash impairment charge of $65 million for the year ended December 31, 2009, representing the difference between the carrying value of the intangible asset and its estimated fair value. The impairment charge has been recognized in earnings and is included the Impairment of other intangible assets line item in the Consolidated Statements of Operations. We believe the most subjective assumption in our discounted cash flow model is the probability of regulatory approval. Assessing the probability of achieving the estimated cash flows is challenging particularly as it relates to in-process research and development assets. These probabilities have a material impact on the ultimate fair value of the asset as the probability of regulatory approval is applied directly to our future revenue projections. Although we believe our probabilities of success used in our fair value determination are reasonable, changes in these assumptions would impact the impairment charge as follows: A 500 basis point change in the overall probability of approval would have resulted in a change to the impairment charge of approximately $5 million.

In 2010, we met with the FDA to discuss the existing clinical data provided to the FDA as well as the potential path-forward. The Company is continuing to evaluate how best to address the concerns of the FDA and

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intends to have future dialogue with the agency regarding a possible regulatory pathway. The outcome of future communications with the FDA could have a material impact on (1) management’s assessment of the overall probability of approval, (2) the timing of such approval, (3) the targeted indication or patient population and (4) the likelihood of additional clinical trials. Changes in any of these assumptions may result in a further reduction to the estimated fair value of the Aveed^TM intangible asset resulting in additional and potentially full future impairment charges. Such additional impairment charges could materially impact our results of operations in future periods.

In May 2010, Teva Pharmaceutical Industries Ltd. terminated the pagoclone development and licensing arrangement with the Company upon the completion of the Phase IIb study. As a result, the Company concluded that there was a decline in the fair value of the corresponding indefinite-lived intangible asset. Accordingly, we recorded a $13.0 million impairment charge during the year ended December 31, 2010.

As part of our annual review of all in-process research and development assets, we conducted an in-depth review of both octreotide indications. This review covered a number of factors including the market potential of each product given its stage of development, taking into account, among other things, issues of safety and efficacy, product profile, competitiveness of the marketplace, the proprietary position of the product and its potential profitability. Our review resulted in no impact to the carrying value of our octreotide – acromegaly intangible asset. However, the analysis identified certain commercial challenges with respect to the octreotide – carcinoid syndrome intangible asset including the expected rate of physician acceptance and the expected rate of existing patients willing to switch therapies. Upon analyzing the Company’s R&D priorities, available resources for current and future projects, and the commercial potential for octreotide – carcinoid syndrome, the Company has decided to discontinue development of octreotide for the treatment of carcinoid syndrome. As a result of the above developments, the Company recorded a pre-tax non-cash impairment charge of $22.0 million for the year ended December 31, 2010, to write-off, in its entirety, the octreotide – carcinoid syndrome intangible asset.

Acquisition-related in-process research and development and contingent consideration

Effective January 1, 2009, acquired businesses are accounted for using the acquisition method of accounting, which requires that the purchase price be allocated to the net assets acquired at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Amounts allocated to acquired in-process research and development (IPR&D) and contingent consideration are recorded to the balance sheet at the date of acquisition based on their relative fair values. The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of operations.

There are several methods that can be used to determine the fair value of assets acquired and liabilities assumed. For intangible assets, including IPR&D, we typically use the “income method.” This method starts with our forecast of all of the expected future net cash flows. These cash flows are then adjusted to present value by applying an appropriate discount rate that reflects the risk factors associated with the cash flow streams. Some of the more significant estimates and assumptions inherent in the income method or other methods include: the amount and timing of projected future cash flows; the amount and timing of projected costs to develop the IPR&D into commercially viable products; the discount rate selected to measure the risks inherent in the future cash flows; and the assessment of the asset’s life cycle and the competitive trends impacting the asset, including consideration of any technical, legal, regulatory, or economic barriers to entry, as well as expected changes in standards of practice for indications addressed by the asset.

Determining the useful life of an intangible asset also requires judgment, as different types of intangible assets will have different useful lives. Acquired IPR&D is designated as an indefinite-lived intangible asset until the associated research and development activities are completed or abandoned.

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We account for contingent consideration in accordance with applicable guidance provided within the business combination rules. As part of our consideration for the Indevus and Qualitest acquisitions, we are contractually obligated to pay certain consideration resulting from the outcome of future events. Therefore, we are required to update our assumptions each reporting period, based on new developments, and record such amounts at fair value until such consideration is satisfied.

Indevus

The contingent consideration relates to the amounts payable under the Aveed^TM Contingent Cash Consideration Agreement and the Octreotide Contingent Cash Consideration Agreement. In the event that the Company receives an approval letter from the FDA with respect to the Aveed^TM NDA on or before the third anniversary of the time at which we purchased the Indevus Shares in the Offer, then the Company will, subject to the terms described below, (i) pay an additional $2.00 per Indevus Share to the former stockholders of Indevus, if such approval letter grants the right to market and sell Aveed^TM immediately and provides labeling for Aveed^TM that does not contain a “boxed warning” (Aveed^TM With Label) or alternatively, (ii) pay an additional $1.00 per Indevus Share, if such approval letter grants the right to market and sell Aveed^TM immediately and provides labeling for Aveed^TM that contains a “boxed warning” (Aveed^TM Without Label). In the event that either an Aveed^TM With Label approval or an Aveed^TM Without Label approval has not been obtained prior to the third anniversary of the closing of the Offer, then the Company will not pay, and the former Indevus stockholders will not receive, any payments under the Aveed^TM Contingent Cash Consideration Agreement.

Further, in the event that the Aveed^TM Without Label approval is received and subsequently, Endo and its subsidiaries publicly report audited financial statements which reflect cumulative net sales of Aveed^TM of at least $125.0 million for four consecutive calendar quarters on or prior to the fifth anniversary of the date of the first commercial sale of Aveed^TM (Aveed^TM Net Sales Event), then the Company will, subject to the terms described below, pay an additional $1.00 per Indevus Share to the former stockholders of Indevus. In the event that the Aveed^TM Net Sales Event does not occur prior to the fifth anniversary of the date of the first commercial sale of Aveed^TM then the Company will not pay, and former Indevus stockholders will not receive, any additional amounts under the Aveed^TM Contingent Cash Consideration Agreement.

The range of the undiscounted amounts the Company could pay under the Aveed^TM Contingent Cash Consideration Agreement is between $0 and approximately $175.0 million. The fair value of the contractual obligation to pay the Aveed^TM contingent consideration recognized on the Indevus Acquisition Date was $133.1 million. We determined the fair value of the obligation to pay the Aveed^TM contingent consideration based on a probability-weighted income approach. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. Under the Aveed^TM Contingent Cash Consideration Agreement, there are three scenarios that could potentially lead to amounts being paid to the former stockholders of Indevus. These scenarios are (1) obtaining an Aveed^TM With Label approval, (2) obtaining an Aveed^TM Without Label approval and (3) achieving the $125.0 million sales milestone on or prior to the fifth anniversary of the date of the first commercial sale of Aveed^TM should the Aveed^TM Without Label approval be obtained. The fourth scenario is Aveed^TM not receiving approval within three years of the closing of the Offer, which would result in no payment to the former stockholders of Indevus. Each scenario was assigned a probability based on the current regulatory status of Aveed^TM. The resultant probability-weighted cash flows were then discounted using a discount rate of U.S. Prime plus 300 basis points, which the Company believes is appropriate and is representative of a market participant assumption. The fair value of the contractual obligation to pay the Aveed^TM contingent consideration was $7.1 million and $7.5 million at December 31, 2010 and December 31, 2009, respectively. Future changes in any of our assumptions could result in further volatility to the estimated fair value of the acquisition-related contingent consideration. Such additional changes to fair value could materially impact our results of operations in future periods.

Similarly, in the event that an approval letter from the FDA is received with respect to an octreotide NDA, which we refer to as the Octreotide Approval, on or before the fourth anniversary of the closing of the Offer, then

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the Company will, subject to the terms described below, pay an additional $1.00 per Indevus Share to the former stockholders of Indevus (such payment, the Octreotide Contingent Cash Consideration Payment). In the event that an Octreotide Approval has not been obtained prior to the fourth anniversary of the closing of the Offer, then the Company will not pay, and the former Indevus stockholders shall not receive, the Octreotide Contingent Cash Consideration Payment.

The range of the undiscounted amounts the Company could pay under the Octreotide Contingent Cash Consideration Agreement is between $0 and approximately $91.0 million. The fair value of the octreotide contractual obligation to pay the contingent consideration recognized on the Indevus Acquisition Date was $39.8 million. We determined the fair value of the contractual obligation to pay the Octreotide Contingent Consideration Payment based on a probability-weighted income approach. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. Under the Octreotide Contingent Cash Consideration Agreement, the two scenarios that require consideration are (1) Octreotide Approval on or before the fourth anniversary of the closing of the Offer or (2) no Octreotide Approval on or before the fourth anniversary of the closing of the Offer. Each scenario was assigned a probability based on the current development stage of octreotide. The resultant probability-weighted cash flows were then discounted using a discount rate of U.S. Prime plus 300 basis points, which the Company believes is appropriate and is representative of a market participant assumption. The fair value of the contractual obligation to pay the octreotide contingent consideration was determined to be $0 at December 31, 2010 compared to $42.5 million at December 31, 2009. Future changes in any of our assumptions could result in further volatility to the estimated fair value of the acquisition-related contingent consideration. Such additional changes to fair value could materially impact our results of operations in future periods.

In addition to the potential contingent payments under the Aveed^TM Contingent Cash Consideration Agreement and the Octreotide Contingent Cash Consideration Agreement, the Company has assumed a pre-existing contingent consideration obligation relating to Indevus’ acquisition of Valera Pharmaceuticals, Inc. (the Valera Contingent Consideration), which was consummated on April 18, 2007. The Valera Contingent Consideration entitles former Valera shareholders to receive additional Indevus Shares based on an agreed upon conversion factor if FDA approval of the octreotide implant for the treatment for acromegaly is achieved on or before April 18, 2012. Upon Endo’s acquisition of Indevus, each Valera shareholder’s right to receive additional Indevus Shares was converted into the right to receive $4.50 per Indevus Share that such former Valera shareholder would have received plus contractual rights to receive up to an additional $3.00 per Indevus Share that such former Valera shareholder would have received in contingent cash consideration payments under the Aveed^TM Contingent Cash Consideration Agreement and the Octreotide Contingent Cash Consideration Agreement. These amounts would only be payable to former Valera shareholders if there were Octreotide Approval. The range of the undiscounted amounts the Company could pay with respect to the Valera Contingent Consideration is between $0 and approximately $33.0 million.

The Company is accounting for the Valera Contingent Consideration in the same manner as if it had entered into that arrangement with respect to its acquisition of Indevus. Accordingly, the fair value of the Valera Contingent Consideration recognized on the Indevus Acquisition Date was $13.7 million. Fair value was estimated based on a probability-weighted discounted cash flow model, or income approach. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the Valera Contingent Consideration is estimated using the same assumptions used for the Aveed^TM Contingent Cash Consideration Agreement and Octreotide Contingent Cash Consideration Agreement, except that the probabilities associated with the Valera Contingent Consideration take into account the probability of obtaining the Octreotide Approval on or before the fourth anniversary of the closing of the Offer. This is due to the fact that the Valera Contingent Consideration will not be paid unless octreotide for the treatment of acromegaly is approved prior to April 18, 2012. The fair value of the contractual obligation to pay the Valera Contingent Consideration was determined to be $0 at December 31, 2010 compared to $8.5 million at December 31, 2009. Future changes in any of our assumptions could result in further volatility to the estimated fair value of the acquisition-related contingent consideration. Such additional changes to fair value could materially impact our results of operations in future periods.

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As of December 31, 2010, the fair value of the Indevus acquisition-related contingent consideration decreased by approximately $51.4 million from December 31, 2009, primarily due to management’s current assessment that it will not be obligated to make contingent consideration payments based on the anticipated timeline for the NDA filing and FDA approval of octreotide for the treatment of acromegaly. The decrease in the liability was recorded as a gain and is included in the Acquisition-related items line item in the accompanying Consolidated Statements of Operations.

As of December 31, 2009, the fair value of the Indevus acquisition-related contingent consideration decreased by approximately $128.1 million from the acquisition date, primarily reflecting management’s assessment of the decreased probability that we will be obligated to make contingent consideration payments under the Aveed^TM Contingent Cash Consideration Agreement within the specified contractual timeframe, as well as the anticipated timeline for the NDA filing and FDA approval of octreotide. The decrease in the liability was recorded as a gain and is included in the Acquisition-related items line item in the accompanying Consolidated Statements of Operations.

Qualitest

On November 30, 2010 (the Qualitest Acquisition Date), Endo acquired Qualitest, who was party to an asset purchase agreement with Teva Pharmaceutical Industries Ltd (Teva) (the Teva Agreement). Pursuant to this agreement, Qualitest purchased certain pipeline generic products from Teva and could be obligated to pay consideration to Teva upon the achievement of certain future regulatory milestones (the Teva Contingent Consideration). As of December 31, 2010, the range of the undiscounted amounts the Company could pay with respect to the Teva Contingent Consideration is between $0 and $12.5 million.

The Company is accounting for the Teva Contingent Consideration in the same manner as if it had entered into that arrangement with respect to its acquisition of Qualitest. Accordingly, the fair value of the Teva Contingent Consideration recognized on the Qualitest Acquisition Date was $9.0 million. Fair value was estimated based on a probability-weighted discounted cash flow model, or income approach. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contractual obligation to pay contingent consideration was $9.0 million at December 31, 2010. Future changes in any of our assumptions could result in further volatility to the estimated fair value of the acquisition-related contingent consideration. Such additional changes to fair value could impact our results of operations in future periods.

Income taxes

Provisions for income taxes are calculated on reported pre-tax income based on current tax laws, statutory tax rates and available tax incentives and planning opportunities in various jurisdictions in which we operate. Such provisions differ from the amounts currently receivable or payable because certain items of income and expense are recognized in different time periods for financial reporting purposes than for income tax purposes. We recognize deferred taxes by the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for differences between the financial statement and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. Significant judgment is required in determining income tax provisions and evaluating tax positions. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The factors used to assess the likelihood of realization are the Company’s forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. Failure to achieve forecasted taxable income in applicable tax jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in the Company’s effective tax rate on future earnings.

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At December 31, 2010, we had $399.7 million of gross deferred tax assets, which included federal and state net operating loss carryforwards (NOLs) of approximately $209.6 million, research and development (R&D) credit carryforwards of $15.4 million, capital loss carryforwards of $16.9 million and temporary differences of approximately $157.8 million. At December 31, 2010, our NOLs and R&D credit carryforwards were related to multiple tax jurisdictions, including federal and various state jurisdictions, which expire at intervals between 2011 and 2029. We evaluate the potential realization of our deferred tax benefits on a jurisdiction-by-jurisdiction basis. Our analysis of the realization considers the probability of generating taxable income or other sources of income as defined within the applicable income tax authoritative guidance, which could be utilized to support the assets over the permitted carryforward period in each jurisdiction. Where we have determined under the more likely than not standard that we do not have a better-than-50% probability of realization, we establish a valuation allowance against that portion of the deferred tax asset where our analysis and judgment indicates a less-than-50% probability of realization. Based on our forecasted taxable income within these jurisdictions, we believe we will generate sufficient future taxable income to realize a significant portion of our deferred tax assets associated with our NOLs and R&D credit carryfowards. However, the Company does not anticipate future capital gains that would be required to obtain the tax benefit of our net unrealized capital loss. Accordingly, this deferred tax asset is offset by a valuation allowance of $16.9 million at December 31, 2010. In addition, due to our historical losses in certain state jurisdictions and the absence of sources of income, we have established a $9.0 valuation allowance for our state NOL carryforwards.

On a periodic basis, we evaluate the realizability of our deferred tax assets and liabilities and will adjust such amounts in light of changing facts and circumstances, including but not limited to future projections of taxable income, tax legislation, rulings by relevant tax authorities, tax planning strategies and the progress of ongoing tax audits. Settlement of filing positions that may be challenged by tax authorities could impact the income tax position in the year of resolution.

On January 1, 2007, the Company adopted the provisions for accounting for uncertain tax positions. The provisions apply to all material tax positions in all taxing jurisdictions for all open tax years. The guidance establishes a two-step process for evaluating tax positions. Step 1 – Recognition, requires the Company to determine whether a tax position, based solely on its technical merits, has a likelihood of more than 50 percent (more-likely-than-not) that the tax position taken will be sustained upon examination. Step 2 – Measurement, which is only addressed if Step 1 has been satisfied, requires the Company to measure the tax benefit as the largest amount of benefit, determined on a cumulative probability basis that is more-likely-than-not to be realized upon ultimate settlement.

Contingencies

The Company is subject to various patent, product liability, government investigations and other legal proceedings in the ordinary course of business. Legal fees and other expenses related to litigation are expensed as incurred and included in selling, general and administrative expenses. Contingent accruals are recorded when the Company determines that a loss related to a litigation matter is both probable and reasonably estimable. Due to the fact that legal proceedings and other contingencies are inherently unpredictable, our assessments involve significant judgments regarding future events.

Stock-based compensation

The Company accounts for its stock-based compensation plans in accordance with the guidance for share-based payments. Accordingly, all stock-based compensation is measured at the grant date, based on the estimated fair value of the award, and is recognized as an expenses over the requisite service period. Determining the appropriate fair-value model and calculating the fair value of share-based awards at the date of grant requires judgment. We use the Black-Scholes option pricing model to estimate the fair value of employee stock options.

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The Black-Scholes option pricing model utilizes assumptions related to volatility, the risk-free interest rate, the dividend yield (which is expected to be zero, as the Company has not paid cash dividends to date and does not currently expect to pay cash dividends) and the expected term of the option. Expected volatilities utilized in the model are based mainly on the historical volatility of the Company’s stock price and other factors. To the extent volatility of our stock price increases in the future, our estimates of the fair value of stock options granted in the future could increase, thereby increasing stock-based compensation expense in future periods. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect at the time of grant. We estimate the expected term of options granted based on our historical experience with our employees’ exercise of stock options and other factors, including an estimate of the number of share-based awards which will be forfeited due to employee turnover. Changes in the estimated forfeiture rate may have a significant effect on share-based compensation, as the effect of adjusting the rate for all expense amortization is recognized in the period the forfeiture estimate is changed. If the actual forfeiture rate is higher than the estimated forfeiture rate, then an adjustment is made to increase the estimated forfeiture rate, which will result in a decrease to the expense recognized in the financial statements. If the actual forfeiture rate is lower than the estimated forfeiture rate, then an adjustment is made to decrease the estimated forfeiture rate, which will result in an increase to the expense recognized in the financial statements. Changes in the inputs and assumptions can materially affect the measurement of the estimated fair value of our employee stock options. If there are any modifications or cancellations of the underlying unvested securities, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense. Also, the accounting estimate of stock-based compensation expense is reasonably likely to change from period to period as further stock options are granted and adjustments are made for stock option forfeitures and cancellations.

The fair value of our restricted stock grants is based on the fair market value of our common stock on the date of grant discounted for expected future dividends.

RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

The Company adopted new authoritative guidance on variable interests effective January 1, 2010. The amendments change the process for how an enterprise determines which party consolidates a variable interest entity (a VIE) to a primarily qualitative analysis. The party that consolidates the VIE (the primary beneficiary) is defined as the party with (1) the power to direct activities of the VIE that most significantly affect the VIE’s economic performance and (2) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. Upon adoption, reporting enterprises must reconsider their conclusions on whether an entity should be consolidated and should a change result; the effect on net assets will be recorded as a cumulative effect adjustment to retained earnings. This pronouncement did not have a material impact on the Company’s consolidated financial statements.

The Company elected to adopt early the new authoritative guidance on revenue recognition effective January 1, 2010. The guidance provides greater ability to separate and allocate arrangement consideration in a multiple element revenue arrangement. In addition, it will require the use of estimated selling price to allocate arrangement considerations, therefore eliminating the use of the residual method of accounting. The Company has elected to prospectively adopt these provisions. Our adoption of this pronouncement did not have a material impact on the Company’s consolidated financial statements.

The Company adopted new authoritative guidance on business combinations for acquisitions occurring on or after January 1, 2009. This requires recognition of assets acquired, liabilities assumed, and any noncontrolling interests in the acquiree at the acquisition date, measured at their fair values as of that date. In a business combination achieved in stages, this pronouncement requires recognition of identifiable assets and liabilities, as well as the noncontrolling interests in the acquiree, at the full amounts of their fair values. This pronouncement also requires the fair value of acquired in-process research and development (referred to as IPR&D) to be recorded as indefinite lived intangibles, contingent consideration to be recorded on the acquisition date, and

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restructuring and acquisition-related deal costs to be expensed as incurred. In addition, any excess of the fair value of net assets acquired over purchase price and any subsequent changes in estimated contingencies are to be recorded in earnings. See Note 5 for purchase accounting details.

The Company adopted new authoritative guidance on collaborative arrangements which was effective January 1, 2009 and the provisions have been applied retroactively. According to this pronouncement a collaborative arrangement is one in which the participants are actively involved and are exposed to significant risks and rewards that depend on the ultimate commercial success of the endeavor. Payments to or from collaborators are evaluated and presented based on the nature of the arrangement and its terms, the nature of the entity’s business, and whether those payments are within the scope of other accounting literature. The nature and purpose of collaborative arrangements are disclosed along with the accounting policies and the classification of significant financial statement amounts related to the arrangements. Activities in the arrangement conducted in a separate legal entity are accounted for under other accounting literature; however, required disclosure applies to the entire collaborative agreement. This pronouncement did not have a material impact on the Company’s consolidated financial statements.

The Company adopted new authoritative guidance on the fair value option for financial assets and financial liabilities which became effective for fiscal years beginning after November 15, 2007. The Standard’s objective is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. Generally accepted accounting principles have required different measurement attributes for different assets and liabilities that can create artificial volatility in earnings. This authoritative guidance helps to mitigate this type of accounting-induced volatility by enabling companies to report related assets and liabilities at fair value, which would likely reduce the need for companies to comply with detailed rules for hedge accounting. This Standard requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of the Company’s choice to use fair value on its earnings. It also requires entities to display the fair value of those assets and liabilities for which the Company has chosen to use fair value on the face of the balance sheet. Upon adoption, we chose not to elect the fair value option for our existing financial assets and liabilities. Therefore, the adoption did not have any impact on our consolidated financial statements. In November 2008, simultaneously with our execution of the agreement with UBS with respect to certain auction-rate securities in UBS accounts, we elected the fair value option for the auction-rate securities rights (See Note 3).

The Company adopted the new authoritative guidance on convertible debt instruments that may be settled in cash or other assets on conversion as of January 1, 2009. The guidance requires that issuers of convertible debt instruments that may be settled in cash or other assets on conversion to separately account for the liability and equity components of the instrument in a manner that will reflect the entity’s nonconvertible debt borrowing rate on the instrument’s issuance date when interest cost is recognized in subsequent periods. Our Convertible Notes are within the scope of this new guidance. Therefore, we are required to separate the debt portion of our Convertible Notes from the equity portion at their fair value retrospective to the date of issuance and amortize the resulting discount into interest expense over the life of the debt. The provisions of the guidance are to be applied retrospectively to all periods presented upon adoption and became effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The adoption will result in the recognition of approximately $138.7 million of additional interest expense, on a pre-tax basis, over the life of our Convertible Notes. See Note 18 for further details.

The Company adopted the new authoritative guidance on determining the fair value of a financial asset when the market for that asset is not active for the period ending September 30, 2008. The guidance clarifies the application of fair value measurements when determining the fair value of a financial asset when the market for that asset is not currently active. Additionally, it emphasizes that approaches other than the market approach to determining fair value may be appropriate when it is determined that, as a result of market inactivity, other valuation approaches are more representative of fair value. Other valuation approaches can involve significant assumptions regarding future cash flows. The guidance clarifies that these assumptions must incorporate adjustments for nonperformance and liquidity risks that market participants would consider in valuing the asset in an inactive market. See Note 3 for a further discussion of fair value.

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The Company adopted the new authoritative guidance on interim and annual disclosure about fair value of financial instruments which became effective for periods beginning after December 15, 2009. The guidance amends previous authoritative guidance by requiring disclosures with respect to the fair value of financial instruments in interim and annual financial statements. The adoption did not have a material effect on the Company’s consolidated results of operations or financial condition; however it did result in enhanced disclosures about fair value of financial instruments in our interim financial statements. See Note 3, Fair Value Measurements, for further discussion.

Accounting Pronouncements Issued But Not Yet Adopted

In December 2010, the FASB issued authoritative guidance for accounting for the annual fee imposed by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act. The new guidance specifies that the liability for the fee should be estimated and recorded in full upon the first qualifying sale with a corresponding deferred cost that is amortized to expense. It is effective on a prospective basis for calendar years beginning after December 31, 2010. We expect this fee will be approximately $11 million in 2011, which will be charged as an operating expense ratably throughout 2011.

In December 2010, the FASB issued authoritative guidance on interim and annual disclosure of pro forma financial information related to business combinations. The new guidance clarifies the acquisition date that should be used for reporting the pro forma financial information comparative financial statements are presented. It is effective on a prospective basis for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. We will adopt this guidance beginning with business combinations for which the acquisition date is on or after January 1, 2011.

In April 2010, the FASB issued revised authoritative guidance for milestone revenue recognition. The new guidance recognizes the milestone method as an acceptable revenue recognition method for substantive milestones in research or development transactions. It is effective on a prospective basis to milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. We will adopt this guidance beginning with agreements entered into after January 1, 2011. We are currently evaluating the impact of adoption on our consolidated results of operations and financial position.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the potential loss arising from adverse changes in the financial markets, including interest rates and foreign currency exchange rates.

Interest Rate Risk

Our exposure to interest rate risk relates primarily to our Term Loan Facility, money market funds, and long-term marketable debt securities portfolio. Additionally, if we were to utilize amounts under our Revolving Credit Facility, we could be exposed to interest rate risk. Our current and long-term marketable debt securities classified as “available for sale” consist of auction-rate securities. Our investments in marketable securities are governed by our investment policy, which has been approved by our Board of Directors. Our investment policy seeks to preserve the value of capital, consistent with maximizing return on the Company’s investment, while maintaining adequate liquidity. To achieve this objective, we maintain our portfolio in a variety of high credit quality debt securities. Generally, our interest rate risk with respect to these investments is limited due to yields earned, which approximate current interest rates. We attempt to mitigate default risk by maintaining our portfolio investments in diversified, high-quality investment grade securities with limited time to maturity. We constantly monitor our investment portfolio and position our portfolio to respond appropriately to a reduction in credit rating of any investment issuer, guarantor or depository.

As of December 31, 2010 and December 31, 2009, we had no other assets or liabilities that have significant interest rate sensitivity.

129

Investment Risk

At December 31, 2010 and 2009, we had publicly traded equity securities totaling $6.2 million and $4.5 million included in long-term marketable securities, respectively. The fair value of our investments are subject to significant fluctuations due to the volatility of the stock market, changes in general economic conditions and changes in the financial condition of the companies we invest in. Based on the fair value of the publicly traded equity securities we held at December 31, 2010, an assumed 25%, 40% and 50% adverse change in the market prices of these securities would result in a corresponding decline in total fair value of approximately $1.5 million, $2.5 million and $3.1 million, respectively. Based on the fair value of the publicly traded equity securities we held at December 31, 2009, an assumed 25%, 40% and 50% adverse change in the market prices of these securities would result in a corresponding decline in total fair value of approximately $1.1 million, $1.8 million and $2.2 million, respectively. Any decline in value below our original investments will be evaluated to determine if the decline in value is considered temporary or other-than-temporary. An other-than-temporary decline in fair value would be included as a charge to earnings.

Beginning in 2008 and continuing into 2010, the securities and credit markets have been experiencing severe volatility and disturbance, increasing risk with respect to certain of our financial assets. At December 31, 2008, the Company determined that the market for its auction-rate securities was inactive. That determination was made considering that there are very few observable transactions for the auction-rate securities or similar securities, the prices for transactions that have occurred are not current, and the observable prices for those transactions—to the extent they exist—vary substantially either over time or among market makers, thus reducing the potential usefulness of those observations.

In January 2008, the Company chose to reduce its exposure to auction-rate securities and ceased all purchases of auction-rate securities effective February 1, 2008, prior to when we began to experience failed auctions. There were no realized holding gains or losses resulting from the sales of our auction-rate securities during the twelve months ended December 31, 2008.

The underlying assets of our auction-rate securities are student loans. Student loans are insured by the Federal Family Education Loan Program, or FFELP.

If uncertainties in the credit and capital markets continue, these markets deteriorate further or we experience any additional cover rating downgrades on any investments in our portfolio (including on our auction-rate securities), we may incur additional impairments in future periods, which could negatively affect our financial condition, cash flow or reported earnings. Any of these events could materially affect our results of operations, financial condition, and cash flows. In the event we need to access these funds, we could be required to sell these securities at an amount below our original purchase value. However, based on our ability to access our cash and cash equivalents and our other liquid investments, and our expected operating cash flows, we do not expect to be required to sell these securities at a loss. However, there can be no assurance that we will not have to sell these securities at a loss.

Foreign Currency Risk

While primarily all of our revenues are within the United States and denominated in U.S. dollars, we purchase Lidoderm^®, in U.S. dollars, from Teikoku Seiyaku Co., Ltd., a Japanese manufacturer. As part of the purchase agreement with Teikoku, there is a price adjustment feature that prevents the cash payment in U.S. dollars from falling outside of a certain pre-defined range in Japanese yen even if the spot rate is outside of that range. In addition, we have certain licensing arrangements which could require us to make payments upon certain regulatory and sales milestones, denominated in Euros.

A 10% change in foreign currency exchange rates would not have a material impact on our financial condition, results of operations or cash flows.

130

Inflation

We do not believe that inflation has had a significant impact on our revenues or operations.

Item 8. Financial Statements and Supplementary Data

The information required by this item is contained in the financial statements set forth in Item 15(a) under the caption “Consolidated Financial Statements” as part of this Annual Report on Form 10-K.

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

Not applicable.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of December 31, 2010. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2010.

(b) Management’s Report on Internal Control over Financial Reporting

The report of management of the Company regarding internal control over financial reporting is set forth in Item 15(a) of this Annual Report on Form 10-K under the caption “Management’s Report on Internal Control over Financial Reporting” and incorporated herein by reference.

(c) Attestation Report of Independent Registered Public Accounting Firm

The attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting is set forth in Item 15(a) of this Annual Report on Form 10-K under the caption “Report of Independent Registered Public Accounting Firm” and incorporated herein by reference.

(d) Changes in Internal Control over Financial Reporting

The Company acquired HealthTronics, Inc., Penwest Pharmaceuticals Co., and Generics International (US Parent), Inc. (Qualitest) on July 2, 2010, September 20, 2010, and November 30, 2010, respectively. The Company began to integrate these acquired companies into its internal control over financial reporting structure subsequent to their respective acquisition dates. As such, there have been changes during the year ended December 31, 2010 associated with the establishment of internal control over financial reporting with respect to these acquired companies. As of December 31, 2010, Qualitest which, in the aggregate, represents 36.6% and 1.8% of consolidated total assets and consolidated total revenues, respectively, of the Company as of and for the year ended December 31, 2010, has been excluded from management’s report of internal control over financial reporting due to the November 30, 2010 closing date and its proximity to the date of management’s assessment of the effectiveness of the Company’s internal control over financial reporting.

There were no other changes in the Company’s internal control over financial reporting during the fourth quarter of 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

131

Item 9B. Other Information

On February 23, 2011, we gave notice to Novartis Consumer Health, Inc. (Novartis) that we would terminate our Master Development and Toll Manufacturing Agreement, as amended, effective February 2014. Pursuant to the terms of this agreement, our requirement to make minimum purchases of approximately $14 million per year, or pro rata portion thereof, will remain in effect until the effective date of the termination of this agreement.

In February 2011, Edward J. Sweeney elected to resign his position as the Company’s Vice President, Controller and Principal Accounting Officer, to become Vice President, Finance effective March 31, 2011. Daniel A. Rudio, age 37, has been appointed as the Company’s Vice President, Controller and Principal Accounting Officer effective April 1, 2011. Mr. Rudio joined the Company in November 2006 as Financial Reporting Manager and has held various positions of increasing responsibility, most recently as Senior Director, Finance & Accounting. Prior to joining the Company, Mr. Rudio was a business unit finance manager for the Americas at Rohm and Haas Company where he worked for 4 years in a variety of accounting and finance related positions of increasing responsibility. Before that, Mr. Rudio was a manager at Ernst & Young LLP where he worked from July 1995 to November 2002. Mr. Rudio is a licensed certified public accountant in the Commonwealth of Pennsylvania and holds Bachelor of Science degrees in both accounting and finance from Rutgers University.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Directors

The information concerning our directors required under this Item is incorporated herein by reference from our proxy statement, which will be filed with the Securities and Exchange Commission, relating to our 2011 Annual Meeting of Stockholders (2011 Proxy Statement).

Executive Officers

For information concerning Endo’s executive officers, see “Item 1. Business—Executive Officers of the Registrant” and our 2011 Proxy Statement.

Code of Ethics

The information concerning our Code of Conduct is incorporated herein by reference from our 2011 Proxy Statement.

Audit Committee

The information concerning our Audit Committee is incorporated herein by reference from our 2011 Proxy Statement.

Audit Committee Financial Experts

The information concerning our Audit Committee Financial Experts is incorporated herein by reference from our 2011 Proxy Statement.

Item 11. Executive Compensation

The information required under this Item is incorporated herein by reference from our 2011 Proxy Statement.

132

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

Equity Compensation Plan Information. The following information relates to plans in effect as of December 31, 2010 under which equity securities of Endo may be issued to employees and directors. The Endo Pharmaceuticals Holdings Inc. 2004, 2007, and 2010 Stock Incentive Plans provide that stock options may be granted thereunder to non-employee consultants.

	Column A		Column B			Column C
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in Column A)
Equity compensation plans approved by security holders
Endo Pharmaceuticals Holdings Inc. 2004 Stock Incentive Plan		2,654,040		23.96			—
Endo Pharmaceuticals Holdings Inc. 2007 Stock Incentive Plan		4,119,965		21.11	(1)		—
Endo Pharmaceuticals Holdings Inc. 2010 Stock Incentive Plan		602,880		27.68	(1)		10,347,536

(1) Excludes shares of restricted stock units outstanding

The other information required under this Item is incorporated herein by reference from our 2011 Proxy Statement.

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

The information required under this Item is incorporated herein by reference from our 2011 Proxy Statement.

Item 14. Principal Accountant Fees and Services

Information about the fees for 2010 and 2009 for professional services rendered by our independent registered public accounting firm is incorporated herein by reference from our 2011 Proxy Statement. Our Audit Committee’s policy on pre-approval of audit and permissible non-audit services of our independent registered public accounting firm is incorporated by reference from our 2011 Proxy Statement.

PART IV

Item 15. Exhibits, Financial Statement Schedules

Documents filed as part of this Annual Report on Form 10-K

1. Consolidated Financial Statements: See accompanying Index to Consolidated Financial Statements.

2. Consolidated Financial Statement Schedule:

133

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

	Balance at Beginning of Period		Additions, Costs and Expenses		Deductions, Write-offs			Balance at End of Period
Allowance For Doubtful Accounts:
Year Ended December 31, 2008	$	1,465	$	—	$	—		$	1,465
Year Ended December 31, 2009	$	1,465	$	—	$	(442	)	$	1,023
Year Ended December 31, 2010	$	1,023	$	855	$	(748	)	$	1,130

All other financial statement schedules have been omitted because they are not applicable or the required information is included in the Consolidated Financial Statements or notes thereto.

3. Exhibits: The information called for by this item is incorporated by reference to the Exhibit Index of this Report.

134

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.

ENDO PHARMACEUTICALS HOLDINGS INC. (Registrant)
	/s/    DAVID P. HOLVECK
Name:	David P. Holveck
Title:	President and Chief Executive Officer (Principal Executive Officer)
	/s/    ALAN G. LEVIN
Name:	Alan G. Levin
Title:	Executive Vice President, Chief Financial Officer (Principal Financial Officer)
	/s/    EDWARD J. SWEENEY
Name:	Edward J. Sweeney
Title:	Vice President, Controller and Principal Accounting Officer (Principal Accounting Officer)

Date: February 28, 2011

Pursuant to the requirements of the Securities Exchange 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/    DAVID P. HOLVECK         David P. Holveck		President and Chief Executive Officer	February 28, 2011
/S/    ALAN G. LEVIN         Alan G. Levin		Executive Vice President, Chief Financial Officer	February 28, 2011
* Roger H. Kimmel		Chairman and Director	February 28, 2011
* John J. Delucca		Director	February 28, 2011
* Nancy J. Hutson, Ph.D.		Director	February 28, 2011
* Michael Hyatt		Director	February 28, 2011
* William P. Montague		Director	February 28, 2011
* Joseph C. Scodari		Director	February 28, 2011
* William F. Spengler		Director	February 28, 2011
*By:	/s/    CAROLINE B. MANOGUE          Caroline B. Manogue	Attorney-in-fact, pursuant to a Power of Attorney filed with this Report as Exhibit 24	February 28, 2011

135

INDEX TO FINANCIAL STATEMENTS

	Page
Management’s Report on Internal Control Over Financial Reporting		F-2
Reports of Independent Registered Public Accounting Firm		F-3, F-4
Consolidated Balance Sheets as of December 31, 2010 and 2009		F-5
Consolidated Statements of Operations for the Years Ended December 31, 2010, 2009, and 2008		F-6
Consolidated Statements of Stockholders’ Equity and Comprehensive Income for the Years Ended December 31, 2010, 2009, and 2008		F-7
Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009, and 2008		F-9
Notes to Consolidated Financial Statements for the Years Ended December 31, 2010, 2009, and 2008		F-10

F-1

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Endo Pharmaceuticals Holdings Inc. is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Endo Pharmaceuticals Holdings Inc.’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of its published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Endo Pharmaceuticals Holdings Inc.’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment we believe that, as of December 31, 2010, the Company’s internal control over financial reporting is effective based on those criteria.

On November 30, 2010, the Company completed its acquisition of Generics International (US Parent), Inc. (Qualitest). Due to the close proximity of the completion date of the acquisition of Qualitest to the date of management’s assessment of the effectiveness of the Company’s internal control over financial reporting, management excluded Qualitest from its assessment of internal control over financial reporting. Qualitest, a wholly owned subsidiary of the Company, represents, in the aggregate, 36.6% and 1.8% of consolidated total assets and consolidated total revenues, respectively, of the Company as of and for the year ended December 31, 2010. This acquisition is more fully discussed in Note 5 to our Consolidated Financial Statements for the year ended December 31, 2010.

Endo Pharmaceuticals Holdings Inc.’s independent registered public accounting firm has issued its report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010. This report appears on page F-4.

/s/ DAVID P. HOLVECK

David P. Holveck

President and Chief Executive Officer

/s/ ALAN G. LEVIN

Alan G. Levin

Executive Vice President, Chief Financial Officer

February 28, 2011

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Endo Pharmaceuticals Holdings Inc.

Chadds Ford, Pennsylvania

We have audited the accompanying consolidated balance sheets of Endo Pharmaceuticals Holdings Inc. and subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule listed in the Index at 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 the 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, such consolidated financial statements present fairly, in all material respects, the financial position of Endo Pharmaceuticals Holdings 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, such 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.

We have also 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 the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Philadelphia, Pennsylvania

February 28, 2011

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Endo Pharmaceuticals Holdings Inc.

Chadds Ford, Pennsylvania

We have audited the internal control over financial reporting of Endo Pharmaceuticals Holdings Inc. and subsidiaries (the “Company”) 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. As described in the accompanying Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Generics International (US Parent), Inc. (Qualitest), which was acquired on November 30, 2010, and whose financial statements constitute 36.6% and 1.8% of consolidated total assets and consolidated total revenues, respectively, of the consolidated financial statement amounts as of and for the year ended December 31, 2010. Accordingly, our audit did not include the internal control over financial reporting at Generics International (US Parent), Inc. 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 by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel 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 the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the 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, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2010 of the Company and our report dated February 28, 2011 expressed an unqualified opinion on those financial statements and financial statement schedule.

/s/ DELOITTE & TOUCHE LLP

Philadelphia, Pennsylvania

February 28, 2011

F-4

ENDO PHARMACEUTICALS HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2010 AND 2009

(In thousands, except share and per share data)

	2010			2009
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	466,214		$	708,462
Restricted cash		—			1,515
Marketable securities		—			25,275
Accounts receivable, net of allowance of $1,130 and $1,023 at December 31, 2010 and 2009		547,807			323,501
Inventories		178,805			84,893
Prepaid expenses and other current assets		22,841			17,081
Auction-rate securities rights, at fair value		—			15,659
Income taxes receivable		3,143			13,762
Deferred income taxes		140,724			90,433
Total current assets		1,359,534			1,280,581
MARKETABLE SECURITIES		23,509			211,792
PROPERTY AND EQUIPMENT, NET		215,295			47,529
GOODWILL		715,005			302,534
OTHER INTANGIBLES, NET		1,531,760			609,909
OTHER ASSETS		67,286			36,458
TOTAL ASSETS	$	3,912,389		$	2,488,803
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	241,114		$	176,076
Accrued expenses		469,721			286,606
Current portion of long-term debt		24,993			—
Income taxes payable		—			9,498
Total current liabilities		735,828			472,180
DEFERRED INCOME TAXES		217,334			49,180
ACQUISITION-RELATED CONTINGENT CONSIDERATION		16,050			58,470
LONG-TERM DEBT, LESS CURRENT PORTION, NET		1,045,801			322,534
OTHER LIABILITIES		94,047			89,028
COMMITMENTS AND CONTINGENCIES (NOTE 14)
STOCKHOLDERS’ EQUITY:
Preferred Stock, $0.01 par value; 40,000,000 shares authorized; none issued		—			—
Common Stock, $0.01 par value; 350,000,000 shares authorized; 136,309,917 and 134,986,612 shares issued; 116,057,895 and 117,270,309 outstanding at December 31, 2010 and 2009, respectively		1,363			1,350
Additional paid-in capital		860,882			817,467
Retained earnings		1,364,297			1,105,291
Accumulated other comprehensive loss		(1,161	)		(1,881	)
Treasury stock, 20,252,022 and 17,716,303 shares at December 31, 2010 and December 31, 2009, respectively		(483,790	)		(424,816	)
Total Endo Pharmaceuticals Holdings Inc. stockholders’ equity		1,741,591			1,497,411
Noncontrolling interests		61,738			—
Total stockholders’ equity		1,803,329			1,497,411
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,912,389		$	2,488,803

See notes to consolidated financial statements.

F-5

ENDO PHARMACEUTICALS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2010, 2009, AND 2008

(In thousands, except per share data)

	2010			2009			2008
REVENUES:
Net sales	$	1,601,192		$	1,451,577		$	1,260,536
Device, service and other revenues		115,037			9,264			—
TOTAL REVENUES		1,716,229			1,460,841		$	1,260,536
COSTS AND EXPENSES:
Cost of revenues		504,757			375,058			267,235
Selling, general and administrative		547,605			534,523			488,063
Research and development		144,525			185,317			110,211
Impairment of other intangible assets		35,000			69,000			8,083
Acquisition-related items		18,976			(93,081	)		—
Purchased in-process research and development		—			—			(530	)
OPERATING INCOME		465,366			390,024			387,474
INTEREST EXPENSE (INCOME), NET		46,601			37,718			(6,107	)
OTHER (INCOME) EXPENSE, NET		(1,933	)		(3,329	)		1,753
GAIN ON EXTINGUISHMENT OF DEBT, NET		—			(4,025	)		—
INCOME BEFORE INCOME TAX		420,698			359,660			391,828
INCOME TAX		133,678			93,324			136,492
CONSOLIDATED NET INCOME	$	287,020		$	266,336		$	255,336
Less: Net income attributable to noncontrolling interests		28,014			—			—
NET INCOME ATTRIBUTABLE TO ENDO PHARMACEUTICALS HOLDINGS INC.	$	259,006		$	266,336		$	255,336
NET INCOME PER SHARE ATTRIBUTABLE TO ENDO PHARMACEUTICALS HOLDINGS INC.:
Basic	$	2.23		$	2.27		$	2.07
Diluted	$	2.20		$	2.27		$	2.06
WEIGHTED AVERAGE SHARES:
Basic		116,164			117,112			123,248
Diluted		117,951			117,515			123,720

See notes to consolidated financial statements.

F-6

ENDO PHARMACEUTICALS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31, 2010, 2009, AND 2008

(In thousands, except share data)

	Endo Pharmaceuticals Holdings Inc. Shareholders
	Common Stock					Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Treasury Stock						Total Endo Pharmaceuticals Holdings Inc. Stockholders’ Equity			Noncontrolling Interests		Total Stockholders’ Equity
	Number of Shares			Amount										Number of Shares			Amount
BALANCE, JANUARY 1, 2008		134,144,993		$	1,341	$	704,305		$	583,619	$	3,025			—		$	—		$	1,292,290		$	—	$	1,292,290
Estimated tax sharing distributions due to Endo Pharma LLC		—			—		14			—		—			—			—			14			—		14
Compensation related to stock-based awards		—			—		16,934			—		—			—			—			16,934			—		16,934
Forfeiture of restricted stock awards		(1,131	)		—		—			—		—			—			—			—			—		—
Exercise of options		150,191			2		2,233			—		—			—			—			2,235			—		2,235
Tax benefits of stock awards		—			—		(92	)		—		—			—			—			(92	)		—		(92	)
Common stock issued		7,951			—		185			—		—			—			—			185			—		185
Issuance of Convertible Senior Subordinated Notes due 2015, net of tax of $56,417		—			—		85,782			—		—			—			—			85,782			—		85,782
Sale of common stock warrants		—			—		50,371			—		—			—			—			50,371			—		50,371
Purchase of common stock call options		—			—		(107,607	)		—		—			—			—			(107,607	)		—		(107,607	)
Tax benefit of call options		—			—		41,160			—		—			—			—			41,160			—		41,160
Treasury stock acquired		—			—		—			—		—			(17,716,303	)		(424,816	)		(424,816	)		—		(424,816	)
Comprehensive income:
Unrealized gain on securities, net of tax		—			—		—			—		(31,098	)		—			—			(31,098	)		—		(31,098	)
Reclassification due to other-than-temporary impairment		—			—		—			—		26,417			—			—			26,417			—		26,417
Net income		—			—		—			255,336		—			—			—			255,336			—		255,336
Total comprehensive income																				$	250,655		$	—	$	250,655
BALANCE, DECEMBER 31, 2008		134,302,004		$	1,343	$	793,285		$	838,955	$	(1,656	)		(17,716,303	)	$	(424,816	)	$	1,207,111		$	—	$	1,207,111
Compensation related to stock-based awards		—			—		19,593			—		—			—			—			19,593			—		19,593
Forfeiture of restricted stock awards		(1,131	)		—		—			—		—			—			—			—			—		—
Exercise of options		554,827			6		8,031			—		—			—			—			8,037			—		8,037
Tax benefits of stock awards		—			—		(3,693	)		—		—			—			—			(3,693	)		—		(3,693	)
Common stock issued		130,912			1		251			—		—			—			—			252			—		252
Treasury stock acquired		—			—		—			—		—			—			—			—			—		—
Comprehensive income:
Unrealized loss on securities, net of tax		—			—		—			—		(225	)		—			—			(225	)		—		(225	)
Net income		—			—		—			266,336		—			—			—			266,336			—		266,336
Total comprehensive income																				$	266,111		$	—	$	266,111
BALANCE, DECEMBER 31, 2009		134,986,612		$	1,350	$	817,467		$	1,105,291	$	(1,881	)		(17,716,303	)	$	(424,816	)	$	1,497,411		$	—	$	1,497,411

F-7

ENDO PHARMACEUTICALS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31, 2010, 2009, AND 2008 – (Continued)

(In thousands, except share data)

	Endo Pharmaceuticals Holdings Inc. Shareholders
	Common Stock				Additional Paid-in Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Treasury Stock						Total Endo Pharmaceuticals Holdings Inc. Stockholders’ Equity			Noncontrolling Interests			Total Stockholders’ Equity
	Number of Shares		Amount										Number of Shares			Amount
Compensation related to stock-based awards		—		—		22,909			—		—			—			—			22,909			—			22,909
Exercise of options		965,013		9		20,874			—		—			—			—			20,883			—			20,883
Tax benefits of stock awards		—		—		(805	)		—		—			—			—			(805	)		—			(805	)
Common stock issued		358,292		4		437			—		—			—			—			441			—			441
Treasury stock acquired		—		—		—			—		—			(2,535,719	)		(58,974	)		(58,974	)		—			(58,974	)
Noncontrolling interests acquired in business combinations		—		—		—			—		—			—			—			—			63,227			63,227
Distributions to noncontrolling interests		—		—		—			—		—			—			—			—			(28,870	)		(28,870	)
Buy-out of noncontrolling interests		—		—		—			—		—			—			—			—			(633	)		(633	)
Comprehensive income:
Unrealized loss on securities, net of tax		—		—		—			—		720			—			—			720			—			720
Net income		—		—		—			259,006		—			—			—			259,006			28,014			287,020
Total comprehensive income																			$	259,726		$	28,014		$	287,740
BALANCE, DECEMBER 31, 2010		136,309,917	$	1,363	$	860,882		$	1,364,297	$	(1,161	)		(20,252,022	)	$	(483,790	)	$	1,741,591		$	61,738		$	1,803,329

See notes to consolidated financial statements.

F-8

ENDO PHARMACEUTICALS HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008

(In thousands)

	2010			2009			2008
OPERATING ACTIVITIES:
Net income	$	287,020		$	266,336		$	255,336
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		108,404			80,381			46,445
Stock-based compensation		22,909			19,593			16,934
Amortization of deferred financing/debt issuance costs and premium/discount		22,013			19,503			13,833
Provision for bad debts		855			—			—
Selling, general and administrative expenses paid in shares of common stock		220			251			185
Deferred income taxes		(15,420	)		(36,395	)		3,082
Loss (gain) on disposal of property and equipment		154			(16	)		143
Change in the fair value of acquisition-related contingent consideration		(51,420	)		(128,090	)		—
Loss (gain) on auction-rate securities rights		15,659			11,662			(27,321	)
(Gain) loss on trading securities		(15,420	)		(15,222	)		4,225
(Gain) on extinguishment of debt, net		—			(4,025	)		—
Impairment of long-lived assets		35,000			69,000			12,680
Purchased in-process research and development		—			—			(530	)
Other-than-temporary impairment of available-for-sale securities		—			—			26,417
Changes in assets and liabilities which provided (used) cash:
Accounts receivable		(84,659	)		(62,584	)		3,458
Inventories		13,894			12,920			(11,428	)
Prepaid and other assets		(4,003	)		13,554			(1,755	)
Accounts payable		30,145			12,068			(17,969	)
Accrued expenses		93,346			34,112			40,561
Other liabilities		(5,612	)		9,653			11,009
Income taxes receivable/payable		561			(7,295	)		(19,189	)
Note receivable		—			—			(489	)
Net cash provided by operating activities		453,646			295,406			355,627
INVESTING ACTIVITIES:
Purchases of property and equipment		(19,891	)		(12,415	)		(17,428	)
Purchases of available-for-sale securities		—			—			(134,211	)
Proceeds from sales of trading securities		231,125			23,750			975
Proceeds from sales of available-for-sale securities		—			—			447,111
Proceeds from sale of property and equipment		356			—			27
Principal payments on note receivable		—			—			3,333
License fees		(400	)		(4,485	)		(85,000	)
Acquisitions, net of cash acquired		(1,105,040	)		(250,359	)		(15,000	)
Other investments		(2,473	)		(2,000	)		(20,000	)
Net cash (used in) provided by investing activities		(896,323	)		(245,509	)		179,807
FINANCING ACTIVITIES:
Capital lease obligations repayments		(313	)		(250	)		(625	)
Tax sharing payments to Endo Pharma LLC		—			—			(671	)
Tax benefits of stock awards		1,944			717			307
Deferred financing fees		(13,563	)		(5,162	)		—
Exercise of Endo Pharmaceuticals Holdings Inc. Stock Options		20,883			8,037			2,235
Principal payments on HealthTronics senior credit facility		(40,000	)
Principal payments on Qualitest debt		(406,758	)
Principal payments on debt		(61,559	)		(120,470	)		—
Net proceeds from issuance of debt		786,576			—			370,740
Proceeds from other indebtedness, net		1,696
Purchase of hedge on convertible senior subordinated notes due 2015		—			—			(107,607	)
Sale of common stock warrants		—			—			50,371
Purchase of common stock		(58,974	)		—			(424,816	)
Distributions to noncontrolling interests		(28,870	)		—			—
Buy-out of noncontrolling interests, net of contributions		(633	)		—			—
Net cash provided by (used in) financing activities		200,429			(117,128	)		(110,066	)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(242,248	)		(67,231	)		425,368
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		708,462			775,693			350,325
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	466,214		$	708,462		$	775,693
SUPPLEMENTAL INFORMATION:
Interest paid	$	22,187		$	19,265		$	3,373
Income taxes paid	$	143,529		$	126,431		$	142,660
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Purchase of property and equipment financed by capital leases	$	689		$	235		$	798
Accrual for purchases of property and equipment	$	6,793		$	2,635		$	4,211
Settlement of note receivable	$	—		$	—		$	(46,667	)
Acquisition of license rights	$	—		$	—		$	90,657
Transfer of securities from available-for-sale to trading	$	—		$	—		$	228,633

See notes to consolidated financial statements.

F-9

ENDO PHARMACEUTICALS HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008

NOTE 1. DESCRIPTION OF BUSINESS

Endo Pharmaceuticals Holdings Inc., together with its subsidiaries, (the Company or we) is a United States-based, specialty healthcare solutions company focused on high-value branded products and generics as well as devices and services. We aim to partner with healthcare professionals and payment providers to deliver a suite of complementary branded and generic drugs, devices and clinical data to meet the needs of patients in areas such as pain management, urology, oncology and endocrinology. The Company was incorporated on November 18, 1997 under the laws of the State of Delaware.

In the first quarter of 2009, we acquired Indevus Pharmaceuticals (Indevus), a specialty pharmaceutical company engaged in the acquisition, development and commercialization of products to treat conditions in urology and endocrinology. On July 2, 2010, we acquired HealthTronics, Inc. a provider of healthcare services and manufacturer of medical devices, primarily for the urology community. On September 20, 2010, we acquired a majority interest in Penwest Pharmaceuticals Co., a drug development company. Additionally, on November 30, 2010, we acquired Qualitest, a privately-held generics company in the U.S.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation—The Consolidated Financial Statements include the accounts of Endo Pharmaceuticals Holdings Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated.

As a result of the Healthtronics acquisition, we now own interests in various partnerships and limited liability corporations, or LLCs. We consolidate our investments in these partnerships or LLCs, where we, as the general partner or managing member, exercise effective control, even though our ownership is less than 50%. The related governing agreements provide us with broad powers, and the other parties do not participate in the management of the entity and do not have the substantial ability to remove us. We have reviewed each of the underlying agreements and determined we have effective control; however, if it was determined this control did not exist, these investments would be reflected on the equity method of accounting. Although this would change individual line items within our consolidated financial statements, it would have no effect on our net income and/or total stockholders’ equity attributable to Endo Pharmaceuticals Holdings Inc.

Reclassifications—Certain prior period amounts have been reclassified to conform to the current period presentation.

Use of Estimates—Management uses estimates and assumptions in preparing financial statements in accordance with U.S. generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were assumed in preparing the consolidated financial statements.

F-10

Customer, Product and Supplier Concentration—We primarily sell our products directly to a limited number of large pharmacy chains and through a limited number of wholesale drug distributors who, in turn, supply products to pharmacies, hospitals, governmental agencies and physicians. Total revenues from customers who accounted for 10% or more of our total revenues during the years ended December 31 are as follows:

	2010			2009			2008
Cardinal Health, Inc.		33	%		35	%		36	%
McKesson Corporation		28	%		29	%		31	%
AmerisourceBergen Corporation.		15	%		16	%		15	%

Revenues from these customers are included within our Branded Pharmaceuticals and Generics segments.

The Company derives a majority of its total revenues from a limited number of products. Products that accounted for 10% or more of our total revenues during the years ended December 31 were as follows:

	2010			2009			2008
Lidoderm®		46	%		52	%		61	%
Opana® ER and Opana®		17	%		16	%		14	%
Percocet®		7	%		9	%		10	%

We have agreements with Novartis Consumer Health, Inc., Novartis AG, Teikoku Seiyaku Co., Ltd., Almac Pharma Services, Sharp Corporation and Noramco Inc. for the manufacture and supply of a substantial portion of our existing pharmaceutical products. Additionally, we utilize UPS Supply Chain Solutions, Inc. for customer service support, warehouse and distribution services (see Note 14 for further details).

Revenue Recognition—

Net sales. Our net sales consist of revenues from sales of our pharmaceutical products, less estimates for chargebacks, rebates, sales incentives and allowances, certain royalties, distribution service fees, returns and allowances, as well as fees for services. We recognize revenue for product sales when title and risk of loss has passed to the customer, which is typically upon delivery to the customer, when estimated provisions for chargebacks, rebates, sales incentives and allowances, certain royalties, distribution service fees, returns and allowances are reasonably determinable, and when collectability is reasonably assured. Revenue from the launch of a new or significantly unique product, for which we are unable to develop the requisite historical data on which to base estimates of returns and allowances, due to the uniqueness of the therapeutic area or delivery technology as compared to other products in our portfolio and in the industry, may be deferred until such time that an estimate can be determined and all of the conditions above are met and when the product has achieved market acceptance, which is typically based on dispensed prescription data and other information obtained during the period following launch.

Devices and services. Our fees for urology and pathology services are recorded when the procedure is performed and are based on contracted rates. Management fees from limited partnerships are recorded monthly when earned. Image guided radiation therapy (IGRT) technical services are billed monthly and the related revenues are recognized as the related services are provided.

Sales Deductions—When we recognize net sales from the sale of our products, we simultaneously record an adjustment to revenue for estimated chargebacks, rebates, sales incentives and allowances, certain royalties, distribution service fees, returns and allowances. These provisions, are estimated based on historical experience, estimated future trends, estimated customer inventory levels, current contract sales terms with our wholesale and indirect customers and other competitive factors. If the assumptions we used to calculate these adjustments do not appropriately reflect future activity, our financial position, results of operations and cash flows could be materially impacted.

Research and Development—Expenditures for research and development are expensed as incurred. Property and equipment that are acquired or constructed for research and development activities and that have alternate future uses are capitalized and depreciated over their estimated useful lives on a straight-line basis. Upfront and

F-11

milestone payments made to third parties in connection with agreements with third parties are generally expensed as incurred up to the point of regulatory approval, absent any alternative future uses. Payments made to third parties subsequent to regulatory approval are generally capitalized and amortized over the remaining useful life of the related product. Amounts capitalized for such payments are included in other intangibles, net of accumulated amortization.

Cash and Cash Equivalents—The Company considers all highly liquid money market instruments with an original maturity of three months or less when purchased to be cash equivalents. At December 31, 2010, cash equivalents were deposited in financial institutions and consisted of immediately available fund balances. The Company maintains its cash deposits and cash equivalents with well-known and stable financial institutions.

Marketable Securities—At the time of purchase, we classify our marketable securities as either available-for-sale securities or trading securities, depending on our intent at that time. In rare or unique circumstances, management may determine that a one-time transfer of securities from available-for-sale to a trading classification is appropriate.

Available-for-sale and trading securities are carried at fair value with unrealized holding gains and losses recorded within other comprehensive income or net income, respectively. Fair value is determined based on observable market quotes or valuation models using assessments of counterparty credit worthiness, credit default risk or underlying security and overall capital market liquidity. The Company reviews unrealized losses associated with available-for-sale securities to determine the classification as a “temporary” or “other-than-temporary” impairment. A temporary impairment results in an unrealized loss being recorded in other comprehensive income. An impairment that is viewed as other-than-temporary is recognized in net income. The Company considers various factors in determining the classification, including the length of time and extent to which the fair value has been less than the Company’s cost basis, the financial condition and near-term prospects of the issuer or investee, and the Company’s ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

Cost of Revenues—Cost of revenues includes all costs directly related to bringing both purchased and manufactured products to their final selling destination, as well as providing our services to our customers. It includes purchasing and receiving costs, direct and indirect costs to manufacture products, including direct materials, direct labor, and direct overhead expenses necessary to acquire and convert purchased materials and supplies into finished goods. Cost of revenues also includes royalties on certain licensed products, inspection costs, depreciation, amortization of intangible assets, warehousing costs, freight charges, costs to operate our equipment, and other shipping and handling activity.

Generally, the Company classifies marketable securities as current when maturity is less than or equal to twelve months or, if time to maturity is greater than twelve months, when they represent investments of cash that are intended to be used in current operations.

The cost of securities sold is based on the specific identification method. Auction-rate securities that become illiquid as a result of a failed auction are generally classified as non-current assets as the Company cannot predict when future auctions related to these securities will be successful.

Concentrations of Credit Risk— Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash equivalents, marketable debt securities, and accounts receivable. We invest our excess cash in high-quality, liquid money market instruments and auction-rate debt securities maintained by major U.S. banks and financial institutions. We have not experienced any losses on our cash equivalents.

At December 31, 2010, $18.8 million of our marketable securities portfolio is invested in auction-rate securities with underlying ratings of AAA. As explained in Note 3, the fair value of these securities, as

F-12

determined using a valuation model, was $17.3 million, $1.5 million less than their original par value of approximately $18.8 million. Due to the continuing changes and uncertainty in the credit markets, it is possible that the valuation of auction-rate securities will further fluctuate in the near term.

We perform ongoing credit evaluations of our customers and generally do not require collateral. We have no history of significant losses from uncollectible accounts. Approximately 79% and 80% of our trade accounts receivable balance represent amounts due from three customers at December 31, 2010 and 2009, respectively.

Inventories— Inventories consist of finished goods held for distribution, raw materials and work-in-process. Our inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out method. We write-down inventories to net realizable value based on forecasted demand and market conditions, which may differ from actual results.

Property and Equipment—Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed over the estimated useful life of the related assets, ranging from 1 to 45 years, on a straight-line basis. Leasehold improvements and capital lease assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the terms of their respective leases.

License Rights—The cost of licenses are either expensed immediately or, if capitalized, are stated at cost, less accumulated amortization and are amortized using the straight-line method over their estimated useful lives ranging from two to twenty years, with a weighted average useful life of approximately 10 years. We determine amortization periods for licenses based on our assessment of various factors impacting estimated useful lives and cash flows of the acquired rights. Such factors include the expected launch date of the product, the strength of the intellectual property protection of the product and various other competitive, developmental and regulatory issues, and contractual terms.

Developed Technology—Acquired developed technology is recorded at fair value upon acquisition and amortized using estimated useful lives ranging from ten to twenty years, with a weighted average useful life of approximately 15 years. We determine amortization periods for developed technology based on our assessment of various factors impacting estimated useful lives and cash flows of the acquired assets. Such factors include the strength of the intellectual property protection of the product and various other competitive and regulatory issues, and contractual terms. Significant changes to any of these factors may result in a reduction in the useful life of the asset and an acceleration of related amortization expense, which could cause our operating income, net income and earnings per share to decrease. The value of these assets is subject to continuing scientific, medical and marketplace uncertainty.

Impairment of Long-Lived Assets—Long-lived assets, which includes property and equipment, and other intangible assets, are assessed for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. The impairment testing involves comparing the carrying amount of the asset to the forecasted undiscounted future cash flows generated by that asset. In the event the carrying value of the asset exceeds the undiscounted future cash flows generated by that asset and the carrying value is not considered recoverable, an impairment exists. An impairment loss is measured as the excess of the asset’s carrying value over its fair value, calculated using a discounted future cash flow method. An impairment loss would be recognized in net income in the period that the impairment occurs.

In-Process Research and Development Assets —The fair value of in-process research and development (IPR&D) acquired in a business combination is determined based on the present value of each research project’s projected cash flows using an income approach. Future cash flows are predominately based on the net income forecast of each project, consistent with historical pricing, margins and expense levels of similar products. Revenues are estimated based on relevant market size and growth factors, expected industry trends, individual project life cycles and the life of each research project’s underlying patent. In determining the fair value of each research project, expected cash flows are adjusted for the technical and regulatory risk of completion.

F-13

IPR&D acquired after January 1, 2009 is initially capitalized and considered indefinite-lived assets subject to annual impairment reviews or more often upon the occurrence of certain events. The review requires the determination of the fair value of the respective intangible assets. If the fair value of the intangible assets is less than its carrying value, an impairment loss is recognized for the difference. For those compounds that reach commercialization, the assets are amortized over the expected useful lives. Prior to January 1, 2009, amounts allocated to acquired IPR&D were expensed at the date of acquisition.

Goodwill—Goodwill, which represents the excess of purchase price over the fair value of net assets acquired, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value based test. Goodwill is assessed for impairment on an annual basis as of January 1st of each year or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment model prescribes a two-step method for determining a goodwill impairment. In the first step, we determine the fair value of our six reporting units using a discounted cash flow analysis. If the net book values of our reporting units exceed the fair value, we would then perform the second step of the impairment test which requires allocation of our reporting units’ fair value to all of its assets and liabilities using the acquisition method prescribed under authoritative guidance for business combinations with any residual fair value being allocated to goodwill. An impairment charge will be recognized only when the implied fair value of our reporting unit’s goodwill is less than its carrying amount.

Advertising Costs—Advertising costs are expensed as incurred and included in selling, general and administrative expenses and amounted to $44.3 million, $56.9 million and $50.9 million for the years ended December 31, 2010, 2009 and 2008, respectively.

Income Taxes—Provisions for income taxes are calculated on reported pre-tax income based on current tax laws, statutory tax rates and available tax incentives and planning opportunities in various jurisdictions in which we operate. Such provisions differ from the amounts currently receivable or payable because certain items of income and expense are recognized in different time periods for financial reporting purposes than for income tax purposes. We recognize deferred taxes by the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for differences between the financial statement and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. Significant judgment is required in determining income tax provisions and evaluating tax positions. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The factors used to assess the likelihood of realization are the Company’s forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. Failure to achieve forecasted taxable income in applicable tax jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in the Company’s effective tax rate on future earnings.

We must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution.

Contingencies—The Company is subject to various patent, product liability, government investigations and other legal proceedings in the ordinary course of business. Legal fees and other expenses related to litigation are expensed as incurred and included in selling, general and administrative expenses. Contingent accruals are recorded when the Company determines that a loss is both probable and reasonably estimable. Due to the fact that legal proceedings and other contingencies are inherently unpredictable, our assessments involve significant judgment regarding future events.

Contingent Consideration—We account for contingent consideration in a purchase business combination in accordance with applicable guidance provided within the business combination rules. As part of our

F-14

consideration for the Indevus and Qualitest acquisitions, we could be contractually obligated to pay additional purchase price consideration upon the achievement of certain regulatory, commercial or other milestones. Therefore, we are required to update our assumptions each reporting period, based on new developments, and record such amounts at fair value until such consideration is satisfied.

Stock-Based Compensation—Effective January 1, 2006, the Company adopted the fair value recognition provisions for share based compensation using the modified-prospective-transition method. Under that transition method, compensation cost recognized during the years ended December 31, 2010, 2009 and 2008 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value and (b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value.

Segment Information—As of December 31, 2010, our operations are organized into three reportable segments: Branded Pharmaceuticals, Generics, and Devices and Services. The Generics and Devices and Services segments were established during the year ended December 31, 2010 pursuant to changes in the organization of our business resulting from the acquisitions of Qualitest and HealthTronics, respectively. A summary of our net revenues to external customers and adjusted income (loss) before income tax for each of our segments is found in Note 6 to the Consolidated Financial Statements.

Comprehensive Income—Comprehensive income includes all changes in equity during a period except those that resulted from investments by or distributions to a company’s stockholders. Other comprehensive income or loss refers to revenues, expenses, gains and losses that are included in comprehensive income, but excluded from net income as these amounts are recorded directly as an adjustment to stockholders’ equity.

Treasury Stock—Treasury stock consists of shares of Endo Pharmaceuticals Holdings Inc. that have been issued but subsequently reacquired. We account for treasury stock purchases under the cost method. In accordance with the cost method, we account for the entire cost of acquiring shares of our stock as treasury stock, which is a contra equity account. If these shares are reissued, we would use an average cost method for determining cost. Proceeds in excess of cost would then be credited to additional paid-in capital. No treasury shares have been reissued as of December 31, 2010.

Convertible Senior Subordinated Notes—We accounted for the issuance of our 1.75% Convertible Senior Subordinated Notes due April 2015 (the Convertible Notes) in accordance with the guidance regarding the accounting for convertible debt instruments that may be settled in cash upon conversion, which among other items, specifies that contracts issued or held by an entity that are both (1) indexed to the entities own common stock and (2) classified in stockholders’ equity in its statement of financial position are not considered to be derivative financial instruments if the appropriate provisions are met. Accordingly, we have recorded the Convertible Notes as long-term debt in the accompanying Consolidated Balance Sheets.

Concurrent with the issuance of the Convertible Notes we entered into privately negotiated common stock call options with affiliates of the initial purchasers. In addition, we sold warrants to affiliates of certain of the initial purchasers. In addition to entering into the convertible note hedge transaction and the warrant transaction, we entered into a privately-negotiated accelerated share repurchase agreement with the same counterparty, as part of our broader share repurchase program described in Note 13. We accounted for the call options, warrants, and accelerated share repurchase agreement in accordance with the guidance regarding the accounting derivative financial instruments indexed to, and potentially settled in, a company’s own stock. The call options, warrants, and accelerated share repurchase agreement meet the requirements to be accounted for as equity instruments. The cost of the call options and the proceeds related to the sale of the warrants are included in additional paid-in capital in the accompanying Consolidated Balance Sheet.

Recently Adopted Accounting Pronouncements

The Company adopted new authoritative guidance on variable interests effective January 1, 2010. The amendments change the process for how an enterprise determines which party consolidates a variable interest

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entity (a VIE) to a primarily qualitative analysis. The party that consolidates the VIE (the primary beneficiary) is defined as the party with (1) the power to direct activities of the VIE that most significantly affect the VIE’s economic performance and (2) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. Upon adoption, reporting enterprises must reconsider their conclusions on whether an entity should be consolidated and should a change result; the effect on net assets will be recorded as a cumulative effect adjustment to retained earnings. This pronouncement did not have a material impact on the Company’s consolidated financial statements.

The Company elected to adopt early the new authoritative guidance on revenue recognition effective January 1, 2010. The guidance provides greater ability to separate and allocate arrangement consideration in a multiple element revenue arrangement. In addition, it will require the use of estimated selling price to allocate arrangement considerations, therefore eliminating the use of the residual method of accounting. The Company has elected to prospectively adopt these provisions. Our adoption of this pronouncement did not have a material impact on the Company’s consolidated financial statements.

The Company adopted new authoritative guidance on business combinations for acquisitions occurring on or after January 1, 2009. This requires recognition of assets acquired, liabilities assumed, and any noncontrolling interests in the acquiree at the acquisition date, measured at their fair values as of that date. In a business combination achieved in stages, this pronouncement requires recognition of identifiable assets and liabilities, as well as the noncontrolling interests in the acquiree, at the full amounts of their fair values. This pronouncement also requires the fair value of acquired in-process research and development (referred to as IPR&D) to be recorded as indefinite lived intangibles, contingent consideration to be recorded on the acquisition date, and restructuring and acquisition-related deal costs to be expensed as incurred. In addition, any excess of the fair value of net assets acquired over purchase price and any subsequent changes in estimated contingencies are to be recorded in earnings. See Note 5 for purchase accounting details.

The Company adopted new authoritative guidance on collaborative arrangements which was effective January 1, 2009 and the provisions have been applied retroactively. According to this pronouncement a collaborative arrangement is one in which the participants are actively involved and are exposed to significant risks and rewards that depend on the ultimate commercial success of the endeavor. Payments to or from collaborators are evaluated and presented based on the nature of the arrangement and its terms, the nature of the entity’s business, and whether those payments are within the scope of other accounting literature. The nature and purpose of collaborative arrangements are disclosed along with the accounting policies and the classification of significant financial statement amounts related to the arrangements. Activities in the arrangement conducted in a separate legal entity are accounted for under other accounting literature; however, required disclosure applies to the entire collaborative agreement. This pronouncement did not have a material impact on the Company’s consolidated financial statements.

The Company adopted new authoritative guidance on the fair value option for financial assets and financial liabilities which became effective for fiscal years beginning after November 15, 2007. The Standard’s objective is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. Generally accepted accounting principles have required different measurement attributes for different assets and liabilities that can create artificial volatility in earnings. This authoritative guidance helps to mitigate this type of accounting-induced volatility by enabling companies to report related assets and liabilities at fair value, which would likely reduce the need for companies to comply with detailed rules for hedge accounting. This Standard requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of the Company’s choice to use fair value on its earnings. It also requires entities to display the fair value of those assets and liabilities for which the Company has chosen to use fair value on the face of the balance sheet. Upon adoption, we chose not to elect the fair value option for our existing financial assets and liabilities. Therefore, the adoption did not have any impact on our consolidated financial statements. In November 2008, simultaneously with our

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execution of the agreement with UBS with respect to certain auction-rate securities in UBS accounts, we elected the fair value option for the auction-rate securities rights (See Note 3).

The Company adopted the new authoritative guidance on convertible debt instruments that may be settled in cash or other assets on conversion as of January 1, 2009. The guidance requires that issuers of convertible debt instruments that may be settled in cash or other assets on conversion to separately account for the liability and equity components of the instrument in a manner that will reflect the entity’s nonconvertible debt borrowing rate on the instrument’s issuance date when interest cost is recognized in subsequent periods. Our Convertible Notes are within the scope of this new guidance. Therefore, we are required to separate the debt portion of our Convertible Notes from the equity portion at their fair value retrospective to the date of issuance and amortize the resulting discount into interest expense over the life of the debt. The provisions of the guidance are to be applied retrospectively to all periods presented upon adoption and became effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The adoption results in the recognition of approximately $138.7 million of additional interest expense, on a pre-tax basis, over the life of our Convertible Notes. See Note 18 for further details.

The Company adopted the new authoritative guidance on determining the fair value of a financial asset when the market for that asset is not active for the period ending September 30, 2008. The guidance clarifies the application of fair value measurements when determining the fair value of a financial asset when the market for that asset is not currently active. Additionally, it emphasizes that approaches other than the market approach to determining fair value may be appropriate when it is determined that, as a result of market inactivity, other valuation approaches are more representative of fair value. Other valuation approaches can involve significant assumptions regarding future cash flows. The guidance clarifies that these assumptions must incorporate adjustments for nonperformance and liquidity risks that market participants would consider in valuing the asset in an inactive market. See Note 3 for a further discussion of fair value.

The Company adopted the new authoritative guidance on interim and annual disclosure about fair value of financial instruments which became effective for periods beginning after December 15, 2009. The guidance amends previous authoritative guidance by requiring disclosures with respect to the fair value of financial instruments in interim and annual financial statements. The adoption did not have a material effect on the Company’s consolidated results of operations or financial condition; however it did result in enhanced disclosures about fair value of financial instruments in our interim financial statements. See Note 3, Fair Value Measurements for further discussion.

Accounting Pronouncements Issued But Not Yet Adopted

In December 2010, the FASB issued authoritative guidance for accounting for the annual fee imposed by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act. The new guidance specifies that the liability for the fee should be estimated and recorded in full upon the first qualifying sale with a corresponding deferred cost that is amortized to expense. It is effective on a prospective basis for calendar years beginning after December 31, 2010. We expect this fee will be approximately $11 million in 2011, which will be charged as an operating expense ratably throughout 2011.

In December 2010, the FASB issued authoritative guidance on interim and annual disclosure of pro forma financial information related to business combinations. The new guidance clarifies the acquisition date that should be used for reporting the pro forma financial information comparative financial statements are presented. It is effective on a prospective basis for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. We will adopt this guidance beginning with business combinations for which the acquisition date is on or after January 1, 2011.

In April 2010, the FASB issued revised authoritative guidance for milestone revenue recognition. The new guidance recognizes the milestone method as an acceptable revenue recognition method for substantive

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milestones in research or development transactions. It is effective on a prospective basis to milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. We will adopt this guidance beginning with agreements entered into after January 1, 2011. We are currently evaluating the impact of adoption on our consolidated results of operations and financial position.

NOTE 3. FAIR VALUE MEASUREMENTS

The financial instruments recorded in our Consolidated Balance Sheets include cash and cash equivalents, accounts receivable, marketable securities, auction-rate securities rights, equity and cost method investments, accounts payable, acquisition-related contingent consideration and our debt obligations. Included in cash and cash equivalents are money market funds representing a type of mutual fund required by law to invest in low-risk securities (for example, U.S. government bonds, U.S. Treasury Bills and commercial paper). Money market funds are structured to maintain the fund’s net asset value at $1 per unit, which assists in ensuring adequate liquidity upon demand by the holder. Money market funds pay dividends that generally reflect short-term interest rates. Thus, only the dividend yield fluctuates. Due to their short-term maturity, the carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate their fair values.

The following table presents the carrying amounts and estimated fair values of our other financial instruments for the years ended December 31 (in thousands):

	2010						2009
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Current assets:
Auction-rate securities	$	—		$	—		$	25,275		$	25,275
Auction-rate securities rights		—			—			15,659			15,659
Long-term assets:
Auction-rate securities		17,332			17,332			207,334			207,334
Equity securities		6,177			6,177			4,458			4,458
Equity and cost method investments		34,677			N/A			30,236			N/A
	$	58,186					$	282,962
Current liabilities:
Current portion of long-term debt	$	(24,993	)	$	(24,993	)	$	—		$	—
Long-term liabilities:
Acquisition-related contingent consideration	$	(16,050	)	$	(16,050	)	$	(58,470	)	$	(58,470	)
Term Loan Due 2015, less current portion, net		(377,500	)		(380,038	)		—			—
7.00% Senior Notes Due 2020, net		(386,716	)		(403,308	)		—			—
1.75% Convertible Senior Subordinated Notes Due 2015, net		(278,922	)		(324,257	)		(260,279	)		(277,651	)
Minimum Voltaren® Gel royalties due to Novartis		(38,922	)		(38,922	)		(49,996	)		(49,996	)
Other long-term debt, less current portion		(2,663	)		(2,663	)		(62,255	)		(61,896	)
	$	(1,125,766	)	$	(1,190,231	)	$	(431,000	)	$	(448,013	)

Equity securities consist of publicly traded common stock the value which is based on a quoted market price. These securities are not held to support current operations and are therefore classified as non-current assets. The acquisition-related contingent consideration represents amounts payable to the former Indevus shareholders under contingent cash consideration agreements relating to the development of Aveed^TM (see Note 5 for further details) as well as contingent cash consideration related to the acquistion of Qualitest, which occurred in November 2010 (see Note 7 for further details). These amounts are required to be measured at fair value on a recurring basis. The fair values of our Term Loan Facility due 2015 and our 7.00% Senior Notes due 2020 (the

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Senior Notes) were estimated using a discounted cash flow model based on the contractual repayment terms of the respective instruments and discount rates that reflect current market conditions. The fair value of our 1.75% Convertible Senior Subordinated Notes is based on an income approach known as the binomial lattice model which incorporated certain inputs and assumptions, including scheduled coupon and principal payments, the conversion feature inherent in the Convertible Notes, the put feature inherent in the Convertible Notes, and stock price volatility assumptions of 33% in 2010 and 36% in 2009 that were based on historic volatility of the Company’s common stock and other factors. The fair value of our Non-recourse notes at December 31, 2009, included within other long-term debt in the table above, was determined using an income approach (present value technique) consistent with the methodology used as of February 23, 2009.

The minimum Voltaren^® Gel royalty due to Novartis AG was recorded at fair value at inception during 2008 using an income approach (present value technique) and is being accreted up to the maximum potential future payment of $60.0 million. The Company is not aware of any events or circumstances that would have a significant effect on the fair value of this Novartis AG liability. We believe the carrying amount of this minimum royalty guarantee at December 31, 2010 represents a reasonable approximation of the price that would be paid to transfer the liability in an orderly transaction between market participants at the measurement date. Accordingly, the carrying value approximates fair value as of December 31, 2010. The fair value of equity method and cost method investments is not readily available nor have we estimated the fair value of these investments and disclosure is not required. The Company is not aware of any identified events or changes in circumstances that would have a significant adverse effect on the carrying value of our $23.6 million of cost method investments.

As of December 31, 2010, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis, including money market funds, available-for-sale securities, and acquisition-related contingent consideration. Fair value guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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The Company’s financial assets and liabilities measured at fair value on a recurring basis at December 31, 2010 and December 31, 2009, were as follows (in thousands):

	Fair Value Measurements at Reporting Date Using
December 31, 2010	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total
Assets:
Money market funds	$	149,318	$	—	$	—		$	149,318
Auction-rate securities		—		—		17,332			17,332
Equity securities		6,177		—		—			6,177
Total	$	155,495	$	—	$	17,332		$	172,827
Liabilities:
Acquisition-related contingent consideration – long-term		—		—		(16,050	)		(16,050	)
Total	$	—	$	—	$	(16,050	)	$	(16,050	)
	Fair Value Measurements at Reporting Date Using
December 31, 2009	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total
Assets:
Money market funds	$	279,772	$	—	$	—		$	279,772
Auction-rate securities		25,275		—		207,334			232,609
Auction-rate securities rights		—		—		15,659			15,659
Equity securities		4,458		—		—			4,458
Total	$	309,505	$	—	$	222,993		$	532,498
Liabilities:
Acquisition-related contingent consideration – long-term		—		—		(58,470	)		(58,470	)
Total	$	—	$	—	$	(58,470	)	$	(58,470	)

Overview of Auction-Rate Securities

Auction-rate securities are long-term variable rate bonds tied to short-term interest rates. After the initial issuance of the securities, the interest rate on the securities is reset periodically, at intervals established at the time of issuance (e.g., every seven, twenty-eight, or thirty-five days; every six months; etc.). In an active market, auction-rate securities are bought and sold at each reset date through a competitive bidding process, often referred to as a “Dutch auction”. Auctions are successful when the supply and demand of securities are in balance. Financial institutions brokering the auctions would also participate in the auctions to balance the supply and demand. Beginning in the second half of 2007, auctions began to fail for specific securities and in mid-February 2008 auction failures became common, prompting market participants, including financial institutions, to cease or limit their exposure to the auction-rate market. Given the current negative liquidity conditions in the global credit markets, the auction-rate securities market has become inactive. Consequently, our auction-rate securities are currently illiquid through the normal auction process. As a result of the inactivity in the market, quoted market prices and other observable data are not available or their utility is limited.

At December 31, 2010 and 2009, the Company determined that the market for its auction-rate securities was still inactive. That determination was made considering that there are very few observable transactions for the auction-rate securities or similar securities, the prices for transactions that have occurred are not current, and the observable prices for those transactions – to the extent they exist – vary substantially either over time or among market makers, thus reducing the potential usefulness of those observations. In addition, the current lack of liquidity prevents the Company from comparing our securities directly to securities with quoted market prices.

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Our auction-rate securities consist of municipal bonds with an auction reset feature, the underlying assets of which are student loans that are backed substantially by the federal government and have underlying credit ratings of AAA as of December 31, 2010. Further, the issuers have been making interest payments promptly.

Overview of Auction-Rate Securities Rights

In October 2008, UBS AG (UBS) made an offer (the UBS Offer) to the Company and other clients of UBS Securities LLC and UBS Financial Services Inc. (collectively, the UBS Entities), pursuant to which the Company received auction-rate securities rights (the Rights) to sell to UBS all auction-rate securities held by the Company as of February 13, 2008 in a UBS account (the Eligible Auction-Rate Securities). The Rights permitted the Company to require UBS to purchase the Eligible Auction-Rate Securities for a price equal to par value plus any accrued but unpaid dividends or interest beginning on June 30, 2010 and ending on July 2, 2012.

The UBS Offer was made pursuant to agreements in principle entered into by the UBS Entities with the Securities and Exchange Commission, the New York Attorney General, the Texas State Securities Board and other state regulatory agencies represented by North American Securities Administrators Association, and a settlement agreement with the Massachusetts Securities Division to settle investigations brought by each of these agencies against the UBS Entities relating to the sale and marketing of auction-rate securities. The alleged conduct underlying these investigations suggested that the UBS Entities marketed auction-rate securities as cash alternatives but failed to adequately disclose liquidity risk.

On November 10, 2008, the Company accepted the UBS Offer. As a result, the Company granted to the UBS Entities, the sole discretion and right to sell or otherwise dispose of, and/or enter orders in the auction process with respect to the Eligible Auction-Rate Securities on the Company’s behalf until the Expiration Date, without prior notification, so long as the Company receives a payment of par value plus any accrued but unpaid dividends or interest upon any sale or disposition. The fair values of our Term Loan Facility due 2015 and our 7.00% Senior Notes due 2020 (the Senior Notes) were estimated using a discounted cash flow model based on the contractual repayment terms of the respective instruments and discount rates that reflect current market conditions.

Acceptance of the UBS Offer constituted a substantive change in facts and circumstances that altered the Company’s view that it intended to hold the impaired securities until their anticipated recovery. Accordingly, we could no longer assert that we had the intent to hold the auction-rate securities until anticipated recovery. As a result, during the fourth quarter of 2008, we recognized an other-than-temporary impairment charge recorded in earnings. The charge was measured as the difference between the par value and fair value of the auction-rate securities on November 10, 2008. Previously recognized declines in fair value associated with the Eligible Auction-Rate Securities that were determined to be temporary were transferred out of other comprehensive income and charged to earnings as part of the impairment charge.

Acceptance of the UBS Offer created an enforceable legal right by and between the Company and UBS. The UBS Offer was a legally separate contractual agreement and was non-transferable. The Rights were not readily convertible to cash and did not provide for net settlement. Accordingly, the Rights did not meet the definition of a derivative instrument and were treated as a freestanding financial instrument.

Subsequent Accounting for Auction-Rate Securities and Auction-Rate Securities Rights

Acceptance of the UBS Offer constituted a substantive change in facts and circumstances that altered the Company’s view that it intended to hold the illiquid securities until their scheduled maturity date. As a result of the change, we recognized an other than temporary impairment charge as of December 31, 2008 of approximately $26.4 million that is included in Other (income) expense, net in the Consolidated Statements of Operations.

Concurrent with the acceptance of the UBS offer, the Company made a one-time election to re-classify the Eligible Auction-Rate Securities from an available-for-sale security to a trading security. Subsequent changes to

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the fair value of these trading securities resulted in $15.4 million and $15.2 million of income during the years ended December 31, 2010 and 2009, respectively, and additional expense of $4.2 million during the year ended December 31, 2008, and were recorded in Other (income) expense, net in the Consolidated Statements of Operations.

As a result of our fair value election for our auction-rate securities rights, the fair value of the auction-rate securities rights were re-measured each reporting period with the corresponding changes in fair value reported in earnings. Since the auction-rate securities rights were freestanding financial instruments, they did not affect the separate determination of the fair value of the Eligible Auction-Rate Securities. However, in management’s view, the auction-rate securities rights acted as an economic hedge against further fair value changes in the Eligible Auction-Rate Securities. On June 30, 2010, our auction-rate securities rights were exercised. Accordingly, the related asset was written off with a corresponding charge to earnings of $15.7 million for the year ended December 31, 2010. At December 31, 2009, the fair value of our auction-rate securities rights was $15.7 million. The changes in fair value during 2009 resulted in a loss of $11.7 million during the year ended December 31, 2009. These amounts were recognized in earnings and included in other (income) expense, net in the Consolidated Statements of Operations.

Valuation of the Auction-Rate Securities

The Company determined that an income approach (present value technique) that maximizes the use of observable market inputs is the preferred approach to measuring the fair value of our securities. Specifically, the Company used the discount rate adjustment technique to determine an indication of fair value.

To calculate a price for our auction-rate securities, the Company calculates duration to maturity, coupon rates, market required rates of return (discount rate) and a discount for lack of liquidity in the following manner:

• The Company identifies the duration to maturity of the auction-rate securities as the time at which principal is available to the investor. This can occur because the auction-rate security is paying a coupon that is above the required rate of return, and the Company treats the security as being called. It can also occur because the market has returned to normal and the Company treats the auctions as having recommenced. Lastly, and most frequently, the Company treats the principal as being returned as prepayment occurs and at the maturity of the security. The life used for each remaining security, representing time to maturity is eight years.

• The Company calculates coupon rates based on estimated relationships between the maximum coupon rate (the coupon rate in event of a failure) and market interest rates. The representative coupon rate on December 31, 2010 was 5.10% and ranged from 5.37% to 6.12% at December 31, 2009. The Company calculates appropriate discount rates for securities that include base interest rates, index spreads over the base rate, and security-specific spreads. These spreads include the possibility of changes in credit risk over time. The spreads over the base rate for our securities applied to our securities was 218 basis points at December 31, 2010 and ranged from 154 basis points to 410 basis points at December 31, 2009.

• The Company believes that a market participant would require an adjustment to the required rate of return to adjust for the lack of liquidity. We do not believe it is unreasonable to assume a 150 basis points adjustment to the required rate of return and a term of either three, four or five years to adjust for this lack of liquidity. The increase in the required rate of return decreases the prices of the securities. However, the assumption of a three, four or five-year term shortens the times to maturity and increases the prices of the securities. The Company has evaluated the impact of applying each term and the reasonableness of the range indicated by the results. The Company chose to use a four-year term to adjust for the lack of liquidity as we believe it is the point within the range that is most representative of fair value. The Company’s conclusion is based in part on the fact that the fair values indicated by the results are reasonable in relation to each other given the nature of the securities and current market conditions.

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At December 31, 2010, the fair value of our auction-rate securities, as determined by applying the above described discount rate adjustment technique, was approximately $17.3 million, representing an eight percent (8%), or $1.5 million discount from their original purchase price or par value. This compares to approximately $232.6 million, representing a seven percent (7%), or $16.5 million discount from their original purchase price or par value at December 31, 2009. We believe we have appropriately reflected our best estimate of the assumptions that market participants would use in pricing the assets in a current transaction to sell the asset at the measurement date. Accordingly, the carrying value of our auction-rate securities at December 31, 2010 and 2009 were reduced by approximately $1.5 million and $16.5 million, respectively. These adjustments appropriately reflect the changes in fair value, which the Company attributes to liquidity issues rather than credit issues.

The portion of this decline in fair value related to the Eligible Auction-Rate Securities was recorded in earnings as an other-than-temporary impairment charge or as changes in the fair value of trading securities. The Company has assessed the portion of the decline in fair value not associated with the Eligible Auction-Rate Securities to be temporary due to the financial condition and near-term prospects of the underlying issuers, our intent and ability to retain our investment in the issuers for a period of time sufficient to allow for any anticipated recovery in market value and based on the extent to which fair value is less than par. Accordingly, we recorded a $0.4 million loss and a $0.6 million gain in shareholders’ equity in accumulated other comprehensive loss as of December 31, 2010, and 2009, respectively. Securities not subject to the UBS Offer are analyzed each reporting period for other-than-temporary impairment factors. Any future fluctuation in fair value related to these instruments that the Company judges to be temporary, including any recoveries of previous write-downs, would be recorded to other comprehensive income. If the Company determines that any future valuation adjustment was other-than-temporary, it would record a charge to earnings as appropriate. However, there can be no assurance that our current belief that the securities not subject to the UBS Offer will recover their value will not change.

Valuation of the Auction-Rate Securities Rights

The Company has determined that an income approach (present value technique) that maximizes the use of observable market inputs is the preferred approach to measuring the fair value of the auction-rate securities rights. Specifically, the Company used the discount rate adjustment technique to determine an indication of fair value.

The values of the Rights at December 31, 2009 were estimated as the value of a portfolio designed to approximate the cash flows of the UBS Agreement. The portfolio consists of a bond issued by UBS that will mature equal to the face value of the auction-rate securities, a series of payments that will replicate the coupons of the auction-rate securities, and a short position in the callable auction-rate security. If the UBS agreement is in the money on the exercise date, then both the UBS agreement and the replicating portfolio will be worth the difference between the par value of the auction-rate securities and the market value of the auction-rate securities. If the UBS agreement is out of the money on the exercise date, then both the replicating portfolio and the UBS agreement will have no value.

For purposes of valuing the UBS bond, management selected a required rate of return for a UBS obligation based on market factors including relevant credit default spreads. The rate of return for the auction-rate securities is determined as described above under “Valuation of the Auction-Rate Securities” and is used to determine the present value of the coupons of the auction-rate security.

At June 30, 2010, the fair value of our auction-rate securities rights were adjusted to $0 due to the Rights being exercised and the associated UBS securities being sold as of June 30, 2010. For comparable 2009 periods, the Company chose to use a four-year term to adjust for the lack of liquidity on the auction-rate securities as we believe it is the point within the range that is most representative of fair value. Accordingly, the same term was used when valuing the Rights. We believe we have appropriately reflected our best estimate of the assumptions that market participants would use in pricing the asset in a current transaction to sell the asset at the measurement date.

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The following table presents changes to the Company’s financial assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the twelve months ended December 31, 2010 (in thousands):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Auction-rate Securities			Auction-rate Securities Rights			Total
Balance at January 1, 2010	$	207,334		$	15,659		$	222,993
Securities sold or redeemed		(205,050	)		—			(205,050	)
Securities purchased or acquired		—			—			—
Transfers in and/or (out) of Level 3		—			—			—
Changes in fair value recorded in earnings		15,420			(15,659	)		(239	)
Unrealized loss included in other comprehensive loss		(372	)		—			(372	)
Balance at December 31, 2010	$	17,332		$	—		$	17,332

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Acquisition-related Contingent Consideration
Liabilities:
Balance at January 1, 2010	$	(58,470	)
Amounts acquired or issued		(9,000	)
Transfers in and/or (out) of Level 3		—
Changes in fair value recorded in earnings		51,420
Balance at December 31, 2010	$	(16,050	)

The following table presents changes to the Company’s financial assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the twelve months ended December 31, 2009 (in thousands):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Auction-rate Securities			Auction-rate Securities Rights			Total
Balance at January 1, 2009	$	234,005		$	27,321		$	261,326
Securities sold or redeemed		(17,250	)		—			(17,250	)
Securities purchased or acquired		—			—			—
Transfers in and/or (out) of Level 3		(25,275	)		—			(25,275	)
Changes in fair value recorded in earnings		15,222			(11,662	)		3,560
Unrealized gain included in other comprehensive loss		632			—			632
Balance at December 31, 2009	$	207,334		$	15,659		$	222,993

F-24

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Acquisition-related Contingent Consideration
Liabilities:
Balance at January 1, 2009	$	—
Amounts acquired or issued		(186,560	)
Transfers in and/or (out) of Level 3		—
Changes in fair value recorded in earnings		128,090
Balance at December 31, 2009	$	(58,470	)

At December 31, 2010 and 2009, the fair value of the Company’s trading securities was $0 and $214.9 million, respectively. The following is a summary of available-for-sale securities held by the Company as of December 31, 2010 and 2009 (in thousands):

	Available-for-sale
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
December 31, 2010:
Money market funds	$	149,318	$	—	$	—		$	149,318
Total included in cash and cash equivalents	$	149,318	$	—	$	—		$	149,318
Auction-rate securities		18,800		—		(1,468	)		17,332
Equity securities		5,564		613		—			6,177
Long-term available-for-sale securities	$	24,364	$	613	$	(1,468	)	$	23,509
Total available-for-sale securities	$	173,682	$	613	$	(1,468	)	$	172,827

	Available-for-sale
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
December 31, 2009:
Money market funds	$	279,772	$	—	$	—		$	279,772
Total included in cash and cash equivalents	$	279,772	$	—	$	—		$	279,772
Auction-rate securities		18,800		—		(1,096	)		17,704
Equity securities		5,564		—		(1,106	)		4,458
Long-term available-for-sale securities	$	24,364	$	—	$	(2,202	)	$	22,162
Total available-for-sale securities	$	304,136	$	—	$	(2,202	)	$	301,934

During the year ended December 31, 2010, we sold $230.3 million of auction-rate securities at par value. During the year ended December 31, 2009, we sold $23.8 million of auction-rate securities at par value. There were no realized holding gains and losses resulting from the sales of our auction-rate securities and variable rate demand obligations during the periods ended December 31, 2010 and 2009. The cost of securities sold is based on the specific identification method.

The underlying assets of our auction-rate securities are student loans. Student loans are insured by the Federal Family Education Loan Program, or FFELP.

F-25

The following table sets forth the fair value of our long-term auction-rate securities by type of security and underlying credit rating as of December 31, 2010 (in thousands):

	Underlying Credit Rating(1)
	AAA		A		B2		Ba2		Baa3		Total
Underlying security:
Student loans	$	17,332	$	—	$	—	$	—	$	—	$	17,332
Total auction-rate securities included in long-term marketable securities	$	17,332	$	—	$	—	$	—	$	—	$	17,332

(1) Our auction-rate securities maintain split ratings. For purposes of this table, securities are categorized according to their lowest rating.

The following table sets forth the fair value of our long-term auction-rate securities by type of security and underlying credit rating as of December 31, 2009 (in thousands):

	Underlying Credit Rating(1)
	AAA		A		B2		Ba2		Baa3		Total
Underlying security:
Student loans	$	130,861	$	51,781	$	9,934	$	7,201	$	7,557	$	207,334
Total auction-rate securities included in long-term marketable securities	$	130,861	$	51,781	$	9,934	$	7,201	$	7,557	$	207,334

(1) Our auction-rate securities maintain split ratings. For purposes of this table, securities are categorized according to their lowest rating.

As of December 31, 2010, the yields on our long-term auction-rate securities ranged from 0.54% to 0.60%. These yields represent the predetermined “maximum” reset rates that occur upon auction failures according to the specific terms within each security’s prospectus. As of December 31, 2010, the weighted average yield for our long-term auction-rate securities was 0.57%. Total interest recognized on our auction-rate securities and variable rate demand obligations during the year ended December 31, 2010, 2009 and 2008 was $0.7 million, $2.4 million, and $15.5 million, respectively. Further, the issuers have been making interest payments promptly.

The amortized cost and estimated fair value of available-for-sale debt and equity securities by contractual maturities are shown below (in thousands). Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	December 31, 2010				December 31, 2009
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-sale debt securities:
Due in less than 1 year	$	—	$	—	$	—	$	—
Due in 1 to 5 years		—		—		—		—
Due in 5 to 10 years		—		—		—		—
Due after 10 years		18,800		17,332		18,800		17,704
Equity securities		5,564		6,177		5,564		4,458
Total	$	24,364	$	23,509	$	24,364	$	22,162

F-26

The Company’s financial assets measured at fair value on a nonrecurring basis at December 31, 2010, were as follows (in thousands):

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Loss
Assets:
Pagoclone indefinite-lived intangible asset	$	—	$	—	$	8,000	$	(13,000	)
Total	$	—	$	—	$	8,000	$	(13,000	)

The Company’s financial assets measured at fair value on a nonrecurring basis at December 31, 2009, were as follows (in thousands):

	Fair Value Measurements at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Loss
Assets:
AveedTM indefinite-lived intangible asset	$	—	$	—	$	35,000	$	(65,000	)
Total	$	—	$	—	$	35,000	$	(65,000	)

See Note 9 for a discussion of these impairments. As required, we also performed an impairment analysis on all other indefinite-lived intangible assets as of January 1, 2011 and January 1, 2010. None of our other indefinite-lived intangible assets were determined to be impaired.

NOTE 4. INVENTORIES

Inventories are comprised of the following for the years ended December 31 (in thousands):

	2010		2009
Raw materials	$	45,957	$	8,510
Work-in-process		34,208		25,799
Finished goods		98,640		50,584
Total	$	178,805	$	84,893

NOTE 5. ACQUISITIONS

Indevus Pharmaceuticals, Inc.

On February 23, 2009 (the Indevus Acquisition Date), the Company completed its initial tender offer (the Offer) for all outstanding shares of common stock of Indevus. Through purchases in subsequent offer periods, the exercise of a top-up option and a subsequent merger (the Merger), the Company completed its acquisition of Indevus on March 23, 2009, at which time Indevus became a wholly-owned subsidiary of the Company. The Indevus Shares were purchased at a price of $4.50 per Indevus Share, net to the seller in cash, plus contractual rights to receive up to an additional $3.00 per Indevus Share in contingent cash consideration payments, pursuant to the terms of the Agreement and Plan of Merger, dated as of January 5, 2009. Accordingly, the Company paid

F-27

approximately $368 million in aggregate initial cash consideration for the Indevus Shares and entered into the Aveed^TM Contingent Cash Consideration Agreement and the Octreotide Contingent Cash Consideration Agreement (each as defined in the Merger Agreement), providing for the payment of up to an additional $3.00 per Indevus Share in contingent cash consideration payments, in accordance with the terms of the Offer. The total cost to acquire all outstanding Indevus Shares pursuant to the Offer and the Merger could be up to an additional approximately $267 million, if Endo is obligated to pay the maximum amounts under the Aveed^TM Contingent Cash Consideration Agreement and the Octreotide Contingent Cash Consideration Agreement.

Indevus was a specialty pharmaceutical company engaged in the acquisition, development, and commercialization of products to treat conditions in urology, endocrinology and oncology. Following the completion of the Merger, Indevus was renamed Endo Pharmaceuticals Solutions Inc.

Approved products assumed in the acquisition included Sanctura^® (trospium chloride) and Sanctura XR^® (trospium chloride extended release capsules) for the treatment of overactive bladder (OAB); Supprelin^® LA (histrelin acetate) for treating central precocious puberty (CPP); Vantas^® (histrelin) for the palliative treatment of advanced prostate cancer; Delatestryl^® (testosterone enanthate) for the treatment of male hypogonadism; Hydron^® Implant utilized as a drug delivery device providing for a sustained release of a broad spectrum of drugs continuously and Valstar^® (valrubicin) for therapy of bacillus Calmette-Guerin (BCG)-refractory carcinoma in situ (referred to as CIS) of the bladder.

Primary development products include the following:

• Aveed^TM (testosterone undecanoate) is expected to be the first long-acting injectable testosterone preparation available in the U.S. for the treatment of male hypogonadism in the growing market for testosterone replacement therapies. Aveed^TM had historically been referred to as Nebido^® which the Company acquired the U.S. rights to from Schering AG, Germany, in July 2005. On May 6, 2009, we received notice from the FDA that Nebido^® was unacceptable as a proprietary name for testosterone undecanoate. In August 2009, we received approval from FDA to use the name Aveed^TM. The contingent cash consideration agreement relating to the product, which we have historically referred to as the Nebido^® Contingent Cash Consideration Agreement, will now be referred to as the Aveed^TM Contingent Cash Consideration Agreement throughout this Report. On December 2, 2009, we received a complete response letter from the FDA regarding Aveed^TM in response to our March 2009 complete response submission. In the complete response letter, the FDA has requested information from Endo to address the agency’s concerns regarding very rare but serious adverse events, including post-injection anaphylactic reaction and pulmonary oily microembolism. The letter also specified that the proposed REMS is not sufficient. In 2010, the Company met with the FDA to discuss the existing clinical data provided to the FDA as well as the potential path-forward. The Company is evaluating how best to address the concerns of the FDA and intends to have future dialogue with the agency regarding a possible regulatory pathway. The outcome of future communications with the FDA could have a material impact on (1) management’s assessment of the overall probability of approval, (2) the timing of such approval, (3) the targeted indication or patient population and (4) the likelihood of additional clinical trials.

• Octreotide, currently in Phase III clinical trials for the treatment of acromegaly, utilizes our patented Hydron^® Polymer Technology to deliver six months of octreotide, a long-acting octapeptide that mimics the natural hormone somatostatin to block production of growth hormone (GH). Octreotide is also approved to treat symptoms associated with metastatic carcinoid tumors and vasoactive intestinal peptide secreting adenomas, which are gastrointestinal tumors. In February 2011, the FDA requested additional pre-clinical studies, including a carcinogenicity study, be completed prior to the submission of the NDA for the octreotide implant for the treatment of acromegaly. Although this development causes a delay of up to four years in the timing associated with regulatory approval, the Company intends to continue the development of this product and is encouraged by recent preliminary results from its Phase III study. In addition, the Company recently assessed all of its in-process research and

F-28

development assets and concluded, separately, to discontinue development of its octreotide implant for the treatment of carcinoid syndrome due to recent market research that indicates certain commercial challenges, including the expected rate of physician acceptance and the expected rate of existing patients willing to switch therapies.

Management believes the Company’s acquisition of Indevus is particularly significant because it reflects our commitment to expand our business beyond pain management into complementary medical areas where we believe we can be innovative and competitive.

The operating results of Indevus from February 23, 2009 to December 31, 2010 are included in the accompanying Consolidated Statements of Operations. The Consolidated Balance Sheets as of December 31, 2010 and December 31, 2009 reflect the acquisition of Indevus, effective February 23, 2009, the date the Company obtained control of Indevus. The acquisition date fair value of the total consideration transferred was $540.9 million, which consisted of the following (in thousands):

	Fair Value of Consideration Transferred
Cash	$	368,034
Contingent consideration		172,860
Total	$	540,894

As of December 31, 2010 and 2009, the fair value of the Indevus contingent consideration is $7.1 million and $58.5 million, respectively.

The contingent consideration relates to the amounts payable under the Aveed^TM Contingent Cash Consideration Agreement and the Octreotide Contingent Cash Consideration Agreement. In the event that the Company receives an approval letter from the FDA with respect to the Aveed^TM NDA on or before the third anniversary of the time at which we purchased the Indevus Shares in the Offer, then the Company will, subject to the terms described below, (i) pay an additional $2.00 per Indevus Share to the former stockholders of Indevus, if such approval letter grants the right to market and sell Aveed^TM immediately and provides labeling for Aveed^TM that does not contain a “boxed warning” (Aveed^TM With Label) or alternatively, (ii) pay an additional $1.00 per Indevus Share, if such approval letter grants the right to market and sell Aveed^TM immediately and provides labeling for Aveed^TM that contains a “boxed warning” (Aveed^TM Without Label). In the event that either an Aveed^TM With Label approval or an Aveed^TM Without Label approval has not been obtained prior to the third anniversary of the closing of the Offer, then the Company will not pay, and the former Indevus stockholders will not receive, any payments under the Aveed^TM Contingent Cash Consideration Agreement.

Further, in the event that the Aveed^TM Without Label approval is received and subsequently, Endo and its subsidiaries publicly report audited financial statements which reflect cumulative net sales of Aveed^TM of at least $125.0 million for four consecutive calendar quarters on or prior to the fifth anniversary of the date of the first commercial sale of Aveed^TM (Aveed^TM Net Sales Event), then the Company will, subject to the terms described below, pay an additional $1.00 per Indevus Share to the former stockholders of Indevus. In the event that the Aveed^TM Net Sales Event does not occur prior to the fifth anniversary of the date of the first commercial sale of Aveed^TM then the Company will not pay, and former Indevus stockholders will not receive, any additional amounts under the Aveed^TM Contingent Cash Consideration Agreement.

The range of the undiscounted amounts the Company could pay under the Aveed^TM Contingent Cash Consideration Agreement is between $0 and approximately $175.0 million. The fair value of the contractual obligation to pay the Aveed^TM contingent consideration recognized on the Indevus Acquisition Date was $133.1 million. We determined the fair value of the obligation to pay the Aveed^TM contingent consideration based on a probability-weighted income approach. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. Under the Aveed^TM

F-29

Contingent Cash Consideration Agreement, there are three scenarios that could potentially lead to amounts being paid to the former stockholders of Indevus. These scenarios are (1) obtaining an Aveed^TM With Label approval, (2) obtaining an Aveed^TM Without Label approval and (3) achieving the $125.0 million sales milestone on or prior to the fifth anniversary of the date of the first commercial sale of Aveed^TM should the Aveed^TM Without Label approval be obtained. The fourth scenario is Aveed^TM not receiving approval within three years of the closing of the Offer, which would result in no payment to the former stockholders of Indevus. Each scenario was assigned a probability based on the current regulatory status of Aveed^TM. The resultant probability-weighted cash flows were then discounted using a discount rate of U.S. Prime plus 300 basis points, which the Company believes is appropriate and is representative of a market participant assumption. The fair value of the contractual obligation to pay the Aveed^TM contingent consideration was $7.1 million and $7.5 million at December 31, 2010 and December 31, 2009, respectively. Future changes in any of our assumptions could result in further volatility to the estimated fair value of the acquisition-related contingent consideration. Such additional changes to fair value could materially impact our results of operations in future periods.

Similarly, in the event that an approval letter from the FDA is received with respect to an octreotide NDA (such approval letter, the Octreotide Approval) on or before the fourth anniversary of the closing of the Offer, then the Company will, subject to the terms described below, pay an additional $1.00 per Indevus Share to the former stockholders of Indevus (such payment, the Octreotide Contingent Cash Consideration Payment). In the event that an Octreotide Approval has not been obtained prior to the fourth anniversary of the closing of the Offer, then the Company will not pay, and the former Indevus stockholders shall not receive, the Octreotide Contingent Cash Consideration Payment.

The range of the undiscounted amounts the Company could pay under the Octreotide Contingent Cash Consideration Agreement is between $0 and approximately $91.0 million. The fair value of the octreotide contractual obligation to pay the contingent consideration recognized on the Indevus Acquisition Date was $39.8 million. We determined the fair value of the contractual obligation to pay the Octreotide Contingent Consideration Payment based on a probability-weighted income approach. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. Under the Octreotide Contingent Cash Consideration Agreement, the two scenarios that require consideration are (1) Octreotide Approval on or before the fourth anniversary of the closing of the Offer or (2) no Octreotide Approval on or before the fourth anniversary of the closing of the Offer. Each scenario was assigned a probability based on the current development stage of octreotide. The resultant probability-weighted cash flows were then discounted using a discount rate of U.S. Prime plus 300 basis points, which the Company believes is appropriate and is representative of a market participant assumption. The fair value of the contractual obligation to pay the octreotide contingent consideration was determined to be $0 at December 31, 2010 compared to $42.5 million at December 31, 2009. Future changes in any of our assumptions could result in further volatility to the estimated fair value of the acquisition-related contingent consideration. Such additional changes to fair value could materially impact our results of operations in future periods.

In addition to the potential contingent payments under the Aveed^TM Contingent Cash Consideration Agreement and the Octreotide Contingent Cash Consideration Agreement, the Company has assumed a pre-existing contingent consideration obligation relating to Indevus’ acquisition of Valera Pharmaceuticals, Inc. (the Valera Contingent Consideration), which was consummated on April 18, 2007. The Valera Contingent Consideration entitles former Valera shareholders to receive additional Indevus Shares based on an agreed upon conversion factor if FDA approval of the octreotide implant for the treatment for acromegaly is achieved on or before April 18, 2012. Upon Endo’s acquisition of Indevus, each Valera shareholder’s right to receive additional Indevus Shares was converted into the right to receive $4.50 per Indevus Share that such former Valera shareholder would have received plus contractual rights to receive up to an additional $3.00 per Indevus Share that such former Valera shareholder would have received in contingent cash consideration payments under the Aveed^TM Contingent Cash Consideration Agreement and the Octreotide Contingent Cash Consideration Agreement. These amounts would only be payable to former Valera shareholders if there were Octreotide Approval. The range of the undiscounted amounts the Company could pay with respect to the Valera Contingent Consideration is between $0 and approximately $33.0 million.

F-30

The Company is accounting for the Valera Contingent Consideration in the same manner as if it had entered into that arrangement with respect to its acquisition of Indevus. Accordingly, the fair value of the Valera Contingent Consideration recognized on the Indevus Acquisition Date was $13.7 million. Fair value was estimated based on a probability-weighted discounted cash flow model, or income approach. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the Valera Contingent Consideration is estimated using the same assumptions used for the Aveed^TM Contingent Cash Consideration Agreement and Octreotide Contingent Cash Consideration Agreement, except that the probabilities associated with the Valera Contingent Consideration take into account the probability of obtaining the Octreotide Approval on or before the fourth anniversary of the closing of the Offer. This is due to the fact that the Valera Contingent Consideration will not be paid unless Octreotide for the treatment of acromegaly is approved prior to April 18, 2012. The fair value of the contractual obligation to pay the Valera Contingent Consideration was determined to be $0 at December 31, 2010 compared to $8.5 million at December 31, 2009. Future changes in any of our assumptions could result in further volatility to the estimated fair value of the acquisition-related contingent consideration. Such additional changes to fair value could materially impact our results of operations in future periods.

As of December 31, 2010, the fair value of the Indevus acquisition-related contingent consideration decreased by approximately $51.4 million from December 31, 2009, primarily due to management’s current assessment that it will not be obligated to make contingent consideration payments based on the anticipated timeline for the NDA filing and FDA approval of octreotide for the treatment of acromegaly. The decrease in the liability was recorded as a gain and is included in the Acquisition-related items line item in the accompanying Consolidated Statements of Operations.

As of December 31, 2009, the fair value of the Indevus acquisition-related contingent consideration decreased by approximately $128.1 million from the acquisition date, primarily reflecting management’s assessment of the decreased probability that we will be obligated to make contingent consideration payments under the Aveed^TM Contingent Cash Consideration Agreement within the specified contractual timeframe, as well as the anticipated timeline for the NDA filing and FDA approval of octreotide. The decrease in the liability was recorded as a gain and is included in the Acquisition-related items line item in the accompanying Consolidated Statements of Operations.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the Indevus Acquisition Date (in thousands):

	February 23, 2009
Cash and cash equivalents	$	117,675
Accounts receivable		14,591
Inventories		17,157
Prepaid and other current assets		8,322
Property, plant and equipment		8,856
Other intangible assets		532,900
Deferred tax assets		167,749
Other non-current assets		1,331
Total identifiable assets	$	868,581
Accounts payable	$	(5,116	)
Accrued expenses		(26,725	)
Convertible notes		(72,512	)
Non-recourse notes		(115,235	)
Deferred tax liabilities		(210,647	)
Other non-current liabilities		(18,907	)
Total liabilities assumed		(449,142	)
Net identifiable assets acquired	$	419,439
Goodwill	$	121,455
Net assets acquired	$	540,894

F-31

The above estimated fair values of assets acquired and liabilities assumed are based on the information that was available as of the Indevus Acquisition Date. As of December 31, 2009, our measurement period adjustments were complete.

Of the $532.9 million of acquired intangible assets, $255.9 million was assigned to in-process research and development. The remaining $277.0 million has been assigned to license rights and is subject to a weighted average useful life of approximately 11 years.

The valuation of the intangible assets acquired and related amortization periods are as follows:

	Valuation (in millions)		Amortization Period (in years)
In-Process Research & Development:
Valstar®(1)	$	88.0		n/a
Aveed™(2)		100.0		n/a
Octreotide(3)		31.0		n/a
Pagoclone(4)		21.0		n/a
Pro2000(5)		4.0		n/a
Other		11.9		n/a
Total	$	255.9		n/a
License Rights:
Hydron® Polymer	$	22.0		10
Vantas®		36.0		10
Sanctura® Franchise		94.0		12
Supprelin® LA		124.0		10
Other		1.0		4
Total	$	277.0		11
Total other intangible assets	$	532.9

(1) The FDA approved the sNDA for Valstar^® subsequent to the Indevus Acquisition Date. Therefore, Valstar^® was initially classified as in-process research and development and subsequently transferred to License Rights upon obtaining FDA approval and is being amortized over a 15 year useful life.

(2) As a result of the FDA’s complete response letter related to our filed NDA, we performed an impairment analysis during the fourth quarter ended December 31, 2009. We concluded there was a decline in the fair value of the indefinite-lived intangible. Accordingly, we recorded a $65.0 million impairment charge.

(3) As part of our annual review of all in-process research and development assets, we conducted an in-depth review of both octreotide indications. This review covered a number of factors including the market potential of each product given its stage of development, taking into account, among other things, issues of safety and efficacy, product profile, competitiveness of the marketplace, the proprietary position of the product and its potential profitability. Our review resulted in no impact to the carrying value of our octreotide – acromegaly intangible asset. However, the analysis identified certain commercial challenges with respect to the octreotide – carcinoid syndrome intangible asset including the expected rate of physician acceptance and the expected rate of existing patients willing to switch therapies. Upon analyzing the Company’s R&D priorities, available resources for current and future projects, and the commercial potential for octreotide – carcinoid syndrome, the Company has decided to discontinue development of octreotide for the treatment of carcinoid syndrome. As a result of the above developments, the Company recorded a pre-tax non-cash impairment charge of $22.0 million for the year ended December 31, 2010, to write-off, in its entirety, the octreotide – carcinoid syndrome intangible asset.

(4) In May 2010, Teva terminated the development and licensing arrangement with us upon the completion of the Phase IIb study. We concluded there was a decline in the fair value of the indefinite-lived intangible asset. Accordingly, we recorded a $13.0 million impairment charge.

(5) In December 2009, our Phase III clinical trials for Pro2000 provided conclusive results that the drug was not effective. We concluded there was no further value or alternative future uses associated with this indefinite-lived asset. Accordingly, we recorded a $4.0 million impairment charge to write-off the Pro2000 intangible asset in its entirety.

F-32

The fair value of the in-process research and development assets and License Rights assets, with the exception of the Hydron^® Polymer Technology, were estimated using an income approach. Under this method, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. To calculate fair value, the Company used probability-weighted cash flows discounted at rates considered appropriate given the inherent risks associated with each type of asset. The Company believes that the level and timing of cash flows appropriately reflect market participant assumptions. Cash flows were generally assumed to extend either through or beyond the patent life of each product, depending on the circumstances particular to each product. The fair value of the Hydron^® Polymer Technology was estimated using an income approach, specifically known as the relief from royalty method. The relief from royalty method is based on a hypothetical royalty stream that would be received if the Company were to license the technology. The Hydron^® Polymer Technology is currently used in the following products: Vantas^®, Supprelin^® LA and octreotide. Thus, we derived the hypothetical royalty income from the projected revenues of those drugs. The fair value of the Hydron^® Polymer Technology also includes an existing royalty payable by the Company to certain third party partners based on the net sales derived from drugs that use the Hydron^® Polymer Technology. Discount rates applied to the estimated cash flows for all intangible assets acquired ranged from 13% to 20%, depending on the current stage of development, the overall risk associated with the particular project or product and other market factors. We believe the discount rates used are consistent with those that a market participant would use.

The $121.5 million of goodwill was assigned to our Branded Pharmaceuticals segment. The goodwill recognized is attributable primarily to the potential additional applications for the Hydron^® Polymer Technology, expected corporate synergies, the assembled workforce of Indevus and other factors. None of the goodwill is expected to be deductible for income tax purposes.

The deferred tax assets of $167.7 million are related primarily to federal net operating loss and credit carryforwards of Indevus and its subsidiaries. The deferred tax liabilities of $210.6 million are related primarily to the difference between the book basis and tax basis of identifiable intangible assets.

During the years ended December 31, 2010 and 2009, we recorded $51.4 million and $93.1 million in income for Indevus acquisition-related items. These amounts are included Acquisition-related items in the accompanying Consolidated Statements of Operations and are comprised of the following items (in thousands):

	Acquisition-related items
	Year ended December 31, 2010			February 23, 2009 to December 31, 2009
Investment bank fees, includes Endo and Indevus	$	—		$	13,030
Legal, separation, integration, and other items		—			21,979
Changes in fair value of acquisition-related contingent consideration		(51,420	)		(128,090	)
Total	$	(51,420	)	$	(93,081	)

The amounts of revenue and net loss of Indevus included in the Company’s Consolidated Statements of Operations for the year ended December 31, 2009 are as follows (dollars in thousands, except per share data):

	February 23, 2009 to December 31, 2009
Revenue	$	66,719
Net loss	$	(107,779	)
Basic and diluted loss per share	$	(0.92	)

F-33

The following supplemental pro forma information presents the financial results as if the acquisition of Indevus had occurred January 1, 2009 for the year ended December 31, 2009 and on January 1, 2008 for the year ended December 31, 2008. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition of Indevus been completed on January 1, 2009, nor are they indicative of any future results.

	Twelve Months Ended December 31,
	2009		2008
Pro forma consolidated results (in thousands, except per share data):
Revenue	$	1,471,141	$	1,326,717
Net income	$	243,336	$	192,826
Basic net income per share	$	2.08	$	1.56
Diluted net income per share	$	2.07	$	1.56

These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Indevus to reflect a different revenue recognition model, the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment, intangible assets, unfavorable leases and current and long-term debt, had been applied on January 1, 2009 or 2008, as applicable, together with the consequential tax effects.

HealthTronics, Inc.

On July 2, 2010 (the HealthTronics Acquisition Date), the Company completed its initial tender offer for all outstanding shares of common stock of HealthTronics and obtained effective control of HealthTronics. On July 12, 2010, Endo completed its acquisition of HealthTronics for approximately $214.8 million in aggregate cash consideration for 100% of the outstanding shares, at which time HealthTronics became a wholly-owned subsidiary of the Company. The HealthTronics Shares were purchased at a price of $4.85 per HealthTronics Share. In addition, Endo paid $40 million to retire HealthTronics debt that had been outstanding under its Senior Credit Facility. As a result of the acquisition, the HealthTronics Senior Credit Facility was terminated.

HealthTronics is a provider of healthcare services and manufacturer of medical devices, primarily for the urology community. The HealthTronics business and applicable services include:

Lithotripsy services.

HealthTronics provides lithotripsy services, which is a medical procedure where a device called a lithotripter transmits high energy shockwaves through the body to break up kidney stones. Lithotripsy services are provided principally through limited partnerships and other entities that HealthTronics manages, which use lithotripters. In 2009, physician partners used our lithotripters to perform approximately 50,000 procedures in the U.S. While the physicians render medical services, HealthTronics does not. As the general partner of limited partnerships or the manager of other types of entities, HealthTronics also provide services relating to operating its lithotripters, including scheduling, staffing, training, quality assurance, regulatory compliance, and contracting with payors, hospitals, and surgery centers.

Prostate treatment services.

HealthTronics provides treatments for benign and cancerous conditions of the prostate. In treating benign prostate disease, HealthTronics deploys three technologies in a number of its partnerships above: (1) photo-selective vaporization of the prostate (PVP), (2) trans-urethral needle ablation (TUNA), and (3) trans-urethral microwave therapy (TUMT). All three technologies apply an energy source which reduces the size of the prostate gland. For treating prostate and other cancers, HealthTronics uses a procedure called cryosurgery, a process which uses lethal ice to destroy tissue such as tumors for therapeutic purposes. In April 2008, HealthTronics

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acquired Advanced Medical Partners, Inc., which significantly expanded its cryosurgery partnership base. In July 2009, HealthTronics acquired Endocare, Inc., which manufactures both the medical devices and related consumables utilized by its cryosurgery operations and also provides cryosurgery treatments. The prostate treatment services are provided principally by using equipment that HealthTronics leases from limited partnerships and other entities that HealthTronics manages. Benign prostate disease and cryosurgery cancer treatment services are billed in the same manner as its lithotripsy services under either retail or wholesale contracts. HealthTronics also provides services relating to operating the equipment, including scheduling, staffing, training, quality assurance, regulatory compliance, and contracting.

Radiation therapy services.

HealthTronics provides image guided radiation therapy (IGRT) technical services for cancer treatment centers. Its IGRT technical services may relate to providing the technical (non-physician) personnel to operate a physician practice group’s IGRT equipment, leasing IGRT equipment to a physician practice group, providing services related to helping a physician practice group establish an IGRT treatment center, or managing an IGRT treatment center.

Anatomical pathology services.

HealthTronics provides anatomical pathology services primarily to the urology community. HealthTronics has one pathology lab located in Georgia, which provides laboratory detection and diagnosis services to urologists throughout the United States. In addition, in July 2008, HealthTronics acquired Uropath LLC, now referred to as HealthTronics Laboratory Solutions, which managed pathology laboratories located at Uropath sites for physician practice groups located in Texas, Florida and Pennsylvania. Through HealthTronics Laboratory Solutions, HealthTronics continues to provide administrative services to in-office pathology labs for practice groups and pathology services to physicians and practice groups with its lab equipment and personnel at the HealthTronics Laboratory Solutions laboratory sites.

Medical products manufacturing, sales and maintenance.

HealthTronics manufactures and sells medical devices focused on minimally invasive technologies for tissue and tumor ablation through cryoablation, which is the use of lethal ice to destroy tissue, such as tumors, for therapeutic purposes. HealthTronics develops and manufactures these devices for the treatment of prostate and renal cancers and our proprietary technologies also have applications across a number of additional markets, including the ablation of tumors in the lung, liver metastases and palliative intervention (treatment of pain associated with metastases). HealthTronics manufactures the related spare parts and consumables for these devices. HealthTronics also sells and maintains lithotripters and related spare parts and consumables.

The acquisition of HealthTronics reflects Endo’s desire to continue expanding our business beyond pain management into complementary medical areas where HealthTronics can be innovative and competitive. We believe this expansion will enable us to be a provider of multiple healthcare solutions and services that fill critical gaps in patient care.

The operating results of HealthTronics from July 2, 2010 are included in the accompanying Consolidated Statements of Operations. The Consolidated Balance Sheet as of December 31, 2010 reflects the acquisition of HealthTronics, effective July 2, 2010, the date the Company obtained control of HealthTronics.

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The following table summarizes the fair values of the assets acquired and liabilities assumed at the HealthTronics Acquisition Date (in thousands):

	July 2, 2010 (As initially reported)			Measurement period adjustments			July 2, 2010 (As Adjusted)
Cash and cash equivalents	$	6,769		$	—		$	6,769
Accounts receivable		33,111			677			33,788
Other receivables		1,006			—			1,006
Inventories		12,399			—			12,399
Prepaid expenses and other current assets		5,204			—			5,204
Deferred income taxes		43,737			3,676			47,413
Property and equipment		30,687			—			30,687
Other intangible assets		65,866			8,458			74,324
Other assets		5,210			—			5,210
Total identifiable assets	$	203,989		$	12,811		$	216,800
Accounts payable	$	(3,084	)	$	—		$	(3,084	)
Accrued expenses		(11,551	)		(8,659	)		(20,210	)
Deferred income taxes		(20,377	)		(3,188	)		(23,565	)
Long-term debt		(44,751	)		1,291			(43,460	)
Other liabilities		(1,434	)		(351	)		(1,785	)
Total liabilities assumed	$	(81,197	)	$	(10,907	)	$	(92,104	)
Net identifiable assets acquired	$	122,792		$	1,904		$	124,696
Noncontrolling interests	$	(60,119	)	$	(3,108	)	$	(63,227	)
Goodwill	$	152,170		$	1,204		$	153,374
Net assets acquired	$	214,843		$	—		$	214,843

The above estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the HealthTronics Acquisition Date to estimate the fair value of assets acquired and liabilities assumed. The Company believes that information provides a reasonable basis for estimating the fair values but the Company is waiting for additional information necessary to finalize those amounts, particularly with respect to the estimated fair value of noncontrolling interests and deferred income taxes. Thus, the provisional measurements of fair value reflected are subject to change. Such changes could be significant. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the HealthTronics Acquisition Date.

The valuation of the intangible assets acquired and related amortization periods are as follows:

	Valuation (in millions)		Amortization Period (in years)
Endocare Developed Technology	$	46.3		10
HealthTronics Tradename		14.6		15
Service Contract		13.4		n/a
Total	$	74.3		n/a

The fair value of the developed technology assets were estimated using an income approach. Under this method, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. To calculate fair value, the Company used probability-weighted cash flows discounted at rates considered appropriate given the inherent risks associated with each type of asset. The Company believes that the level and timing of cash flows appropriately reflect market participant assumptions. Cash flows were assumed to extend through the patent life

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of the purchased technology. The fair value of the HealthTronics Tradename was estimated using an income approach, specifically known as the relief from royalty method. The relief from royalty method is based on a hypothetical royalty stream that would be received if the Company were to license the HealthTronics Tradename. Thus, we derived the hypothetical royalty income from the projected revenues of HealthTronics’ services.

HealthTronics has investments in partnerships and limited liability companies (LLCs) where we, as the general partner or managing member, exercise effective control. Accordingly, we consolidate various entities where we do not own 100% of the entity in accordance with the accounting consolidation principles. As a result, we are required to fair value the noncontrolling interests as part of our purchase price allocation. To calculate fair value, the Company used historical transactions which represented level 2 data points within the fair value hierarchy to calculate applicable multiples of each respective noncontrolling interest in the partnerships and LLCs.

The $153.4 million of goodwill was assigned to our Devices and Services segment, which was established in July 2010 pursuant to our acquisition of HealthTronics. The goodwill recognized is attributable primarily to strategic and synergistic opportunities across the HealthTronics network of urology partnerships, expected corporate synergies, the assembled workforce of HealthTronics and other factors. Approximately $33.6 million of goodwill is expected to be deductible for income tax purposes.

The deferred tax assets of $47.4 million are related primarily to federal net operating loss and credit carryforwards of HealthTronics and its subsidiaries. The deferred tax liabilities of $23.6 million are related primarily to the difference between the book basis and tax basis of identifiable intangible assets.

The Company recognized $20.9 million of HealthTronics acquisition-related costs that were expensed for the twelve months ended December 31, 2010. These costs are included in the line item entitled “Acquisition-related items” in the accompanying Consolidated Statements of Operations and are comprised of the following items (in thousands):

	Acquisition-related Costs
	Twelve Months Ended December 31, 2010
Investment bank fees, includes Endo and HealthTronics	$	2,017
Acceleration of outstanding HealthTronics stock-based compensation		7,924
Legal, separation, integration, and other costs		10,988
Total	$	20,929

The amounts of revenue and net loss of HealthTronics included in the Company’s Consolidated Statements of Operations from the HealthTronics Acquisition date to December 31, 2010 are as follows (in thousands, except per share data):

	Revenue and Losses included in the Consolidated Statements  of Operations from July 2, 2010 to December 31, 2010
Revenue	$	102,144
Net loss attributable to Endo Pharmaceuticals Holdings Inc.	$	(8,098	)
Basic and diluted loss per share	$	(0.07	)

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The following supplemental pro forma information presents the financial results as if the acquisition of HealthTronics had occurred on January 1, 2010 for the year ended December 31, 2010 and January 1, 2009 for the year ended December 31, 2009. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition been made on January 1, 2010 or January 1, 2009, nor are they indicative of any future results.

	Twelve Months Ended December 31,
	2010		2009
Pro forma consolidated results (in thousands, except per share data):
Revenue	$	1,814,918	$	1,646,171
Net income attributable to Endo Pharmaceuticals Holdings Inc	$	264,165	$	265,282
Basic earnings per share	$	2.27	$	2.27
Diluted earnings per share	$	2.24	$	2.26

These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of HealthTronics to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments primarily to property, plant and equipment, and intangible assets, had been applied on January 1, 2010 and 2009, as applicable, together with the consequential tax effects.

Penwest Pharmaceuticals Co.

On September 20, 2010 (the Penwest Acquisition Date), the Company completed its tender offer for the outstanding shares of common stock of Penwest, at which time Penwest became a majority-owned subsidiary of the Company. On November 4, 2010, we closed this acquisition immediately following a special meeting of shareholders of Penwest at which they approved the merger. We paid approximately $171.8 million in aggregate cash consideration. Penwest is now our wholly-owned subsidiary.

This transaction contributes to Endo’s core pain management franchise and permits us to maximize the value of our oxymorphone franchise.

The operating results of Penwest from September 20, 2010 are included in the accompanying Consolidated Statements of Operations. The Consolidated Balance Sheet as of December 31, 2010 reflects the acquisition of Penwest, effective September 20, 2010, the date the Company obtained control of Penwest.

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The following table summarizes the fair values of the assets acquired and liabilities assumed at the Penwest Acquisition Date (in thousands):

	September 20, 2010 (As initially reported)			Measurement period adjustments			September 20, 2010 (As adjusted)
Cash and cash equivalents	$	22,343		$	—		$	22,343
Marketable securities		800			—			800
Accounts receivable		10,885			(19	)		10,866
Other receivables		132			(1	)		131
Inventories		396			11			407
Prepaid expenses and other current assets		716			(223	)		493
Deferred income taxes		27,175			3,003			30,178
Property and equipment		1,115			(200	)		915
Other intangible assets		111,200			—			111,200
Other assets		2,104			—			2,104
Total identifiable assets	$	176,866		$	2,571		$	179,437
Accounts payable	$	(229	)	$	—		$	(229	)
Income taxes payable		(347	)		187			(160	)
Penwest shareholder liability		(20,815	)		20,815			—
Accrued expenses		(1,455	)		(87	)		(1,542	)
Deferred income taxes		(39,951	)		(379	)		(40,330	)
Other liabilities		(4,403	)		(118	)		(4,521	)
Total liabilities assumed	$	(67,200	)	$	20,418		$	(46,782	)
Net identifiable assets acquired	$	109,666		$	22,989		$	132,655
Goodwill	$	37,952		$	1,159		$	39,111
Net assets acquired	$	147,618		$	24,148		$	171,766

The above estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the Penwest Acquisition Date to estimate the fair value of assets acquired and liabilities assumed. The Company believes that information provides a reasonable basis for estimating the fair values but the Company is waiting for additional information necessary to finalize those amounts, particularly with respect to intangible assets and deferred taxes. Thus, the provisional measurements of fair value reflected are subject to change. Such changes could be significant. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the Penwest Acquisition Date.

The valuation of the intangible assets acquired and related amortization periods are as follows (in millions):

	Valuation		Amortization Period (in years)
In Process Research & Development:
Otsuka	$	5.5		n/a
A0001		1.6		n/a
Total	$	7.1		n/a
Developed Technology:
Opana® ER	$	104.1		10
Total	$	104.1		10
Total other intangible assets	$	111.2		n/a

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The fair values of the in-process research and development assets and developed technology asset were estimated using an income approach. To calculate fair value, the Company used probability-weighted cash flows discounted at rates considered appropriate given the inherent risks associated with the asset. The Company believes that the level and timing of cash flows appropriately reflect market participant assumptions. Cash flows were assumed to extend through the patent life of our purchased technology.

The $39.1 million of goodwill was assigned to our Branded Pharmaceuticals segment. The goodwill recognized is attributable primarily to the control premium associated with our oxymorphone franchise and other factors. None of the goodwill is expected to be deductible for income tax purposes.

The deferred tax assets of $30.2 million are related primarily to federal net operating loss and credit carryforwards of Penwest. The deferred tax liabilities of $40.3 million are related primarily to the difference between the book basis and tax basis of the identifiable intangible assets.

The Company recognized $10.7 million of Penwest acquisition-related costs that were expensed for the twelve months ended December 31, 2010. These costs are included in the line item entitled “Acquisition-related items” in the accompanying Consolidated Statements of Operations and are comprised of the following items (in thousands):

	Acquisition-related Costs
	Twelve Months Ended December 31, 2010
Investment bank fees, includes Endo and Penwest	$	3,865
Legal, integration, and other costs		6,815
Total	$	10,680

Due to the pro forma impacts of eliminating the pre-existing intercompany royalties between Penwest and Endo, which were determined to be at fair value, we have not provided supplemental pro forma information as amounts are not material to the Consolidated Statements of Operations. We have also considered the impacts of Penwest, since the date we obtained a majority interest, on our Consolidated Statement of Operations and concluded amounts were not material.

Qualitest

On November 30, 2010 (the Qualitest Acquisition Date), Endo completed its acquisition of all of the issued and outstanding capital stock of Generics International (US Parent), Inc (Qualitest) from an affiliate of Apax Partners, L.P. for approximately $769.4 million. In addition, Endo paid $406.8 million to retire Qualitest’s outstanding debt and related interest rate swap on November 30, 2010. In connection with the Qualitest acquisition, $108 million of the purchase price was placed into escrow. One of the escrow amounts is for $8 million and will be used to fund any working capital adjustments, as defined in the Qualitest Stock Purchase Agreement. We expect this escrow to be settled in 2011. There is also a $100 million escrow account that will be used to fund all claims arising out of or related to the Qualitest acquisition.

In connection with the $100 million escrow account, to the extent that we are able to realize tax benefits for costs that are funded by the escrow account, we will be required to share these tax benefits with Apax.

Qualitest is a manufacturer and distributor of generic drugs and over-the-counter pharmaceuticals throughout the United States. Qualitest’s product portfolio is comprised of 175 product families in various forms including tablets, capsules, creams, ointments, suppositories, and liquids. This acquisition will enable us to gain critical mass in our generics business while strengthening our pain portfolio through a larger breadth of product offerings.

The operating results of Qualitest from November 30, 2010 to December 31, 2010 are included in the accompanying Consolidated Statements of Operations. The Consolidated Balance Sheet as of December 31, 2010 reflects the acquisition of Qualitest, effective November 30, 2010, the date the Company obtained control of Qualitest.

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The following table summarizes the fair values of the assets acquired and liabilities assumed at the Qualitest Acquisition Date (in thousands):

	November 30, 2010
Cash and cash equivalents	$	21,828
Accounts receivable		93,228
Other receivables		1,483
Inventories		95,000
Prepaid expenses and other current assets		2,023
Deferred income taxes		63,509
Property and equipment		135,807
Other intangible assets		843,000
Total identifiable assets	$	1,255,878
Accounts payable	$	(27,422	)
Accrued expenses		(55,210	)
Deferred income taxes		(207,733	)
Long-term debt		(406,758	)
Other liabilities		(9,370	)
Total liabilities assumed	$	(706,493	)
Net identifiable assets acquired	$	549,385
Goodwill	$	219,986
Net assets acquired	$	769,371

The above estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the Qualitest Acquisition Date. The Company believes that information provides a reasonable basis for estimating the fair values but the Company is waiting for additional information necessary to finalize those amounts. Thus, the provisional measurements of fair value reflected are subject to change. Such changes could be significant. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the Qualitest Acquisition Date.

The valuation of the intangible assets acquired and related amortization periods are as follows:

	Valuation (in millions)		Amortization Period (in years)
Developed Technology:
Hydrocodone and acetaminophen	$	119.0		17
Oxycodone and acetaminophen		30.0		17
Promethazine		46.0		16
Isosorbide Mononitrate ER		42.0		16
Multi Vitamins		38.0		16
Trazodone		17.0		16
Butalbital, acetaminophen, and caffeine		25.0		16
Triprevifem		16.0		13
Spironolactone		13.0		17
Hydrocortisone		34.0		16
Hydrochlorothiazide		16.0		16
Controlled Substances		52.0		16
Oral Contraceptives		8.0		13
Others		162.0		17
Total	$	618.0		16

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	Valuation (in millions)		Amortization Period (in years)
In Process Research & Development:
Generics portfolio with anticipated 2011 launch	$	63.0		n/a
Generics portfolio with anticipated 2012 launch		30.0		n/a
Generics portfolio with anticipated 2013 launch		17.0		n/a
Generics portfolio with anticipated 2014 launch		88.0		n/a
Total	$	198.0		n/a
Tradename:
Qualitest tradename	$	27.0		n/a
Total	$	27.0		n/a
Total other intangible assets	$	843.0		n/a

The fair value of the developed technology assets and in-process research and development assets were estimated using an income approach. Under this method, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. To calculate fair value, the Company used probability-weighted cash flows discounted at rates considered appropriate given the inherent risks associated with each type of asset. The Company believes that the level and timing of cash flows appropriately reflect market participant assumptions. Cash flows were assumed to extend through the patent life of the purchased technology. The fair value of the Qualitest Tradename was estimated using an income approach, specifically known as the relief from royalty method. The relief from royalty method is based on a hypothetical royalty stream that would be received if the Company were to license the Qualitest Tradename. Thus, we derived the hypothetical royalty income from the projected revenues of Qualitest.

The $220.0 million of goodwill was assigned to our Generics segment, which was established in November 2010 pursuant to our acquisition of Qualitest. The goodwill recognized is attributable primarily to expected purchasing, manufacturing and distribution synergies as well as their assembled workforce. Approximately $170.4 million of goodwill is expected to be deductible for income tax purposes.

The deferred tax assets of $63.5 million are related primarily to federal and state net operating loss and credit carryforwards of Qualitest and its subsidiaries. The deferred tax liabilities of $207.7 million are related primarily to the difference between the book basis and tax basis of identifiable intangible assets.

The Company recognized $38.8 million of Qualitest acquisition-related costs that were expensed for the twelve months ended December 31, 2010. These costs are included in the line item entitled “Acquisition-related items” in the accompanying Consolidated Statements of Operations and are comprised of the following items (in thousands):

	Acquisition-related Costs
	Twelve Months Ended December 31, 2010
Investment bank fees, includes Endo and Qualitest	$	14,215
Legal, separation, integration, and other costs		24,572
Total	$	38,787

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The amounts of revenue and net loss of Qualitest included in the Company’s Consolidated Statements of Operations from the Qualitest Acquisition date to December 31, 2010 are as follows (in thousands, except per share data):

	Revenue and Net Loss included in the Consolidated Statements of Operations from November 30, 2010 to December 31, 2010
Revenue	$	30,323
Net loss attributable to Endo Pharmaceuticals Holdings Inc.	$	(3,056	)
Basic and diluted net loss per share	$	(0.03	)

The following supplemental pro forma information presents the financial results as if the acquisition of Qualitest had occurred on January 1, 2010 for the year ended December 31, 2010 and January 1, 2009 for the year ended December 31, 2009. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition been made on January 1, 2010 or January 1, 2009, nor are they indicative of any future results.

	Twelve Months Ended December 31,
	2010		2009
Pro forma consolidated results (in thousands, except per share data):
Revenue	$	2,038,761	$	1,767,873
Net income attributable to Endo Pharmaceuticals Holdings Inc	$	243,710	$	257,511
Basic earnings per share	$	2.10	$	2.20
Diluted earnings per share	$	2.07	$	2.19

These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Qualitest to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments primarily to property, plant and equipment, and intangible assets, had been applied on January 1, 2010 and 2009, as applicable, together with the consequential tax effects.

NOTE 6. SEGMENT RESULTS

As a result of our recent acquisitions, the Company has realigned its internal management reporting to reflect a total of three reportable segments. These segments reflect the level at which executive management regularly reviews financial information to assess performance and to make decisions about resources to be allocated.

The three reportable business segments in which the Company now operates include: (1) Branded Pharmaceuticals, (2) Generics and (3) Devices and Services. Each segment derives revenue from the sales or licensing of their respective products or services and is discussed below.

Branded Pharmaceuticals

This group of products includes a variety of branded prescription products related to treating and managing pain as well as our urology, endocrinology and oncology products. The established products that are included in this operating segment includes Lidoderm^®, Opana^® ER and Opana^®, Percocet^®, Voltaren^® Gel, Frova^®, Supprelin^® LA, Vantas^®, and Valstar^®.

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Generics

This segment is comprised of our legacy Endo non-branded generic portfolio and the portfolio from our newly acquired Qualitest business. Our generics business has historically focused on selective generics related to pain that have one or more barriers to market entry, such as complex formulation, regulatory or legal challenges or difficulty in raw material sourcing. With the addition of Qualitest, the segment’s product offerings now include products in the pain management, urology, central nervous system (CNS) disorder, immunosuppression, oncology and hypertension markets.

Devices and Services

The Devices and Services operating segment provides urological services, products and support systems to urologists, hospitals, surgery centers and clinics across the United States. These services and products are sold through the following five business lines: Lithotripsy services, Prostate treatment services, Radiation therapy services, Anatomical pathology services, and Medical products manufacturing, sales and maintenance. These business lines are discussed in greater detail within Note 5.

In 2010, the Company began to evaluate segment performance based on each segment’s adjusted income (loss) before tax. We define adjusted income (loss) before tax as income (loss) before tax before certain upfront and milestone payments to partners, acquisition-related items, cost reduction initiatives, asset impairment charges, amortization of commercial intangible assets related to marketed products, inventory step-up recorded as part of our acquisitions, and certain other items that the Company believes do not reflect its core operating performance. Certain corporate general and administrative expenses are not allocated and are therefore included within Corporate unallocated. We calculate consolidated adjusted income (loss) before tax by adding the adjusted income (loss) before tax of each of our reportable segments to corporate unallocated adjusted income (loss) before tax.

The following represents selected information for the Company’s reportable segments for the years ended December 31, 2010, 2009 and 2008 (in thousands):

	Twelve Months Ended December 31,
	2010			2009			2008
Net revenues to external customers
Branded Pharmaceuticals	$	1,467,572		$	1,336,110		$	1,168,204
Generics		146,513			124,731			92,332
Devices and Services		102,144			—			—
Total consolidated net revenues to external customers	$	1,716,229		$	1,460,841		$	1,260,536
Adjusted income (loss) before tax
Branded Pharmaceuticals	$	757,453		$	642,997		$	581,152
Generics		24,722			28,557			23,163
Devices and Services		35,538			—			—
Corporate unallocated		(194,459	)		(174,994	)		(130,539	)
Total consolidated adjusted income (loss) before tax	$	623,254		$	496,560		$	473,776

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The table below provides reconciliations of our consolidated adjusted income (loss) before income tax to our consolidated operating income and our consolidated income before tax, which are determined in accordance with U.S. generally accepted accounting principles (GAAP), for the years ended December 31, 2010, 2009 and 2008 (in thousands):

	Twelve Months Ended December 31,
	2010			2009			2008
Total consolidated adjusted income (loss) before tax	$	623,254		$	496,560		$	473,776
Upfront and milestone payments to partners		(23,850	)		(77,099	)		(8,910	)
Acquisition-related items		(18,976	)		93,081			—
Cost reduction initiatives		(17,245	)		(2,549	)		(16,375	)
Asset impairment charges		(35,000	)		(69,000	)		(12,680	)
Amortization of commercial intangible assets related to marketed products		(83,974	)		(62,931	)		(30,821	)
Inventory step-up		(6,289	)		(11,268	)		—
Purchased in-process research and development		—			—			530
Non-cash interest expense		(16,983	)		(14,719	)		(10,372	)
Other (expense) income		(239	)		3,560			(3,320	)
Gain on extinguishment of debt		—			4,025			—
Total consolidated income before income tax	$	420,698		$	359,660		$	391,828

The following represents additional selected financial information for our reportable segments (in thousands):

	Twelve Months Ended December 31, 2010
	2010		2009		2008
Depreciation expense:
Branded Pharmaceuticals	$	13,259	$	13,400	$	10,255
Generics		1,676		822		508
Devices and Services		6,000		—		—
Corporate unallocated		2,894		2,628		2,214
Total depreciation expense	$	23,829	$	16,850	$	12,977
Amortization expense:
Branded Pharmaceuticals	$	78,647	$	63,531	$	33,468
Generics		3,068		—		—
Devices and Services		2,860		—		—
Total amortization expense	$	84,575	$	63,531	$	33,468

Asset information is not accounted for at the segment level and consequently is not reviewed or included within our internal management reporting. Therefore, the Company has not disclosed asset information for each reportable segment.

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NOTE 7. LICENSE AND COLLABORATION AGREEMENTS

Commercial Products

Novartis AG and Novartis Consumer Health, Inc.

On March 4, 2008, we entered into a License and Supply Agreement (the Voltaren^® Gel Agreement) with and among Novartis AG and Novartis Consumer Health, Inc. (Novartis) to obtain the exclusive U.S. marketing rights for the prescription medicine Voltaren^® Gel (Voltaren^® Gel or Licensed Product). Voltaren^® Gel received regulatory approval in October 2007 from the U.S. Food and Drug Administration (the FDA), becoming the first topical prescription treatment for use in treating pain associated with osteoarthritis and the first new product approved in the U.S. for osteoarthritis since 2001. Voltaren^® Gel was granted marketing exclusivity in the U.S. as a prescription medicine until October 2010.

Under the terms of the five-year Voltaren^® Gel Agreement, Endo made an upfront cash payment of $85 million. Endo has agreed to pay royalties to Novartis on annual Net Sales of the Licensed Product, subject to certain thresholds as defined in the Voltaren^® Gel Agreement. In addition, Endo has agreed to make certain guaranteed minimum annual royalty payments of $30 million per year payable in the fourth and fifth year of the Voltaren^® Gel Agreement, subject to certain limitations including the launch of a generic to the Licensed Product in the United States. These guaranteed minimum royalties will be creditable against royalty payments on an annual basis such that Endo’s obligation with respect to each year is to pay the greater of (i) royalties payable based on annual net sales of the Licensed Product or (ii) the guaranteed minimum royalty for such Voltaren^® Gel Agreement year. No royalty payments were payable to Novartis during 2010 and 2009. Novartis is also eligible to receive a one-time milestone payment of $25 million if annual net sales of Voltaren^® Gel exceed $300 million in the U.S. The $85 million upfront payment and the present value of the guaranteed minimum royalties have been capitalized as an intangible asset in the amount of $129 million, representing the fair value of the exclusive license to market Voltaren^® Gel. We are amortizing this intangible asset into cost of revenues over its estimated five-year useful life.

Endo is solely responsible to commercialize the Licensed Product during the term of the Voltaren^® Gel Agreement. With respect to each year during the term of the Voltaren^® Gel Agreement, Endo is required to incur a minimum amount of annual advertising and promotional expenses on the commercialization of the Licensed Product, subject to certain limitations. In addition, Endo is required to perform a minimum number of face-to-face one-on-one discussions with physicians and other healthcare practitioners (details) for the purpose of promoting the Licensed Product within its approved indication during each year of the Voltaren^® Gel Agreement Further, during the term of the Voltaren^® Gel Agreement, Endo will share in the costs of certain clinical studies and development activities initiated at the request of the FDA or as considered appropriate by Novartis and Endo.

During the term of the Voltaren^® Gel Agreement, Endo has agreed to purchase all of its requirements for the Licensed Product from Novartis. The price was fixed for the first year and subject to annual changes based upon changes in the producer price index and raw materials.

Novartis has the exclusive right, at its sole discretion, to effect a switch of the Licensed Product from a prescription product to an over-the-counter (OTC) product in the United States, (an OTC Switch), by filing an amendment or supplement to the Licensed Product New Drug Application or taking any other action necessary or advisable in connection therewith to effect the OTC Switch, and thereafter to commercialize such OTC product. Notwithstanding the foregoing, Novartis shall not launch an OTC equivalent product prior to a time specified in the Voltaren^® Gel Agreement, and Novartis shall not take any action that results in the loss of the prescription product status for the Licensed Product prior to such time. Novartis will notify Endo if it submits a filing to the FDA in respect of an OTC equivalent product. In the event that Novartis gains approval of an OTC equivalent product that results in the Licensed Product being declassified as a prescription product, then Novartis will make certain royalty payments to Endo on net sales of such OTC equivalent product in the United States by Novartis, its affiliates and their respective licensees or sublicensees as set forth in the Voltaren^® Gel Agreement. As a

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condition to the payment of any and all such royalties, net sales of the Licensed Product in the United States must have exceeded a certain threshold prior to the launch of the OTC equivalent product by Novartis or its affiliates.

The initial term of the Voltaren^® Gel Agreement will expire on June 30, 2013. Endo has the option to extend the Voltaren^® Gel Agreement for two successive one year terms. The Voltaren^® Gel Agreement will remain in place after the first two renewal terms unless either party provides written notice of non-renewal to the other party at least six months prior to the expiration of any renewal term after the first renewal term or the Voltaren^® Gel Agreement is otherwise terminated in accordance with its terms. Among other standard and customary termination rights granted under the Voltaren^® Gel Agreement, the Voltaren^® Gel Agreement can be terminated by either party upon reasonable written notice, if either party has committed a material breach that has not been remedied within ninety (90) days from the giving of written notice. Endo may terminate the Voltaren^® Gel Agreement by written notice upon the occurrence of several events, including the launch in the United States of a generic to the Licensed Product. Novartis may terminate the Voltaren^® Gel Agreement upon reasonable written notice (1) if Endo fails to deliver a set percentage of the minimum details in any given six-month period under the Voltaren^® Gel Agreement; or (2) on or after the launch in the United States of an OTC equivalent product by Novartis, its affiliates or any third party that does not result in the declassification of the Licensed Product as a prescription product, following which net sales in any six-month period under the Voltaren^® Gel Agreement are less than a certain defined dollar amount.

Hind Healthcare Inc.

In November 1998, Endo entered into a license agreement (the Hind License Agreement) with Hind Healthcare Inc., (Hind), for the sole and exclusive right to develop, use, market, promote and sell Lidoderm^® in the United States. Under the terms of the Hind License Agreement, Endo paid Hind approximately $10 million based upon the achievement of certain milestones and capitalized this amount as an intangible asset representing the fair value of these exclusive rights. In addition, Endo pays Hind nonrefundable royalties based on net sales of Lidoderm^®. Royalties are recorded as a reduction to net sales due to the nature of the license agreement and the characteristics of the license involvement by Hind in Lidoderm^®. The royalty rate is 10% of net sales through the shorter of (1) the expiration of the last licensed patent or (2) November 20, 2011, including a minimum royalty of at least $500,000 per year. During 2010, 2009, and 2008, we recorded $86.8 million, $84.9 million, and $84.8 million for these royalties to Hind, respectively, which we recorded as a reduction to net sales. At December 31, 2010 and 2009, $23.0 million and $22.8 million, respectively, is recorded as a royalty payable and included in accounts payable in the accompanying balance sheets. In March 2002, we extended this license with Hind to cover Lidoderm^® in Canada and Mexico.

Penwest Pharmaceuticals Co.

In September 1997, we entered into a collaboration agreement with Penwest Pharmaceuticals Co. (Penwest) to exclusively co-develop opioid analgesic products for pain management, using Penwest’s patent-protected proprietary technology, for commercial sale worldwide. On April 2, 2002, we amended and restated this agreement between the parties (the 2002 Agreement) to provide, among other things, that this collaboration would cover only the opioid analgesic product, oxymorphone ER, now known as Opana^® ER. In September 2010, we acquired Penwest, which effectively eliminated this third party relationship. See Note 5 for discussion of our Penwest Acquisition. We recorded, in cost of revenues, royalties to Penwest under the 2002 Agreement of $29.8 million, $19.3 million, and $5.0 million during the years ended December 31, 2010, 2009, and 2008, respectively.

Valeant Canada Ltd

In June 2009, the Company entered into a License Agreement with Valeant Canada Ltd (Valeant) granting Valeant a license to market Opana^® and Opana^® ER in Canada, Australia and New Zealand. Opana^® ER, the extended release formulation of oxymorphone, was jointly developed by Penwest and Endo. Prior to Endo’s acquisition of the majority of common stock of Penwest, under the terms of the collaboration agreement between Penwest and Endo, the two companies have shared equally in the proceeds received from Valeant for Opana^®

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ER. The license agreement with Valeant also includes rights to Opana^®, the immediate release formulation of oxymorphone developed by Endo. Under the terms of the License Agreement, Valeant made an upfront payment to Endo and may make future payments if certain sales milestones are reached. In addition, Valeant has agreed to pay royalties ranging from 10%-20% on net sales of Opana^® ER and Opana^® in each of the three countries, subject to royalty reductions upon patent expiry or generic entry.

Vernalis Development Limited

In July 2004, we entered into a License Agreement with Vernalis Development Limited (Vernalis) under which Vernalis agreed to license, exclusively to us, rights to market frovatriptan succinate (Frova^®) in North America (the Vernalis License Agreement). Frova^® was launched June 2002 in the U.S. and indicated for the acute treatment of migraine headaches in adults. Under the terms of the Vernalis License Agreement, we paid Vernalis an upfront fee of $30 million and annual $15 million payments each in 2005 and 2006. We capitalized the $30 million up-front payment and the present value of the two $15 million anniversary payments. We are amortizing this intangible asset into cost of revenues on a straight-line basis over its estimated life of twelve and one-half years.

Under the terms of the License Agreement we would have been required to make a $40 million milestone payment upon FDA approval for the short-term prevention of menstrual migraine indication. In September 2007, the FDA issued to the Company and our development partner Vernalis, a “not approvable” letter pertaining to our supplemental new drug application (sNDA) for Frova^® for the additional indication of short-term prevention of menstrual migraine. In April 2008, Endo notified the FDA of the withdrawal of the sNDA without prejudice to refiling as afforded under 21 CFR 314.65 for Frova^® 2.5 mg tablets. Frova^® is approved and marketed for the acute treatment of migraine with or without aura in adults.

In addition, Vernalis could receive one-time milestone payments for the achievement of defined annual net sales targets. These sales milestone payments increase based on increasing net sales targets ranging from a milestone of $10 million on $200 million in net sales to a milestone of $75 million on $1.2 billion in net sales. These sales milestones could total up to $255 million if all of the defined net sales targets are achieved. Beginning on January 1, 2007, we began paying royalties to Vernalis based on the net sales of Frova^®. The term of the license agreement is for the shorter of the time (i) that there are valid claims on the Vernalis patents covering Frova^® or there is market exclusivity granted by a regulatory authority, whichever is longer, or (ii) until the date on which a generic version of Frova^® is first offered, but in no event longer than 20 years. We can terminate the license agreement under certain circumstances, including upon one years’ written notice. In July 2007, Vernalis and Endo entered into an Amendment (Amendment No. 3) to the License Agreement dated July 14, 2004. Under Amendment No. 3, Vernalis granted an exclusive license to Endo to make, have made, use, commercialize and have commercialized the product Frova^® in Canada, under the Canadian Trademark.

In February 2008, we entered into Amendment No. 4 to the Vernalis License Agreement (Amendment No. 4). In addition to amending certain specific terms and conditions of the License Agreement, Amendment No. 4 sets forth an annual minimum net sales threshold such that no royalties will be due on annual U.S. net sales of Frova^® less than $85 million. Prior to this amendment, royalties were payable by us to Vernalis on all net sales of Frova^® in the United States. Now, once the annual minimum net sales amount is reached, royalty payments will be due only on the portion of annual net sales that exceed the $85 million threshold.

Allergan/Esprit

In September 2007, Indevus (now, Endo Pharmaceuticals Solutions Inc.) entered into an Amended and Restated License, Commercialization and Supply Agreement with Esprit Pharma, Inc (Esprit), which modified the obligations of each party and superseded all previous agreements (the Allergan Agreement). In October, 2007, Allergan, Inc. (Allergan) acquired Esprit resulting in Esprit being a wholly-owned subsidiary of Allergan. Under the Allergan Agreement, we received the right to receive a fixed percentage of net sales for the term of the

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Allergan Agreement, subject to increasing annual minimum royalties. Aggregate minimum royalties for the remainder of the Allergan Agreement amount to approximately $88.5 million through December 31, 2014, provided there is no product adverse event, as defined in the Allergan Agreement. Commencing January 1, 2010, Allergan has the right to reduce, subject to quarterly and annual restrictions, royalty payments by $20 million in the aggregate. The Company may also receive a payment of $20 million related to a long-term commercialization milestone related to generic competition on December 31, 2013. Lastly, all third-party royalties paid by the Company as a result of existing licensing, manufacturing and supply agreements associated with sales of Sanctura^® and Sanctura XR^® will be reimbursed to the Company by Allergan up to six percent (6%) of net sales. The Allergan Agreement expires on the later of the twelfth annual anniversary of the launch of Sanctura XR^® or February 1, 2025, the date of the last to expire patent covering Sanctura XR^® in the United States. Either party may also terminate the Allergan Agreement in the event of a material breach by the other party. In August 2008, Indevus assigned its rights to receive a fixed percentage of net sales and $20 million related to a long-term commercialization milestone related to generic competition to the holders of the Non-recourse notes (see Note 18).

In May 2008, together with Madaus AG, Indevus licensed to Allergan the exclusive right to develop, manufacture, and commercialize Sanctura XR^® in Canada. As a result, the Company could receive milestones upon the achievement of certain sales thresholds of up to $2 million. In addition, any third-party royalties owed by the Company on net sales in Canada will be reimbursed by Allergan. This agreement will expire after the later of the expiration of the last applicable patent or our third party royalty obligation, which is currently expected to be November 4, 2024, after which Allergan will have a fully-paid license.

Madaus

In November 1999, Indevus entered into an agreement with Madaus to license the exclusive rights to develop and market certain products, including Sanctura^® in the United States. In November 2006, Indevus entered into (i) a License and Supply Agreement and (ii) an amendment to its original 1999 license agreement with Madaus (collectively, the Madaus Agreements). In March 2010, Endo amended the Madaus Agreements. Under the amended Madaus Agreements, (a) Madaus has licensed the rights to sell Sanctura XR^® in all countries outside of the U.S. (the Madaus Territory) except Canada, Japan, Korea and China (the Joint Territory), (b) Madaus has agreed to pay a fee based on the number of capsules of Sanctura XR sold in the Madaus Territory through December 9, 2015 and (c) Endo has agreed to pay a fee based on the number of capsules of Sanctura XR^® sold in the U.S. through the earlier of August 23, 2014 or upon generic formulations achieving a predetermined market share. In exchange, Madaus (a) agreed to make certain immaterial payments upon the achievement of certain commercial milestones and pay royalties of 5% of net sales based on future sales of Sanctura XR^® in the Madaus Territory and (b) agreed to reimburse Endo for any amounts due to Supernus (see Supernus below) related to the development or commercialization in the Madaus territory. The Company and Madaus will share the development and commercialization costs in the countries in the Joint Territory. If either party decides not to pursue development and commercialization of Sanctura XR^® in any country in the Joint Territory, the other party has the right to independently develop and commercialize Sanctura XR^® in that country. The term of the Madaus Agreement for Sanctura XR^® extends until the expiration, on a country-by-country basis, of all royalty obligations owed to the Company from Madaus which ceases upon the last to expire applicable patent in the Madaus Territory. Either party may terminate the amended Madaus Agreement in the event of a material breach by the other party.

Supernus

In March 2003, Indevus entered into a Development and License Agreement (the Supernus Agreement) with Supernus Pharmaceuticals, Inc. (Supernus) pursuant to which Supernus agreed to develop Sanctura XR^® and granted exclusive, worldwide rights under certain Supernus patents and know-how to Indevus. The Supernus agreement includes potential future development and commercialization milestone payments from the Company to Supernus, including royalties based on sales of Sanctura XR^®, and potential future development and

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commercialization milestone payments for up to an aggregate of $2.4 million upon the launch of Sanctura XR^® in certain geographic areas. In addition, the Supernus agreement includes potential future development and commercialization milestone payments for up to an aggregate of $4.5 million upon the launch of new formulations and over-the-counter products. The Company is responsible for all development costs and the commercialization of Sanctura XR^® under the Supernus agreement. The Supernus agreement continues until the earlier of, in any particular country, (i) the last date on which the manufacture, use or sale of licensed product in such country would infringe a valid claim of a licensed patent in such country but for the license granted by the agreement; or (ii) twelve years from the date of first commercial sale of licensed product in such country. Either party may also terminate this agreement in the event of a material breach by the other party or by mutual consent.

The Population Council

The Company markets its products utilizing the hydrogel polymer technology pursuant to an agreement between Indevus and the Population Council. Unless earlier terminated by either party in the event of a material breach by the other party, the term of the agreement is the shorter of twenty-five years from October 1997 or until the date on which The Population Council receives approximately $40 million in payments from the Company. The Company is required to pay to The Population Council 3% of its net sales of Vantas^® and any polymer implant containing an LHRH analog. We are also obligated to pay royalties to the Population Council ranging from 0.5% of net sales to 4% of net sales under certain conditions. We are also obligated to pay the Population Council 30% of certain profits and payments received in certain territories by the Company from the licensing of Vantas^® or any other polymer implant containing an LHRH analog and 5% for other implants.

Orion Corporation

In April 2008, Indevus entered into a License, Supply and Distribution Agreement (the 2008 Orion Agreement) with Orion Corporation (Orion) granting Orion the rights to market Vantas^® in Europe and in certain other countries outside of Europe. Vantas^® is currently approved for the treatment of advanced prostate cancer in Denmark, the United Kingdom and other European countries, and the Company is seeking additional European approvals through the mutual recognition procedure. In 2010, the Company received $2.8 million from Orion for marketing authorizations in the Benelux countries, Finland, France, Norway and Sweden and could receive, upon the achievement of sales thresholds, an aggregate amount of $11.2 million. Additionally, the Company will supply Vantas^® to Orion at a pre-determined transfer price subject to annual minimum purchase requirements.

In January 2011, the 2008 Orion Agreement was amended, effective December 2010, to reduce minimum purchase obligations, to modify pricing provisions, and to change certain other provisions. The 2008 Orion Agreement, as amended, expires in April 2023, unless earlier terminated by either party in the event of a material breach by the other party. The 2008 Orion Agreement will automatically renew for one-year periods, subject to the right of either party to terminate the agreement at any time effective at the end of the initial fifteen-year term or any subsequent one-year renewal period thereafter with at least six months prior written notice to the other party.

Strakan International Limited

In August 2009, we entered into a License and Supply Agreement with Strakan International Limited, a subsidiary of ProStrakan Group plc (ProStrakan), for the exclusive right to commercialize Fortesta^TM Gel in the U.S. (the ProStrakan Agreement). Fortesta^TM Gel, a patented two percent (2%) testosterone transdermal gel for testosterone replacement therapy in male hypogonadism. A metered dose delivery system permits accurate dose adjustment to increase the ability to individualize patient treatment. Under the terms of the ProStrakan Agreement, Endo paid ProStrakan an up-front cash payment of $10 million, which was recorded as research and development expense.

In October 2009, we received a Complete Response letter from the FDA regarding the NDA for Fortesta^TM Gel. The FDA issues Complete Response letters to communicate that their initial review of an NDA or

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abbreviated new drug application (ANDA) is complete and that the application cannot be approved in its present form. A Complete Response also informs applicants of changes that must be made before an application can be approved, with no implication regarding the ultimate approvability of the application.

Following the July 1, 2010 complete response to the FDA, the Company received FDA approval in December 2010. As of December 31, 2010, the Company has accrued and capitalized the one-time approval milestone to ProStrakan for $12.5 million. ProStrakan could potentially receive up to approximately $175.0 million in additional payments linked to the achievement of future commercial milestones related to Fortesta^TM Gel. We are amortizing this intangible asset into cost of revenues on a straight-line basis over its estimated useful life.

ProStrakan will exclusively supply Fortesta^TM Gel to Endo at a supply price based on a percentage of annual net sales subject to a minimum floor price as defined in the ProStrakan Agreement. Endo may terminate the ProStrakan Agreement upon six months’ prior written notice at no cost to the Company.

Products in Development

Grünenthal GMBH

In February 2009, we entered into a Development, License and Supply Agreement (the Grünenthal Agreement) with Grünenthal GMBH (Grünenthal), granting us the exclusive right in North America to develop and market Grünenthal’s investigational drug, axomadol. Currently in Phase II trials, axomadol is a patented new chemical entity being developed for the treatment of moderate to moderately-severe chronic pain and diabetic peripheral neuropathic pain. Under the terms of the Grünenthal Agreement, Endo paid Grünenthal approximately $9.4 million upfront and an additional $25.2 million in 2009 upon the achievement of certain milestones. We could be obligated to pay additional clinical, regulatory and approval milestone payments of up to approximately 6.3 million Euros (approximately $8.4 million at December 31, 2010) and possibly development and commerce milestone payments of up to an additional $68 million. In addition, Grünenthal will receive payments from Endo based on a percentage of Endo’s annual net sales of the product in the United States and Canada. The Grünenthal Agreement will expire in its entirety on the date of (i) the 15th anniversary of the first commercial sale of the product; or (ii) the expiration of the last issued patent claiming or covering the product, or (iii) the expiration of exclusivity granted by the FDA for the product, whichever occurs later. Among other standard and customary termination rights granted under the Grünenthal Agreement, we may terminate the Grünenthal Agreement at our sole discretion at any time upon ninety (90) days’ written prior notice to Grünenthal and payment of certain penalties.

In December 2007, we entered into a license, development and supply agreement with Grünenthal for the exclusive clinical development and commercialization rights in Canada and the United States for a new oral formulation of long-acting oxymorphone, which is designed to be crush resistant. Under the terms of this agreement Grünenthal is responsible for development efforts to conduct pharmaceutical formulation development and will manufacture any such product or products which obtain FDA approval. Endo is responsible for conducting clinical development activities and for all development costs incurred to obtain regulatory approval. Under the terms of the agreement, we paid approximately $4.9 million for the successful completion of a clinical milestone, which was recorded as research and development expense for the year ended December 31, 2010. Additional payments of approximately 59.2 million Euros (approximately $78.5 million at December 31, 2010) may become due upon achievement of predetermined regulatory and commercial milestones. Endo will also make payments to Grünenthal based on net sales of any such product or products commercialized under this agreement.

Impax Laboratories, Inc.

In June 2010, the Company entered into a Development and Co-Promotion Agreement (the Impax Agreement) with Impax Laboratories, Inc. (Impax), whereby the Company was granted a royalty-free license for

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the co-exclusive rights to co-promote a next generation Parkinson’s disease product. Under the terms of the Impax Agreement, Endo paid Impax an upfront payment of $10 million, which was recorded as research and development expense for the year ended December 31, 2010. In addition, under the terms of the Impax agreement, Impax could potentially receive up to approximately $30 million in additional payments linked to the achievement of future clinical, regulatory, and commercial milestones related to the development product. Prior to the completion of Phase III trials, Endo may only terminate the Impax Agreement upon a material breach.

Bioniche Life Sciences Inc.

In July 2009, the Company entered into a License, Development and Supply Agreement (the Bioniche Agreement) with Bioniche Life Sciences Inc. and Bioniche Urology Inc. (collectively, Bioniche), whereby the Company licensed from Bioniche the exclusive rights to develop and market Bioniche’s proprietary formulation of Mycobacterial Cell Wall-DNA Complex (MCC), known as Urocidin^TM, in the U.S. with an option for global rights. We exercised our option for global rights in the first quarter of 2010. Urocidin^TM is a patented formulation of MCC developed by Bioniche for the treatment of non-muscle-invasive bladder cancer that is currently undergoing Phase III clinical testing. Under the terms of the Bioniche Agreement, Endo paid Bioniche an up-front cash payment of $20.0 million in July 2009, which was recorded as research and development expense. During 2010, Endo paid Bioniche milestone payments of $4.0 million resulting from the achievement of contractual milestones, which were recorded as research and development expense. In addition, Bioniche could potentially receive up to approximately $67.0 million and $29.0 million in additional payments linked to the achievement of future clinical, regulatory, and commercial milestones related to two separate indications for Urocidin^TM. Bioniche will manufacture Urocidin^TM and receive a transfer price for supply based on a percentage of Endo’s annual net sales of Urocidin^TM. Endo may terminate the Bioniche Agreement upon 180 days’ prior written notice.

BayerSchering

In July 2005, Indevus licensed exclusive U.S. rights from Schering AG, Germany, now BayerSchering Pharma AG (BayerSchering) to market a long-acting injectable testosterone preparation for the treatment of male hypogonadism that we refer to as Aveed^TM (the BayerSchering Agreement). The Company is responsible for the development and commercialization of Aveed^TM in the United States. BayerSchering is responsible for manufacturing and supplying the Company with finished product. As part of the BayerSchering Agreement, Indevus agreed to pay to BayerSchering up to $30.0 million in up-front, regulatory milestone, and commercialization milestone payments, including a $5.0 million payment due upon approval by the FDA to market Aveed^TM. Indevus also agreed to pay to BayerSchering 25% of net sales of Aveed^TM to cover both the cost of finished product and royalties. The BayerSchering Agreement expires ten years from the first commercial sale of Aveed^TM. Either party may also terminate the BayerSchering Agreement in the event of a material breach by the other party.

In October 2006, Indevus entered into a supply agreement with BayerSchering pursuant to which BayerSchering agreed to manufacture and supply Indevus with all of its requirements for Aveed^TM for a supply price based on net sales of Aveed^TM. The supply price is applied against the 25% of net sales owed to BayerSchering pursuant to the BayerSchering Agreement. The BayerSchering Agreement expires ten years after the first commercial sale of Aveed^TM.

Sanofi-Aventis

In February 1994, Indevus licensed from Rhone-Poulenc Rorer, S.A., now Aventis Pharma S.A. (Sanofi-Aventis), exclusive, worldwide rights for the manufacture, use and sale of pagoclone under patent rights and know-how related to the drug, except that Indevus granted Sanofi-Aventis an option to sublicense, under certain conditions, rights to market pagoclone in France. Indevus paid Sanofi-Aventis a license fee and agreed to make milestone payments based on clinical and regulatory developments, and to pay royalties based on net sales

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through the expiration of the composition of matter patent. If sublicensed, the Company would pay to Sanofi-Aventis a portion of receipts from the sublicensee in lieu of payments. Under the terms of the agreement with Sanofi-Aventis, the Company is responsible for all costs of developing, manufacturing, and marketing pagoclone. This agreement expires with respect to each country upon the last to expire applicable patent. Additionally either party may also terminate this agreement in the event of a material breach by the other party. The Company could owe an additional $11.1 million if certain clinical and regulatory development milestones are achieved, as well as royalties on net sales or a percentage of royalties it receives if the product is sublicensed.

Hydron Technologies, Inc.

In November 1989, GP Strategies Corporation (GP Strategies), then known as National Patent Development Corporation, entered into an agreement (the Hydron Agreement) with Dento-Med Industries, Inc., now known as Hydron Technologies, Inc. In June 2000, Valera Pharmaceuticals, Inc. (Valera, now a wholly-owned subsidiary of the Company known as Endo Pharmaceuticals Valera Inc.) entered into a contribution agreement with GP Strategies, pursuant to which Valera acquired the assets of GP Strategies’ drug delivery business, including all intellectual property, and all of GP Strategies’ rights under the Hydron Agreement, and certain other agreements with The Population Council and Shire US, Inc.

Pursuant to the Hydron Agreement, the Company has the exclusive right to manufacture, sell and distribute any prescription drug or medical device and certain other products made with the Hydron^® Polymer Technology. Hydron Technologies retained an exclusive, worldwide license to manufacture, market or use products composed of, or produced with the use of, the Hydron^® Polymer Technology in certain consumer and oral health fields. Neither party is prohibited from manufacturing, exploiting, using or transferring the rights to any new non-prescription drug product containing the Hydron^® Polymer Technology, subject to certain exceptions, for limited exclusivity periods. Subject to certain conditions and exceptions, the Company is obligated to supply certain types of Hydron^® Polymer Technology and Hydron Technologies is obligated to purchase them from the Company. In the event the Company withdraws from the business of manufacturing the Hydron^® Polymer Technology, the Company will assign all of its right and interest in the Hydron trademark to Hydron Technologies. This agreement continues indefinitely, unless terminated earlier by the parties. Each party may owe royalties up to 5% to the other party on certain products under certain conditions.

Orion Corporation

In January 2011, the Company entered into a Discovery, Development and Commercialization Agreement (the 2011 Orion Agreement) with Orion Corporation (Orion) to exclusively co-develop products for the treatment of certain cancers and solid tumors. Under the terms of the 2011 Orion Agreement, Endo and Orion each contributed four research programs to the collaboration to be conducted pursuant to the agreement. The development of each research program shall initially be the sole responsibility of the contributing party. However, upon the achievement of certain milestones, the non-contribution party shall have the opportunity to, at its option, to obtain a license to jointly develop and commercialize any research program contributed by the other party for amounts defined in the 2011 Orion Agreement. Subject to certain limitations, upon the first commercial sale of any successfully launched jointly developed product, Endo shall be obligated to pay royalties to 2011 Orion based on net sales of the corresponding product in North America (the Endo territory) and Orion shall be obligated to pay royalties to Endo on net sales of the corresponding product in certain European countries (the Orion territory). The 2011 Orion Agreement shall expire in January 2016, unless terminated early or extended pursuant to the terms of the agreement. In January 2011, Endo exercised its option to obtain a license to jointly develop and commercialize Orion’s Anti-Androgen program focused on castration-resistant prostate cancer, one of Orion’s four contributed research programs, and made a corresponding payment to Orion for $10 million, which will be expensed in the first quarter of 2011.

Teva Pharmaceutical Industries Ltd

On November 30, 2010 (the Qualitest Acquisition Date), Endo acquired Qualitest, who was party to an asset purchase agreement with Teva Pharmaceutical Industries Ltd (Teva) (the Teva Agreement). Pursuant to this

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agreement, Qualitest purchased certain pipeline generic products from Teva and could be obligated to pay consideration to Teva upon the achievement of certain future regulatory milestones. As of December 31, 2010, the maximum amount we could be obligated to pay under the Teva Agreement is $12.5 million.

Other

We have entered into certain other collaboration and discovery agreements with third parties for the development of pain management and other products. These agreements require us to share in the development costs of such products and grant marketing rights to us for such products.

We have also licensed from universities and other similar firms rights to certain technologies or intellectual property generally in the field of pain management. We are generally required to make upfront payments as well as other payments upon successful completion of regulatory or sales milestones. In addition, these agreements generally require us to pay royalties on sales of the products arising from these agreements. These agreements generally permit Endo to terminate the agreement with no significant continuing obligation.

In July 2008, the Company made a $20 million investment in a privately-held company focused on the development of an innovative treatment for certain types of cancer. In exchange for our $20 million payment, we received an equity interest in the privately-held company. The Company’s $20 million payment resulted in an ownership interest of less than 20% of the outstanding voting stock of the privately-held company. In addition, Endo and other equity holders have provided a line of credit totaling $25 million, of which Endo committed to fund $3 million. During 2010, $2.5 million has been funded by Endo under the line-of credit which would be converted into equity of the privately-held company upon certain events. During January of 2011, an additional payment of $0.3 million was subsequently funded under the same commitment. Based on the equity ownership structure, Endo does not have the ability to exert significant influence over the privately-held company. Pursuant to authoritative accounting guidance, our investment constitutes a variable interest in this privately-held company. We have determined that Endo is not the primary beneficiary and therefore have not consolidated the assets, liabilities, and results of operations of the privately-held company into our Condensed Consolidated Financial Statements. Accordingly, Endo is accounting for this investment under the cost method. As of December 31, 2010, our investment in the privately-held company was $22.5 million, representing our maximum exposure to loss.

NOTE 8. PROPERTY AND EQUIPMENT

Property and equipment is comprised of the following for the years ended December 31 (in thousands):

	2010			2009
Buildings and land	$	88,871		$	—
Machinery and equipment		90,503			17,331
Leasehold improvements		25,995			22,567
Computer equipment and software		51,208			40,681
Assets under capital leases		1,952			1,222
Furniture and fixtures		11,286			8,094
Assets under construction		13,818			7,758
		283,633			97,653
Less accumulated depreciation		(68,338	)		(50,124	)
Total	$	215,295		$	47,529

Depreciation expense was $23.8 million, $16.9 million, and $13.0 million for the years ended December 31, 2010, 2009, and 2008, respectively.

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NOTE 9. GOODWILL AND OTHER INTANGIBLES

For the year ended December 31, 2010, changes in the carrying amount of Goodwill consisted of the following (in thousands):

	Carrying Amount
Balance at December 31, 2009	$	302,534
Acquisition of HealthTronics (Note 5)		153,374
Acquisition of Penwest (Note 5)		39,111
Acquisition of Qualitest (Note 5)		219,986
Balance at December 31, 2010	$	715,005

As a result of the HealthTronics, Penwest, and Qualitest acquisitions, Endo recorded goodwill of approximately $412.5 million in 2010. In allocating the goodwill from the acquisitions, Endo determined that the a portion of the goodwill derived from the transactions was assignable to each reporting unit due to the value associated with the forecasted synergies related to the acquisitions.

As of January 1, 2011, our annual assessment date, we tested each of our six reporting units for impairment. The results of our analyses showed that no goodwill impairments exist.

Based upon recent market conditions, and a lack of comparable market transactions for similar assets, Endo determined that an income approach using a discounted cash flow model was an appropriate valuation methodology to determine each reporting units’ fair value. The income approach converts future amounts to a single present value amount (discounted cash flow model). Our discounted cash flow models are highly reliant on various assumptions, including estimates of future cash flow (including long-term growth rates), discount rate, and expectations about variations in the amount and timing of cash flows and the probability of achieving the estimated cash flows. We believe we have appropriately reflected our best estimate of the assumptions that market participants would use in determining the fair value of our reporting units at the measurement date.

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Our other intangible assets consisted of the following at December 31, 2010 and December 31, 2009, respectively (in thousands):

	December 31, 2010			December 31, 2009
Indefinite-lived intangibles:
In-process research and development	$	271,000		$	100,900
Tradenames		27,000			—
Total indefinite-lived intangibles	$	298,000		$	100,900
Definite-lived intangibles:
Licenses (weighted average life of 10 years)		638,142			625,242
Less accumulated amortization		(185,706	)		(116,233	)
Licenses, net	$	452,436		$	509,009
Tradenames (weighted average life of 15 years)		14,600			—
Less accumulated amortization		(486	)		—
Tradenames, net	$	14,114		$	—
Developed technology (weighted average life of 15 years)		768,400			—
Less accumulated amortization		(14,614	)		—
Developed technology, net	$	753,786		$	—
Service contract		13,424			—
Less accumulated amortization		—			—
Service contract, net	$	13,424		$	—
Total definite-lived intangibles, net (weighted average life of 13 years)	$	1,233,760		$	509,009
Other intangibles, net	$	1,531,760		$	609,909

Changes in the gross carrying amount of our other intangible assets for the year ended December 31, 2010, are as follows:

(in thousands)	Gross carrying amount
Balance at December 31, 2009	$	726,142
HealthTronics acquisition		74,324
Penwest acquisition		111,200
Qualitest acquisition		843,000
Milestone resulting from FDA approval of FortestaTM		12,500
Octreotide impairment		(22,000	)
Pagoclone impairment		(13,000	)
Other		400
Balance at December 31, 2010	$	1,732,566

As part of our annual review of all in-process research and development assets, we conducted an in-depth review of both octreotide indications. This review covered a number of factors including the market potential of each product given its stage of development, taking into account, among other things, issues of safety and efficacy, product profile, competitiveness of the marketplace, the proprietary position of the product and its potential profitability. Our review resulted in no impact to the carrying value of $9 million related to our octreotide – acromegaly intangible asset. However, the analysis identified certain commercial challenges with respect to the octreotide – carcinoid syndrome intangible asset including the expected rate of physician

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acceptance and the expected rate of existing patients willing to switch therapies. Upon analyzing the Company’s R&D priorities, available resources for current and future projects, and the commercial potential for octreotide – carcinoid syndrome, the Company has decided to discontinue development of octreotide for the treatment of carcinoid syndrome.

As a result of the above developments, the Company recorded a pre-tax non-cash impairment charge of $22.0 million for the year ended December 31, 2010, to write-off, in its entirety, the octreotide – carcinoid syndrome intangible asset.

In May 2010, following the completion of the pagoclone phase IIb study, Teva terminated their agreement with the Company whereby Teva had agreed to fund all future development and commercialization costs of pagoclone in exchange for exclusive worldwide rights. As a result of this termination, all rights to pagoclone were returned to us. As a result of this triggering event, we assessed the product’s indication and targeted population of eligible recipients, the future probability of regulatory approval, relative timing of commercialization, and estimates of the amount and timing of future cash flows. To calculate the fair value of the pagoclone intangible asset, the Company used an income approach using a discounted cash flow model considering management’s current evaluation of the above mentioned factors. The Company utilized a probability-weighted cash flow model using a present value discount factor of 17% which we believe to be commensurate with the overall risk associated with this particular product. The cash-flow model included our best estimates of future FDA approval associated with the indication and population of eligible recipients. The Company presently believes that the level and timing of cash flows assumed, discount rate, and probabilities of success appropriately reflected market participant assumptions. The fair value of the pagoclone intangible asset was determined to be $8.0 million. Accordingly, the Company recorded a pre-tax non-cash impairment charge of $13.0 million during 2010, representing the difference between the carrying value of the intangible asset and its estimated fair value. The impairment charge was recognized in earnings and included the Impairment of other intangible assets line item in the Condensed Consolidated Statements of Operations. Changes in any of our assumptions may result in a further reduction to the estimated fair value of the pagoclone intangible asset and could result in additional and potentially full future impairment charges of up to $8.0 million.

As a result of the FDA’s Complete Response letter related to our NDA for Aveed^TM in 2009 (see Note 5 for further details), the Company performed an impairment review for the Aveed^TM intangible asset and concluded that it is required, under generally accepted accounting principles, to record a pre-tax, non-cash impairment charge to write-down the asset to its estimated fair value. In the complete response letter, the FDA requested information to address the agency’s concerns regarding rare but serious adverse events, including post-injection anaphylactic reaction and pulmonary oily microembolism. The letter also specified that our proposed Risk Evaluation and Mitigation Strategy with respect to the product is not sufficient. We believe that significant regulatory uncertainty currently exists with respect to the timing, label and regulatory path forward for Aveed^TM, and accordingly determined that a review for asset impairment was appropriate. Although the Company is continuing to evaluate the FDA’s findings to better understand the agency’s concerns, we were required to estimate the fair value of our Aveed^TM indefinite-lived intangible asset as of the date we received the Complete Response letter. To estimate fair value we assessed the possible changes to the product’s indication and targeted population of eligible recipients, the future probability of regulatory approval, relative timing of commercialization, and estimates of the amount and timing of future cash flows. In January 2010, the Company was notified that the U.S. patent office had issued a Notice of Allowance on a patent covering the Aveed^TM formulation. Therefore, management considered the likely benefit of patent exclusivity when estimating these future cash flows. To calculate the fair value of the Aveed^TM intangible asset, the Company used an income approach using a discounted cash flow model considering management’s current evaluation of the above mentioned factors. The Company utilized probability-weighted cash flow models using a present value discount factor of 15% which we believe to be commensurate with the overall risk associated with this particular product. The cash-flow models included our best estimates of future FDA approval associated with each potential indication and population of eligible recipients. The Company believes that the level and timing of cash flows assumed, discount rate, and probabilities of success appropriately reflect market participant assumptions.

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The fair value of the Aveed^TM intangible asset was determined to be $35 million. Accordingly, the Company recorded a pre-tax non-cash impairment charge of $65 million for the year ended December 31, 2009, representing the difference between the carrying value of the intangible asset and its estimated fair value. The impairment charge has been recognized in earnings and included the Impairment of other intangible assets line item in the Consolidated Statements of Operations. Changes in any of these assumptions may result in a further reduction to the estimated fair value of the Aveed^TM intangible asset resulting in additional and potentially full future impairment charges. Such additional impairment charges could materially impact our results of operations in future periods.

In December of 2009, the Company’s Phase III clinical trials for Pro2000 provided conclusive results that the drug was not effective. In December 2009, the Company concluded there was no further value or alternative future uses associated with this indefinite-lived asset. Accordingly, we recorded a $4 million impairment charge to write-off the Pro2000 intangible asset in its entirety.

On November 11, 2009, we reached a settlement with LecTec Corporation on outstanding patent litigation. Endo made a one-time, $23 million payment for the exclusive license to two patents for use in the field of prescription pain medicines and treatment. As part of this settlement, both Hind Healthcare Inc. and Teikoku Seiyaku Co., Ltd. (Teikoku) were each contractually required to fund their share of this settlement. Accordingly, we recorded an intangible asset representing the portion of our net payment attributable to the license. The remaining $1.3 million was charged to expense within selling, general, and administrative, representing our estimate of the portion of our net payment attributable to the settlement. Effective October 1, 2010, we granted Teikoku non-exclusive license rights with respect to the applicable patents.

Amortization expense was $84.6 million, $63.5 million, and $33.5 million for the years ended December 31, 2010, 2009, and 2008, respectively. As of December 31, 2010, estimated amortization of intangibles for the five fiscal years subsequent to December 31, 2010 is as follows (in thousands):

2011	$	147,344
2012	$	147,081
2013	$	105,308
2014	$	92,454
2015	$	92,200

NOTE 10. ACCRUED EXPENSES

Accrued expenses are comprised of the following for each of the years ended December 31 (in thousands):

	2010		2009
Chargebacks	$	87,820	$	51,904
Returns and allowances		65,021		48,274
Rebates		203,225		124,443
Other sales deductions		15,320		6,060
Other		98,335		55,925
Total	$	469,721	$	286,606

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NOTE 11. OTHER (INCOME) EXPENSE, NET

The components of other (income) expense, net for each of the years ended December 31 are as follows (in thousands):

	2010			2009			2008
Other-than-temporary impairment of auction-rate securities	$	—		$	—		$	26,417
(Gain) loss on trading securities		(15,420	)		(15,222	)		4,225
Loss (gain) on auction-rate securities rights		15,659			11,662			(27,321	)
Other (income) expense		(2,172	)		231			(1,568	)
Other (income) expense, net	$	(1,933	)	$	(3,329	)	$	1,753

NOTE 12. INCOME TAXES

Income tax consists of the following for each of the years ended December 31 (in thousands):

	2010			2009			2008
Current:
Federal	$	128,793		$	116,372		$	124,862
State		22,451			17,036			8,639
		151,244			133,408			133,501
Deferred:
Federal		(8,139	)		(18,621	)		2,582
State		(6,871	)		(5,884	)		(743	)
		(15,010	)		(24,505	)		1,839
Excess tax benefits of stock options exercised		(1,051	)		(3,689	)		(92	)
Valuation allowance		(1,505	)		(11,890	)		1,244
Total income tax	$	133,678		$	93,324		$	136,492

A reconciliation of income tax at the federal statutory income tax rate to the total income tax provision for each of the years ended December 31 (in thousands):

	2010			2009			2008
Federal income tax at the statutory rate	$	147,245		$	125,888		$	137,144
Noncontrolling interests		(9,805	)		—			—
State income tax, net of federal benefit		8,447			6,729			6,227
Research and development credit		(3,667	)		(2,915	)		(2,124	)
Orphan drug credit		(904	)		—			—
Uncertain tax positions		1,148			1,574			(550	)
Effect of permanent items:
Changes in contingent consideration		(15,673	)		(40,503	)		—
Transaction-related expenses		9,612			3,256			—
Tax exempt interest income		(237	)		(855	)		(6,068	)
Other		(2,488	)		150			1,863
Total income tax	$	133,678		$	93,324		$	136,492

In order to conform to current year presentation, state taxes related to Research and Development credits, permanent items and Uncertain tax positions as of December 31, 2009, as well as state taxes related to permanent

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items and Uncertain tax positions as of December 31, 2008, have been reclassified to State income tax, net of federal benefit. This reclassification has no impact on the effective tax rate for all years presented.

The tax effects of temporary differences that comprise the current and non-current deferred income tax amounts shown on the balance sheets for the years ended December 31 are as follows (in thousands):

	2010			2009
Deferred tax assets:
Accrued expenses	$	100,068		$	67,953
Compensation related to stock options		18,328			15,693
Purchased in-process research and development		1,820			2,943
Net operating loss carryforward		209,618			122,558
Capital loss carryforward		16,914			11,235
Research and development credit carryforward		15,371			11,604
Uncertain tax positions		17,383			17,795
Other-than-temporary impairment of auction-rate securities		550			6,135
Prepaid royalties		9,115			12,354
Other		10,543			11,722
Total gross deferred income tax assets		399,710			279,992
Deferred tax liabilities:
Property, equipment, and intangibles		(434,013	)		(199,612	)
Convertible debt—non cash interest expense		(8,171	)		(10,469	)
Auction-rate securities rights		—			(5,817	)
Other		(7,859	)		(5,601	)
Total gross deferred income tax liabilities		(450,043	)		(221,499	)
Valuation allowance		(26,277	)		(17,240	)
Net deferred income tax (liability) asset	$	(76,610	)	$	41,253

As of December 31, 2010, the Company recorded a valuation allowance of $0.4 million related to the unrealized holding loss on available-for-sale auction-rate securities, the offset of which was recorded in accumulated other comprehensive loss, a component of stockholders’ equity.

In order to conform to current year presentation, deferred tax assets related to intangible assets totaling $23.8 million as of December 31, 2009 have been reclassified from deferred tax assets to deferred tax liabilities and are now included as an offset to deferred tax liabilities in the Property, equipment, and intangibles line in the table above. This change does not impact the total 2009 net deferred tax asset balance.

On January 1, 2007, the Company adopted the provisions for accounting for uncertain tax positions, which became effective for fiscal years beginning after December 15, 2006. The new standard created a single model to address uncertainty in tax positions and clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. The provisions apply to all material tax positions in all taxing jurisdictions for all open tax years. The standard establishes a two-step process for evaluating tax positions. Step 1 – Recognition, requires the Company to determine whether a tax position, based solely on its technical merits, has a likelihood of more than 50 percent (more-likely-than-not) that the tax position taken will be sustained upon examination. Step 2 – Measurement, which is only addressed if Step 1 has been satisfied, requires the Company to measure the tax benefit as the largest amount of benefit, determined on a cumulative probability basis that is more-likely-than-not to be realized upon ultimate settlement.

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The Company records accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the years ended December 31, 2010 and 2009, interest and penalties included in income tax expense totaled $1.0 million and $2.1 million, respectively.

A reconciliation of the change in the uncertain tax benefits (UTB) balance from January 1, 2008 to December 31, 2010 is as follows (in thousands):

	Unrecognized Tax Benefit Federal, State, and Foreign Tax
UTB Balance at January 1, 2008	$	10,980
Gross additions for current year positions		5,200
Gross additions for prior period positions		17,091
Gross reductions for prior period positions		(11,758	)
Decrease due to settlements		(559	)
Decrease due to lapse of statute of limitations		(1,650	)
UTB Balance at December 31, 2008	$	19,304
Gross additions for current year positions		7,609
Gross additions for prior period positions		217
Gross reductions for prior period positions		(27	)
Decrease due to settlements		—
Decrease due to lapse of statute of limitations		—
UTB Balance at December 31, 2009	$	27,103
Gross additions for current year positions		6,293
Gross additions for prior period positions		—
Gross reductions for prior period positions		(2,887	)
Decrease due to settlements		(351	)
Decrease due to lapse of statute of limitations		(679	)
Additions related to acquisitions		9,702
UTB Balance at December 31, 2010	$	39,181
Accrued interest and penalties		8,226
Total UTB balance including accrued interest and penalties	$	47,407
Current portion (included in accrued expenses)	$	180
Non-current portion (included in other liabilities)	$	47,227

The Company and its subsidiaries are routinely examined by various taxing authorities, which have proposed adjustments to tax for issues such as certain tax credits and the deductibility of certain expenses. While it is possible that one or more of these examinations may be resolved within the next twelve months, it is not anticipated that the total amount of unrecognized tax benefits will significantly increase or decrease within the next twelve months. In addition, the expiration of statutes of limitations for various jurisdictions is expected to reduce the unrecognized tax benefits balance by an insignificant amount.

The Company files income tax returns in the U.S. Federal jurisdiction, and various state and foreign jurisdictions. The Company is subject to U.S. Federal, state and local, and non-U.S. income tax examinations by tax authorities. The Company’s U.S. federal income tax returns for tax years 2003 through 2008 are currently under routine examination by the IRS. In general, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2003. The Company believes that it has adequately provided for uncertain tax positions relating to all open tax years by tax jurisdiction.

The total amount of gross unrecognized tax benefits as of December 31, 2010 is $47.4 million, including interest and penalties, of which $21.6 million, if recognized, would affect the Company’s effective tax rate. The

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change in the total amount of unrecognized tax benefits did not have a material impact on the Company’s results of operations for the year ended December 31, 2010 or our financial position as of December 31, 2010. Any future adjustments to our uncertain tax position liability will result in an impact to our income tax provision and effective tax rate.

It is expected that the amount of unrecognized tax benefits will change during the next twelve months; however, the Company does not anticipate any adjustments that would lead to a material impact on our results of operations or our financial position.

NOTE 13. STOCKHOLDERS’ EQUITY

Common Stock

At our 2008 Annual Meeting held on June 26, 2008, our stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation which increased the total number of shares of common stock, $0.01 par value, that the Company is authorized to issue from 175,000,000 to 350,000,000.

Subject to certain limitations, we are permitted to pay dividends under the 2010 Credit Facility and our Senior Notes. See Note 18 for further details.

Preferred Stock

The Board of Directors may, without further action by the stockholders, issue a series of Preferred Stock and fix the rights and preferences of those shares, including the dividend rights, dividend rates, conversion rights, exchange rights, voting rights, terms of redemption, redemption price or prices, liquidation preferences, the number of shares constituting any series and the designation of such series. As of December 31, 2010, no shares of Preferred Stock have been issued.

Stock-Based Compensation

Endo Pharmaceuticals Holdings Inc. 2000, 2004, 2007, and 2010 Stock Incentive Plans

On August 11, 2000, we established the Endo Pharmaceuticals Holdings Inc. 2000 Stock Incentive Plan. The 2000 Stock Incentive Plan reserved an aggregate of 4,000,000 shares of common stock of the Company for issuance to employees, officers, directors and consultants. The 2000 Stock Incentive Plan provided for the issuance of stock options, restricted stock, stock bonus awards, stock appreciation rights or performance awards. The 2000 Stock incentive expired during 2010. In May 2004, our stockholders approved the Endo Pharmaceuticals Holdings Inc. 2004 Stock Incentive Plan. The maximum number of shares of Company stock reserved for issuance under the 2004 Stock Incentive Plan is 4,000,000 shares. The 2004 Plan provides for the grant of stock options, stock appreciation rights, shares of restricted stock, performance shares, performance units or other share-based awards that may be granted to executive officers and other employees of the Company, including officers and directors who are employees, to non-employee directors and to consultants to the Company. In May 2007, our stockholders approved the Endo Pharmaceuticals Holdings Inc. 2007 Stock Incentive Plan. The maximum number of shares of Company stock reserved for issuance under the 2007 Stock Incentive Plan is 7,000,000 shares (subject to adjustment for certain transactions), but in no event may the total number of shares of Company stock subject to awards awarded to any one participant during any tax year of the Company exceed 750,000 shares (subject to adjustment for certain transactions). During 2009, 43,500 restricted stock units and 66,503 non-qualified stock options were granted to an executive officer of the Company as an inducement to commence employment with the Company. The restricted stock units and non-qualified stock options were granted outside of the 2007 Stock Incentive Plan but are subject to the terms and conditions of the 2007 Stock Incentive Plan and the applicable award agreements. In May 2010, our stockholders approved the Endo Pharmaceuticals Holdings Inc. 2010 Stock Incentive Plan. The maximum number of shares of Company stock reserved for issuance under the Plan includes 8,000,000 shares plus the number of shares of Company stock reserved but unissued under the Company’s 2004 and 2007 Stock Incentive Plans as of April 28, 2010 and may

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be increased to include the number of shares of Company stock that become available for reuse under these plans following April 28, 2010, subject to adjustment for certain transactions. Notwithstanding the foregoing, of the 8,000,000 shares originally reserved for issuance under this Plan, no more than 4,000,000 of such shares shall be issued as awards, other than options, that are settled in the Company’s stock. In no event may the total number of shares of Company stock subject to awards awarded to any one participant during any tax year of the Company, exceed 1,000,000 shares (subject to adjustment for certain transactions). Approximately 18.4 million shares were reserved for future issuance upon exercise of options granted or to be granted under the 2004, 2007, and 2010 Stock Incentive Plans. As of December 31, 2010, stock options, restricted stock awards and restricted stock units have been granted under the Stock Incentive Plans.

Stock-Based Compensation

The Company accounts for its stock-based compensation plans in accordance with the guidance for Share-Based Payments. Accordingly, all stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as an expense in the income statement over the requisite service period.

Presented below is the allocation of stock-based compensation as recorded in our Consolidated Statements of Operations for the years ended December 31 (in thousands).

	2010		2009		2008
Selling, general and administrative expenses	$	19,229	$	17,211	$	15,492
Research and development expenses		3,680		2,382		1,442
Total stock-based compensation expense	$	22,909	$	19,593	$	16,934

Stock Options

For all of the Company’s stock-based compensation plans, the fair value of each option grant was estimated at the date of grant using the Black-Scholes option-pricing model. Black-Scholes utilizes assumptions related to volatility, the risk-free interest rate, the dividend yield (which is assumed to be zero, as the Company has not paid cash dividends to date and does not currently expect to pay cash dividends) and the expected term of the option. Expected volatilities utilized in the model are based mainly on the historical volatility of the Company’s stock price over a period commensurate with the expected life of the share option as well as other factors. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect at the time of grant. We estimate the expected term of options granted based on our historical experience with our employees’ exercise of stock options and other factors.

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A summary of the activity under 2000, 2004, 2007, and 2010 Stock Incentive Plans for the three-year period ended December 31, 2010 is presented below:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding, January 1, 2008		4,336,052		$	24.24
Granted		1,371,253		$	24.78
Exercised		(150,191	)	$	14.88
Forfeited		(834,753	)	$	28.10
Expired		(62,979	)	$	29.11
Outstanding, December 31, 2008		4,659,382		$	23.95
Granted		2,216,544		$	19.30
Exercised		(554,827	)	$	14.48
Forfeited		(300,864	)	$	24.11
Expired		(861,694	)	$	24.67
Outstanding, December 31, 2009		5,158,541		$	22.84
Granted		2,210,537		$	22.23
Exercised		(965,013	)	$	21.64
Forfeited		(305,033	)	$	21.72
Expired		(207,632	)	$	30.44
Outstanding, December 31, 2010		5,891,400		$	22.60		7.60	$	79,141,959
Vested and expected to vest, December 31, 2010		5,453,882		$	22.64		7.50	$	73,014,084
Exercisable, December 31, 2010		1,887,649		$	24.32		5.50	$	22,083,003

The total intrinsic value of options exercised during the years ended December 31, 2010, 2009, and 2008 was $9.0 million, $3.6 million, and $1.4 million, respectively. The weighted-average grant date fair value of the stock options granted during the years ended December 31, 2010, 2009, and 2008 was $7.66, $7.47, and $9.48 per option, respectively, determined using the following assumptions:

	2010			2009			2008
Average expected term (years)		5.25			5.22			4.92
Risk-free interest rate		2.4	%		2.0	%		2.8	%
Dividend yield		0.00			0.00			0.00
Expected volatility		34	%		40	%		39	%

The weighted average remaining requisite service period of the non-vested stock options is 2.5 years. As of December 31, 2010, the total remaining unrecognized compensation cost related to non-vested stock options amounted to $41.5 million. This unrecognized compensation cost does not include the impact of any future stock-based compensation awards.

The following table summarizes information about stock options outstanding under our 2000, 2004, 2007, and 2010 Stock Incentive Plans at December 31, 2010:

2000, 2004, 2007, and 2010 Stock Incentive Plans Options Outstanding

Number Outstanding	Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable		Exercisable Weighted Average Exercise Price		Range of Exercise Prices
5,891,400		7.60	$	22.60		1,887,649	$	24.32	$	9.29-36.70

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Restricted Stock Awards

During the year ended December 31, 2007, the Company began granting restricted stock awards to non-employee directors of the Company. We recognize expense for our restricted stock using the straight-line method over the requisite service period. The total value of compensation expense for restricted stock is equal to the closing price of Endo shares on the date of grant.

A summary of our restricted stock activity during the years ended December 31, 2010, 2009 and 2008 is presented below:

	Number of Shares			Weighted Average Fair Value Per Share		Aggregate Intrinsic Value
Non-vested, January 1, 2008		13,572		$	29.84
Granted		—		$	—
Forfeited		(1,131	)	$	29.84
Vested		(6,786	)	$	29.84	$	175,622
Non-vested, December 31, 2008		5,655		$	29.84
Granted		—		$	—
Forfeited		(1,131	)	$	29.84
Vested		(4,524	)	$	29.84	$	92,832
Non-vested, December 31, 2009		—		$	—
Granted		—		$	—
Forfeited		—		$	—
Vested		—		$	—	$	—
Non-vested, December 31, 2010		—		$	—

As of December 31, 2010, there was no unrecognized compensation cost related to non-vested restricted stock awards.

Restricted Stock Units

During the years ended December 31, 2010, 2009, and 2008, the Company granted restricted stock units to employees and non-employee directors of the Company as part of their annual stock compensation award. We recognize expense for our restricted stock units using the straight-line method over the requisite service period. The total value of compensation expense for restricted stock units is equal to the closing price of Endo shares on the date of grant.

A summary of our restricted stock units activity during the years ended December 31, 2010, 2009, and 2008 is presented below:

	Number of Shares			Aggregate Intrinsic Value
Outstanding, January 1, 2008		—
Granted		639,396
Forfeited		(91,043	)
Vested		—
Outstanding, December 31, 2008		548,353
Granted		1,133,186
Forfeited		(86,286	)
Vested		(118,012	)
Outstanding, December 31, 2009		1,477,241
Granted		1,411,140
Forfeited		(357,546	)
Vested		(319,532	)
Outstanding, December 31, 2010		2,211,303		$	79,651,134

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The weighted average remaining requisite service period of the non-vested restricted stock units is 2.46 years. The weighted-average grant date fair values of the restricted stock units granted during the years ended December 31, 2010, 2009, and 2008 were $21.39, $19.43, and $25.09 per unit, respectively. As of December 31, 2010, the total remaining unrecognized compensation cost related to non-vested restricted stock units amounted to $20.9 million. This unrecognized compensation cost does not include the impact of any future stock-based compensation awards.

Performance Shares

Beginning in the first quarter ended March 31, 2010, the Company began to award performance stock units (PSU) to certain key employees. These PSUs are tied to both Endo’s overall financial performance and Endo’s financial performance relative to the financial performance of a selected industry group. Awards are granted annually, with each award covering a three-year performance cycle. Each PSU is convertible to one share of Endo common stock. Performance measures used to determine the actual number of performance shares issuable upon vesting include an equal weighting of Endo’s total shareholder return (TSR) performance compared to the performance group over the three-year performance cycle and Endo’s three-year cumulative revenue performance as compared to a three-year revenue target. TSR relative to peers is considered a market condition while cumulative revenue performance is considered a performance condition under applicable authoritative guidance. PSUs granted for the year ended December 31, 2010 totaled 163,000. As of December 31, 2010, there was approximately $3.5 million of total unrecognized compensation costs related to PSUs. That cost is expected to be recognized over a weighted-average period of 3.0 years.

Share Repurchase Program

In April 2008, our Board of Directors approved a share repurchase program, authorizing the Company to repurchase in the aggregate up to $750 million of shares of its outstanding common stock. Purchases under this program may be made from time to time in open market purchases, privately-negotiated transactions, and accelerated stock repurchase transactions or otherwise, as determined by Endo.

This program does not obligate Endo to acquire any particular amount of common stock. Additional purchases, if any, will depend on factors such as levels of cash generation from operations, cash requirements for investment in the Company’s business, repayment of future debt, if any, current stock price, market conditions and other factors. The share repurchase program may be suspended, modified or discontinued at any time. As a result of a two-year extension approved by the Board of Directors in February 2010, the share repurchase plan is set to expire in April 2012.

As described in Note 18, we entered into a privately-negotiated $325.0 million accelerated share repurchase agreement as part of our broader share repurchase program described above. Pursuant to the accelerated share repurchase agreement, we purchased approximately 11.9 million shares of our common stock on April 15, 2008. On August 14, 2008, Endo received approximately 1.4 million additional shares of our common stock based on the volume-weighted average price of our common stock during a specified averaging period set forth by the accelerated share repurchase agreement. In addition to the accelerated share repurchase, beginning in April 2008, we made open market purchases of our common stock as part of our broader share repurchase program. As of December 31, 2008, we purchased approximately 4.5 million shares of our common stock on the open market for a total purchase price of approximately $99.8 million. We did not purchase any shares of our common stock during the year ended December 31, 2009. During the year ended December 31, 2010, pursuant to the existing share repurchase program, we purchased approximately 2.5 million shares of our common stock totaling $59.0 million.

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NOTE 14. COMMITMENTS AND CONTINGENCIES

Manufacturing, Supply and Other Service Agreements

We contract with various third party manufacturers and suppliers to provide us with raw materials used in our products and finished goods. Our most significant agreements are with Novartis Consumer Health, Inc. and Novartis AG (collectively, Novartis), Teikoku Seiyaku Co., Ltd., Mallinckrodt Inc., Noramco, Inc., Sharp Corporation, and Ventiv Commercial Services, LLC. If for any reason we are unable to obtain sufficient quantities of any of the finished goods or raw materials or components required for our products, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Novartis Consumer Health, Inc.

On May 3, 2001, we entered into a long-term manufacturing and development agreement with Novartis Consumer Health, Inc. whereby Novartis Consumer Health, Inc. has agreed to manufacture certain of our commercial products and products in development. We are required to purchase, on an annual basis, a minimum amount of product from Novartis Consumer Health, Inc. The purchase price per product is equal to a predetermined amount per unit, subject to periodic adjustments. This agreement had a five-year term, with automatic five-year renewals thereafter. In August 2005, we extended this agreement until 2011. On February 23, 2011, we gave notice to Novartis that we would terminate this agreement effective February 2014. As of December 31, 2010, we are required to purchase a minimum of approximately $14 million of product from Novartis Consumer Health Inc. per year, or pro rata portion thereof, until the effective date of the termination of this agreement. Amounts purchased pursuant to this agreement were $54.9 million, $51.5 million, and $32.0 million for the years ended December 31, 2010, 2009, and 2008, respectively.

Pursuant to the March 2008 Voltaren^® Gel License and Supply Agreement (the Voltaren^® Gel Agreement) with Novartis AG and Novartis Consumer Health, Inc. Endo has agreed to purchase from Novartis all of its requirements for Voltaren^® Gel during the entire term of the Voltaren^® Gel Agreement. The price of product purchased under the Voltaren^® Gel Agreement is fixed for the first year and subject to annual changes based upon changes in the producer price index and raw materials. Amounts purchased pursuant to the Voltaren^® Gel Agreement were $27.1 million, $13.1 million, and $23.4 million for the years ended December 31, 2010, 2009, and 2008, respectively.

As part of the Voltaren^® Gel Agreement, we also agreed to undertake advertising and promotion of Voltaren^® Gel (A&P Expenditures), subject to certain thresholds set forth in the Voltaren^® Gel Agreement. We agreed to spend a minimum of $15 million on A&P Expenditures during the first Voltaren^® Gel Agreement Year which ended on June 30, 2009. During the second Voltaren^® Gel Agreement Year beginning on July 1, 2009 and extended through June 30, 2010, we had agreed to spend a minimum of $20 million on A&P Expenditures. During the third Voltaren^® Gel Agreement Year beginning on July 1, 2010 and extending through June 30, 2011, we had agreed to spend 15% of prior year sales or approximately $13 million on A&P Expenditures. In subsequent Agreement Years, the minimum A&P Expenditures set forth in the Voltaren^® Gel Agreement are determined based on a percentage of net sales of Voltaren^® Gel.

Amounts incurred by Endo for such A&P Expenditures were $18.0 million, $15.6 million, and $9.4 million for the years ended December 31, 2010, 2009, and 2008, respectively.

Teikoku Seiyaku Co., Ltd.

Under the terms of our agreement (the Teikoku Agreement) with Teikoku Seiyaku Co. Ltd. (Teikoku), a Japanese manufacturer, Teikoku manufactures Lidoderm^® at its two Japanese facilities, located on adjacent properties, for commercial sale by us in the United States. We also have an option to extend the supply area to other territories. On April 24, 2007, we amended the Teikoku agreement (the Amended Agreement). The material components of the Amended Agreement are as follows:

• We agreed to purchase a minimum number of patches per year through 2012, representing the noncancelable portion of the Amended Agreement.

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• Teikoku agreed to fix the supply price of Lidoderm^® for a period of time after which the price will be adjusted at future dates certain based on a price index defined in the Amended Agreement. Since future price changes are unknown, we have used prices currently existing under the Amended Agreement, and estimated our minimum purchase requirement to be approximately $32 million per year through 2012. The minimum purchase requirement shall remain in effect subsequent to 2012, except that Endo has the right to terminate the Amended Agreement after 2012, if we fail to meet the annual minimum requirement.

• Following cessation of our obligation to pay royalties to Hind Healthcare Inc. (Hind) under the Sole and Exclusive License Agreement dated as of November 23, 1998, as amended, between Hind and Endo, we will pay to Teikoku annual royalties based on our annual net sales of Lidoderm^®.

• The Amended Agreement will expire on December 31, 2021, unless terminated in accordance with its terms. Either party may terminate this Agreement, upon thirty (30) days written notice, in the event that Endo fails to purchase the annual minimum quantity for each year after 2012 (e.g., 2013 through 2021) upon thirty (30) days’ written notice. Notwithstanding the foregoing, after December 31, 2021, the Amended Agreement shall be automatically renewed on the first day of January each year unless (i) we and Teikoku agree to terminate the Amended Agreement upon mutual written agreement or (ii) either we or Teikoku terminates the Amended Agreement with 180-day written notice to the other party, which notice shall not in any event be effective prior to July 1, 2022.

On January 6, 2010, the parties amended the Teikoku Agreement, effective December 16, 2009. Pursuant to the amendment, Teikoku has agreed to supply the product at a fixed price for a period of time after which the price will be adjusted at future dates certain based on a price index defined in the amendment.

Effective November 1, 2010, the parties amended the Teikoku Agreement. Pursuant to this amendment, Teikoku has agreed to supply additional product at no cost to Endo in each of 2011, 2012 and 2013 in the event Endo’s firm orders of Product exceed certain thresholds in those years.

Amounts purchased pursuant to this agreement, as amended, were $172.3 million, $152.9 million, and $156.9 million for the years ended December 31, 2010, 2009, and 2008, respectively.

Mallinckrodt Inc.

Under the terms of our agreement (the Mallinckrodt Agreement) with Mallinckrodt Inc. (Mallinckrodt), Mallinckrodt manufactures and supplies to us certain narcotic active drug substances, in bulk form, and raw materials for inclusion in our controlled substance pharmaceutical products. There is no minimum annual purchase commitment under the Mallinckrodt Agreement. However, we are required to purchase a fixed percentage of our annual requirements of each narcotic active drug substance covered by the Mallinckrodt Agreement from Mallinckrodt. The purchase price for these substances is equal to a fixed amount, adjusted on an annual basis. The initial term of this agreement is July 1, 1998 until June 30, 2013, with an automatic renewal provision for unlimited successive one-year periods. Either party may terminate the Mallinckrodt agreement in the event of a material breach by the other party. Amounts purchased pursuant to this agreement were $26.1 million, $20.7 million, and $15.8 million for the years ended December 31, 2010, 2009, and 2008, respectively.

Noramco, Inc.

Under the terms of our agreement (the Noramco Agreement) with Noramco Inc. (Noramco), Noramco manufactures and supplies to us certain narcotic active drug substances, in bulk form, and raw materials for inclusion in our controlled substance pharmaceutical products. There are no minimum annual purchase commitments under the Noramco Agreement. However, we are required to purchase a fixed percentage of our annual requirements of each narcotic active drug substance covered by the Noramco Agreement from Noramco.

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The purchase price for these substances is equal to a fixed amount, adjusted on an annual basis. The Noramco Agreement will expire on December 31, 2011, with automatic renewal provisions for unlimited successive one-year periods. Either party may terminate the Noramco Agreement in the event of a material breach by the other party or at a designated time prior to its termination date. Amounts purchased from Noramco were $13.9 million, $3.2 million, and $4.2 million for the years ended December 31, 2010, 2009, and 2008, respectively.

Sharp Corporation

Under the terms of our agreement (the Sharp Agreement) with Sharp Corporation (Sharp), a U.S. manufacturer, Sharp performs certain services for Endo including the packaging and labeling of Lidoderm^® at its facility in Allentown, Pennsylvania, for commercial sale by us in the United States. The Sharp Agreement will expire on March 1, 2011, subject to renewal for additional one-year periods upon mutual agreement by both parties. Endo has the right to terminate the Sharp Agreement at any time upon ninety (90) days’ written notice. Amounts purchased pursuant to the Sharp agreement were $6.9 million, $6.3 million, and $5.3 million for the years ended December 31, 2010, 2009, and 2008, respectively. On December 6, 2010, the parties amended the Sharp Packaging and Labeling agreement, effective December 1, 2010, extending the agreement until March 1, 2015.

Ventiv Commercial Services, LLC

On May 15, 2008, we entered into a services agreement (the 2008 Ventiv Agreement) with Ventiv Commercial Services, LLC (Ventiv). Under the terms of the 2008 Ventiv Agreement, Ventiv provided to Endo certain sales and marketing services through a contracted field force and other sales management positions, collectively referred to as the 2008 Ventiv Field Force. The 2008 Ventiv Field Force promoted primarily Voltaren^® Gel and was required to perform a minimum number of face-to-face one-on-one discussions with physicians and other healthcare practitioners for the purpose of promoting Voltaren^® Gel and other Endo products within their respective approved indications during each year of the 2008 Ventiv Agreement, subject to certain provisions.

Under the terms of the 2008 Ventiv Agreement, we incurred a one-time implementation fee that we recognized in selling, general, and administrative expense in the second quarter of 2008. In addition, each month we were required to pay Ventiv a monthly fixed fee during the term of the 2008 Ventiv Agreement based on a pre-approved budget. Included in the fixed monthly fee were certain costs such as the Ventiv sales representative and district manager salaries, 2008 Ventiv Field Force travel, and office and other expenses captured on routine expense reports, as well as a fixed management fee. Ventiv was also eligible to earn a performance-based bonus equal to the fixed management fee during each year of the 2008 Ventiv Agreement. This performance-based bonus was payable upon the satisfaction of certain conditions, including the sale of a minimum number of Voltaren^® Gel tubes and a minimum number of Details achieved.

In May 2009, we amended the 2008 Ventiv Agreement to change certain provisions including a reduction in the 2008 Ventiv Field Force from 275 to 80 sales representatives effective June 1, 2009. On September 30, 2010, the term of the Ventiv Agreement, which was originally set to expire on August 10, 2010, was extended until the first to occur of the following: (i) Endo and Ventiv entering into the new services agreement or (ii) November 30, 2010. On November 24, 2010, Endo and Ventiv terminated the 2008 Ventiv Agreement and entered into a new services agreement (the 2010 Ventiv Agreement).

Under the terms of the 2010 Ventiv Agreement, Ventiv will provide certain sales and promotional services through a contracted field force of 228 sales representatives, 24 district managers, one project manager, and one national sales director, collectively referred to as the 2010 Ventiv Field Force. The 2010 Ventiv Field Force is required to perform a minimum number of face-to-face, one-on-one discussions with physicians and other health care practitioners for the purpose of promoting Voltaren^® Gel, Lidoderm^®, Frova^®, Opana^® ER, and other Endo products within their respective approved indications during each year of the 2010 Ventiv Agreement, subject to certain provisions.

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Under the terms of the 2010 Ventiv Agreement, we incurred a one-time implementation fee that we recognized in selling, general, and administrative expense in the second half of 2010. In addition, each month we are required to pay Ventiv a monthly fixed fee during the term of the 2010 Ventiv Agreement based on a pre-approved budget. Ventiv is also eligible to earn a performance-based bonus equal to the fixed management fee during each year of the 2010 Ventiv Agreement. This performance-based bonus is payable upon the satisfaction of certain conditions, including the sale of a minimum number of Voltaren^® Gel tubes and a minimum number of Details achieved. The 2010 Ventiv Agreement shall expire on October 1, 2011, unless extended by Endo.

The expenses incurred with respect to Ventiv under both the 2008 Ventiv Agreement and the 2010 Ventiv Agreement were $10.9 million, $21.6 million, and $19.2 million for the years ended December 31, 2010, 2009, and 2008, respectively.

UPS Supply Chain Solutions

Under the terms of this agreement, we utilize UPS Supply Chain Solutions to provide customer service support, chargeback processing, accounts receivables management and warehouse, freight and distribution services for certain of our products in the United States. The initial term of the agreement will extend to March 31, 2015. The agreement may be terminated by either party (1) without cause upon prior written notice to the other party; (2) with cause in the event of an uncured material breach by the other party and (3) if the other party become insolvent or bankrupt. In the event of termination of services provided under the Warehouse Distribution Services Schedule to the agreement (i) by Endo without cause or (ii) by UPS due to Endo’s breach, failure by Endo to make payments when due, or Endo’s insolvency, we would be required to pay UPS certain termination costs. Such termination costs would not exceed $2 million.

General

In addition to the manufacturing and supply agreements described above, we have agreements with various companies for clinical development services. Although we have no reason to believe that the parties to these agreements will not meet their obligations, failure by any of these third parties to honor their contractual obligations may have a materially adverse effect on our business, financial condition, results of operations and cash flows.

Milestones and Royalties

See Note 7 for a complete description of future milestone and royalty commitments pursuant to our acquisitions, license and collaboration agreements.

Employment Agreements

We have entered into employment agreements with certain members of management.

Research Contracts

We routinely contract with universities, medical centers, contract research organizations and other institutions for the conduct of research and clinical studies on our behalf. These agreements are generally for the duration of the contracted study and contain provisions that allow us to terminate prior to completion.

Legal Proceedings

In the ordinary course of its business, the Company is involved in various claims and legal proceedings, including product liability, intellectual property, and commercial litigation. While we cannot predict the outcome of our ongoing legal proceedings and we intend to vigorously defend our position, an adverse outcome in any of these proceedings could have a material adverse effect on our current and future financial position, results of operations and cash flows.

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Withdrawal of Redux, Legal Proceedings, Insurance Claims, and Related Contingencies

In September 1997, Indevus announced a market withdrawal of its first commercial prescription product, the anti-obesity medication Redux (dexfenfluramine hydrochloride capsules C-IV), which had been launched in June 1996 by its licensee, American Home Products Corporation, which became Wyeth, and was later acquired by Pfizer. The withdrawal of Redux was based on a preliminary analysis by the FDA of potential abnormal echocardiogram findings associated with certain patients taking Redux or the combination of fenfluramine with phentermine. Following the withdrawal of Redux, Indevus was named, together with other pharmaceutical companies, as a defendant in several thousand product liability legal actions in federal and state courts relating to the use of Redux and other weight loss drugs. Fewer than 50 cases are still pending against Indevus and/or the Company. In May 2001, Indevus entered into the AHP Indemnity and Release Agreement with Wyeth pursuant to which Wyeth agreed to indemnify Indevus against certain classes of product liability cases filed against Indevus related to Redux and Indevus agreed to dismiss Redux related claims against Wyeth. Under the terms of the AHP Indemnity and Release Agreement, Wyeth has agreed to indemnify Indevus for claims brought by plaintiffs who initially opted out of Wyeth’s national class action settlement of diet drug claims and claimants alleging primary pulmonary hypertension. In addition, Wyeth has agreed to fund all future legal costs of Indevus related to the defense of Redux-related product liability cases. Also, pursuant to the AHP Indemnity and Release Agreement, Wyeth agreed to fund additional insurance coverage to supplement Indevus’ existing product liability insurance. The Company believes the total insurance coverage, including the additional insurance coverage funded by Wyeth, is sufficient to address the potential remaining Redux product liability exposure. However, there can be no assurance Redux claims will not exceed the amount of insurance coverage available to the Company and Wyeth’s indemnification obligations under the AHP Indemnity and Release Agreement. If such insurance coverage and Wyeth indemnification is not sufficient to satisfy Redux-related claims, the payment of amounts to satisfy such claims may have a material adverse effect on the Company’s business, results of operations, financial condition or cash flows. Prior to the effectiveness of the AHP Indemnity and Release Agreement, Redux-related defense costs of Indevus were paid by, or subject to reimbursement from, Indevus’ product liability insurers. To date, there have been no Redux-related product liability settlements or judgments paid by Indevus or their insurers.

If the Company incurs additional product liability defense and other costs subject to claims on the Reliance product liability policy up to the $5.0 million limit of the policy, the Company will have to pay such costs without expectation of reimbursement and will incur charges to operations for all or a portion of such payments.

Department of Health and Human Services Subpoena

In January 2007, the Company received a subpoena issued by the United States Department of Health and Human Services, Office of Inspector General (OIG). The subpoena requests documents relating to Lidoderm^® (lidocaine patch 5%), focused primarily on the sale, marketing and promotion of Lidoderm^®. The Company is cooperating with the government. At this time, the Company cannot predict or determine the outcome of the above matter or reasonably estimate the amount or range of amounts of fines or penalties, if any, that might result from a settlement or an adverse outcome.

Pricing Litigation

A number of cases brought by local and state government entities are pending that allege generally that our wholly-owned subsidiary, Endo Pharmaceuticals Inc. (EPI) and numerous other pharmaceutical companies reported false pricing information in connection with certain drugs that are reimbursable under Medicaid. These cases generally seek damages, treble damages, disgorgement of profits, restitution and attorneys’ fees.

The federal court cases have been consolidated in the United States District Court for the District of Massachusetts under the Multidistrict Litigation Rules as In re: Pharmaceutical Industry Average Wholesale Price Litigation, MDL 1456. The following previously reported cases are pending in MDL 1456 and have been consolidated into one consolidated complaint: City of New York v. Abbott Laboratories, Inc., et al.; County of

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Albany v. Abbott Laboratories, Inc., et al.; County of Allegany v. Abbott Laboratories, Inc., et al.; County of Broome v. Abbott Laboratories, Inc., et al.; County of Cattaraugus v. Abbott Laboratories, Inc., et al; County of Cayuga v. Abbott Laboratories, Inc., et al.; County of Chautauqua v. Abbott Laboratories, Inc., et al.; County of Chemung v. Abbott Laboratories, Inc., et al.; County of Chenango v. Abbott Laboratories, Inc., et al.; County of Columbia v. Abbott Laboratories, Inc., et al.; County of Cortland v. Abbott Laboratories, Inc., et al.; County of Dutchess v. Abbott Laboratories, Inc., et al.; County of Essex v. Abbott Laboratories, Inc., et al.; County of Fulton v. Abbott Laboratories, Inc., et al.; County of Genesee v. Abbott Laboratories, Inc., et al.; County of Greene v. Abbott Laboratories, Inc., et al.; County of Herkimer v. Abbott Laboratories, Inc., et al.; County of Jefferson v. Abbott Laboratories, Inc., et al.; County of Lewis v. Abbott Laboratories, Inc., et al.; County of Madison v. Abbott Laboratories, Inc., et al.; County of Monroe v. Abbott Laboratories, Inc., et al.; County of Niagara v. Abbott Laboratories, Inc., et al.; County of Oneida v. Abbott Laboratories, Inc., et al.; County of Onondaga v. Abbott Laboratories, Inc., et al.; County of Ontario v. Abbott Laboratories, Inc., et al.; County of Orleans v. Abbott Laboratories, Inc., et al.; County of Putnam v. Abbott Laboratories, Inc., et al.; County of Rensselaer v. Abbott Laboratories, Inc., et al.; County of Rockland v. Abbott Laboratories, Inc., et al.; County of St. Lawrence v. Abbott Laboratories, Inc., et al.; County of Saratoga v. Abbott Laboratories, Inc., et al.; County of Schuyler v. Abbott Laboratories, Inc., et al.; County of Seneca v. Abbott Laboratories, Inc., et al.; County of Steuben v. Abbott Laboratories, Inc., et al.; County of Suffolk v. Abbott Laboratories, Inc., et al.; County of Tompkins v. Abbott Laboratories, Inc., et al.; County of Ulster v. Abbott Laboratories, Inc., et al.; County of Warren v. Abbott Laboratories, Inc., et al.; County of Washington v. Abbott Laboratories, Inc., et al.; County of Wayne v. Abbott Laboratories, Inc., et al.; County of Westchester v. Abbott Laboratories, Inc., et al; County of Wyoming v. Abbott Laboratories, Inc., et al.; and County of Yates v. Abbott Laboratories, Inc., et al.

In addition, a previously reported case originally filed in the Southern District of New York, County of Orange v. Abbott Laboratories, Inc., et al., has been transferred to the MDL and consolidated with the cases listed above.

On January 22, 2010, without admitting any liability or wrongdoing, EPI and the plaintiffs reached an agreement in principle to resolve the foregoing federal cases brought by New York City and the New York counties on terms that are not material to the Company’s business, results of operations, financial condition or cash flows.

On November 3, 2010, the State of Louisiana submitted its Third Amending Petition for Damages and Jury Demand in the previously-filed case of State of Louisiana v. Abbott Laboratories, Inc., et al., No. 596164. That Petition names EPI as a defendant. The Petition also names numerous other pharmaceutical companies and contains allegations similar to the allegations in the cases described above. The case is pending in the 19th Judicial District, Parish of East Baton Rouge.

There is a previously reported case pending in the MDL against EPI and numerous other pharmaceutical companies: State of Iowa v. Abbott Laboratories, Inc., et al., Civ. Action No. 4:07-cv-00461. On June 25, 2010, without admitting any liability or wrongdoing, EPI and the plaintiff reached an agreement in principle to resolve this case brought by the State of Iowa on terms that are not material to the Company’s business, results of operations, financial condition or cash flows.

Three previously reported cases, County of Erie v. Abbott Laboratories, Inc., et al., originally filed in the Supreme Court of the State of New York, Erie County, County of Oswego v. Abbott Laboratories, Inc., et al., originally filed in the Supreme Court of the State of New York, Oswego County, and County of Schenectady v. Abbott Laboratories, Inc., et al., originally filed in the Supreme Court of the State of New York, Schenectady County, have been coordinated by the New York Litigation Coordinating Panel in the Supreme Court of the State of New York, Erie County. Without admitting any liability or wrongdoing, EPI and the plaintiffs have reached an agreement in principle to resolve these cases brought by the County of Erie, the County of Oswego and the County of Schenectady on terms that are not material to the Company’s business, results of operations, financial condition or cash flows.

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There is a previously reported case pending in the Circuit Court of Montgomery County, Alabama against EPI and numerous other pharmaceutical companies: State of Alabama v. Abbott Laboratories, Inc., et al.

There is a previously reported case pending in the Third Judicial District Court of Salt Lake County, Utah against EPI and numerous other pharmaceutical companies: State of Utah v. Actavis US, Inc., et al., Civ. Action No. 070913719.

The Company intends to contest the above unresolved cases vigorously and to explore other options as appropriate in the best interests of the Company. Litigation similar to that described above may also be brought by other plaintiffs in various jurisdictions. However, we cannot predict the timing or outcome of any such litigation, or whether any such litigation will be brought against the Company.

Paragraph IV Certifications on Lidoderm^®

On January 15, 2010, the Company and the holders of the Lidoderm^® NDA and relevant patent, Teikoku Seiyaku Co., Ltd., and Teikoku Pharma USA, Inc. (Teikoku) received a Paragraph IV Certification Notice under 21 U.S.C. 355(j) from Watson Laboratories, Inc. advising of the filing of an Abbreviated New Drug Application (ANDA) for a generic version Lidoderm^® (lidocaine topical patch 5%). The Paragraph IV Certification Notice refers to U.S. Patent No. 5,827,529, which covers the formulation of Lidoderm^®, a topical patch to relieve the pain of post herpetic neuralgia launched in 1999. This patent is listed in the FDA’s Orange Book and expires in October 2015. As a result of this Notice, on February 19, 2010, the Company, Teikoku Seiyaku Co., Ltd. and Teikoku Pharma USA, Inc. filed a lawsuit against Watson Laboratories, Inc, in the United States District Court of the District of Delaware. Because the suit was filed within the 45-day period under the Hatch-Waxman Act for filing a patent infringement action, we believe that it triggered an automatic 30-month stay of approval under the Act. On March 4, 2010, Watson filed an Answer and Counterclaims, claiming U.S. Patent No. 5,827,529 is invalid or not infringed. In October 2010, Teikoku Pharma USA listed U.S. Patent No. 5,741,510 in the FDA’s Orange Book, and this patent expires in March 2014. This patent has not yet been challenged. Endo intends, and has been advised by Teikoku that they too intend, to defend Lidoderm^®’s intellectual property rights and to pursue all available legal and regulatory avenues in defense of Lidoderm^®, including enforcement of the product’s intellectual property rights and approved labeling. However, there can be no assurance that we will be successful. Additionally, we cannot predict or determine the timing or outcome of this litigation but will explore all options as appropriate in the best interests of the Company.

In January 2011, the Company and Teikoku received a Paragraph IV Certification Notice under 21 U.S.C. 355(j) from Mylan Technologies Inc. (Mylan) advising of the filing of an ANDA for a generic version of Lidoderm^® (lidocaine topical patch 5%). The Paragraph IV Certification Notice refers to U.S. Patent Nos. 5,827,529 and 5,741,510, which cover the formulation of Lidoderm^®. These patents are listed in the FDA’s Orange Book and expire in October 2015 and March 2014, respectively. The Company is currently reviewing the details of this notice from Mylan and intends, and has been advised by Teikoku that it too intends, to pursue all available legal and regulatory pathways in defense of Lidoderm^®. However, there can be no assurance that we will be successful. If we are unsuccessful and Mylan is able to obtain FDA approval of its product, it may be able to launch its generic version of Lidoderm^® prior to the applicable patents’ expirations in 2014 and 2015.

In addition to the above litigation, it is possible that another generic manufacturer may also seek to launch a generic version of Lidoderm^® and challenge the applicable patents.

Paragraph IV Certifications on Opana^® ER

On December 14, 2007, the Company received a notice from Impax Laboratories, Inc. (Impax) advising of the FDA’s apparent acceptance for substantive review, as of November 23, 2007, of Impax’s amended ANDA for a generic version of Opana^® ER (oxymorphone hydrochloride extended-release tablets CII). Impax’s letter included notification that it had filed Paragraph IV certifications with respect to Penwest’s U.S. Patent Nos. 7,276,250, 5,958,456 and 5,662,933, which cover the formulation of Opana^® ER. These patents are listed in the FDA’s Orange Book and expire in 2023, 2013 and 2013, respectively.

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On June 16, 2008, the Company received a notice from Impax that it had filed an amendment to its ANDA containing Paragraph IV certifications for the 7.5 mg, 15 mg and 30 mg strengths of oxymorphone hydrochloride extended release tablets. The Company and Penwest timely filed lawsuits against Impax in the United States District Court for the District of Delaware in connection with Impax’s ANDAs.

On June 8, 2010, the Company and Penwest settled all of the Impax litigation relating to Opana^® ER. Both sides dismissed their respective claims and counterclaim with prejudice. Under the terms of the settlement, Impax agreed not to challenge the validity or enforceability of Penwest’s patents relating to Opana^® ER. The Company and Penwest agreed to grant Impax a license permitting the production and sale of generic Opana^® ER for 5, 10, 20, 30 and 40 mg tablets commencing on January 1, 2013 or earlier under certain circumstances. Such license is exclusive for 5, 10, 20, 30 and 40 mg tablets of generic Opana^® ER for which Impax obtains first applicant status as described in 21 U.S.C. Section 355(j)(5)(B)(iv), for the period beginning on January 1, 2013 or earlier under certain circumstances, and such exclusivity ends upon expiration or forfeit of the 180-day period described in 21 U.S.C. Section 355(j)(5)(B)(iv) for such dosage strength. Such license is also subject to any agreements executed by us and/or Penwest and any third party holding an ANDA referencing Opana^® ER as of or prior to June 8, 2010.

In February 2008, the Company received a notice from Actavis South Atlantic LLC (Actavis), advising of the filing by Actavis of an ANDA containing a Paragraph IV certification under 21 U.S.C. Section 355(j) for a generic version of Opana^® ER (oxymorphone hydrochloride extended-release tablets CII).

On or around June 2, 2008, the Company received a notice from Actavis that it had filed an amendment to its ANDA containing Paragraph IV certifications for the 7.5 mg and 15 mg dosage strengths of oxymorphone hydrochloride extended release tablets. On or around July 2, 2008, the Company received a notice from Actavis that it had filed an amendment to its ANDA containing a Paragraph IV certification for the 30 mg dosage strength. The Company and Penwest timely filed lawsuits against Actavis in the United States District Court for the District of New Jersey.

On February 20, 2009, the Company and Penwest settled all of the Actavis litigation relating to Opana^® ER. Under the terms of the settlement, Actavis agreed not to challenge the validity or enforceability of Penwest’s patents relating to Opana^® ER. The Company and Penwest agreed to grant Actavis a license permitting the production and sale of generic Opana^® ER 7.5 and 15 mg tablets on July 15, 2011, or earlier under certain circumstances. The Company and Penwest also granted Actavis a license to produce and market other strengths of Opana^® ER generic commencing on the earlier of July 15, 2011 and the date on which any third party commences commercial sales of a generic form of the drug.

On July 14, 2008, the Company received a notice from Sandoz, Inc. (Sandoz), advising of the filing by Sandoz of an ANDA containing a Paragraph IV certification under 21 U.S.C. Section 355(j) with respect to oxymorphone hydrochloride extended-release oral tablets in 5 mg, 10 mg, 20 mg and 40 mg dosage strengths.

On November 20, 2008, the Company received a notice from Sandoz that it had filed an amendment to its ANDA containing Paragraph IV certifications for the 7.5 mg, 15 mg and 30 mg dosage strengths of oxymorphone hydrochloride extended release tablets. The Company and Penwest timely filed lawsuits against Sandoz in the United States District Court for the District of Delaware.

On June 8, 2010, the Company and Penwest settled all of the Sandoz litigation relating to Opana^® ER. Both sides dismissed their respective claims and counterclaim with prejudice. Under the terms of the settlement, Sandoz agreed not to challenge the validity or enforceability of Penwest’s patents relating to Opana^® ER. The Company and Penwest agreed to grant Sandoz a license permitting the production and sale of all strengths of Opana^® ER commencing on September 15, 2012, or earlier under certain circumstances.

On September 12, 2008, the Company received a notice from Barr Laboratories, Inc. (Barr), advising of the filing by Barr of an ANDA containing a Paragraph IV certification under 21 U.S.C. Section 355(j) with respect to oxymorphone hydrochloride extended-release oral tablets in a 40 mg dosage strength. On September 15, 2008,

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the Company received a notice from Barr that it had filed an ANDA containing a Paragraph IV certification under 21 U.S.C. Section 355(j) with respect to oxymorphone hydrochloride extended-release oral tablets in 5 mg, 10 mg, and 20 mg dosage strengths. On June 2, 2009, the Company received a notice from Barr that it had filed an ANDA containing a Paragraph IV certification under 21 U.S.C. Section 355(j) with respect to oxymorphone hydrochloride extended-release oral tablets in 7.5 mg, 15 mg, and 30 mg dosage strengths. The Company and Penwest timely filed lawsuits against Barr in the United States District Court for the District of Delaware in connection with Barr’s ANDA.

On April 12, 2010, the Company and Penwest settled all of the Barr litigation relating to Opana^® ER. Under the terms of the settlement, Barr agreed not to challenge the validity or enforceability of Penwest’s patents relating to Opana^® ER. The Company and Penwest agreed to grant Barr a license permitting the production and sale of all strengths of Opana^® ER commencing on September 15, 2012, or earlier under certain circumstances.

On January 20, 2010, the Company received a notice from Watson Laboratories, Inc. (Watson) advising of the filing by Watson of an ANDA containing a Paragraph IV certification under 21 U.S.C. section 355(j) with respect to oxymorphone hydrochloride extended-release oral tablets in a 40 mg dosage strength. On March 19, 2010, the Company received a notice from Watson advising of the filing by Watson of an ANDA containing a Paragraph IV certification under 21 U.S.C. section 355(j) with respect to oxymorphone hydrochloride extended-release oral tablets in 5, 7.5,10, 15, 20, and 30 mg dosage strengths. The Company and Penwest timely filed lawsuits against Watson in the U.S. District Court for the District of New Jersey in connection with Watson’s ANDA. The lawsuit alleges infringement of an Orange Book-listed U.S. patent that covers the Opana^® ER formulation.

On October 4, 2010, the Company and Penwest settled all of the Watson litigation relating to Opana^® ER. Under the terms of the settlement, Watson agreed not to challenge the validity or enforceability of Penwest’s patents relating to Opana^® ER. The Company and Penwest agreed to grant Watson a license permitting the production and sale of all strengths of Opana^® ER commencing on September 15, 2012, or earlier under certain circumstances.

On December 29, 2009, the Company received a notice from Roxane Laboratories, Inc. (Roxane) advising of the filing by Roxane of an ANDA containing a Paragraph IV certification under 21 U.S.C. section 355(j) with respect to oxymorphone hydrochloride extended-release oral tablets in a 40 mg dosage strength. The notice refers to Penwest’s U.S. Patent Nos. 5,662,933, 5,958,456 and 7,276,250, which cover the formulation of Opana^® ER. These patents are listed in the FDA’s Orange Book and expire in 2013, 2013, and 2023, respectively. Subsequently, on January 29, 2010, the Company and Penwest filed a lawsuit against Roxane in the U.S. District Court for the District of New Jersey in connection with Roxane’s ANDA. The lawsuit alleges infringement of an Orange Book-listed U.S. patent that covers the Opana^® ER formulation. Because the suit was filed within the 45-day period under the Hatch-Waxman Act for filing a patent infringement action, we believe that it triggered an automatic 30-month stay of approval under the Act.

We intend to pursue all available legal and regulatory avenues in defense of Opana^® ER, including enforcement of our intellectual property rights and approved labeling. However, there can be no assurance that we will be successful. Additionally, we cannot predict or determine the timing or outcome of any of these litigations but will explore all options as appropriate in the best interests of the Company.

Paragraph IV Certifications on Sanctura XR^®

On June 2, 2009, the Company’s subsidiary, Endo Pharmaceuticals Solutions, Inc. (Endo Solutions), received a notice from Watson advising that Watson had filed a certification with the FDA under 21 C.F.R. Section 314.95(c)(1) in conjunction with ANDA 91-289 for approval to commercially manufacture and sell generic versions of Sanctura XR^® trospium chloride extended release capsules. The Paragraph IV Certification Notice alleged that U.S. Patent No. 7,410,978, listed in the Orange Book for Sanctura XR^® is invalid and/or will not be infringed by the commercial manufacture, use, or sale of Watson’s generic product. This patent expires February 1, 2025 and is owned by Supernus Pharmaceuticals, Inc. and licensed to Endo Solutions.

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In response to Watson’s notice letter, on July 13, 2009, Endo Solutions and its partners Supernus Pharmaceuticals, Inc. (Supernus) and Allergan filed a lawsuit against Watson in the United States District Court for the District of Delaware alleging infringement of U.S. Patent No. 7,410,978 by Watson’s ANDA. Because the suit was filed within the 45-day period under the Hatch-Waxman Act for filing a patent infringement action, we believe that it triggered an automatic 30-month stay of approval under the Act. We intend, and have been advised by Supernus and Allergan that they too intend, to contest this case vigorously. However, there can be no assurance that we will be successful. Additionally, we cannot predict or determine the timing or outcome of this litigation but will explore all options as appropriate in the best interests of the Company.

On November 4, 2009, the Company received a Paragraph IV Certification Notice under 21 U.S.C. Section 355(j) from Sandoz advising the Company that Sandoz had filed an ANDA for a generic version of Sanctura XR^® trospium chloride extended release capsules. The Paragraph IV Certification Notice alleges that U.S. Patent No. 7,410,978, listed in the Orange Book for Sanctura XR^® is invalid, unenforceable, and/or will not be infringed by the commercial manufacture, use, or sale of Sandoz’s generic product. This patent expires February 1, 2025 and is owned by Supernus Pharmaceuticals, Inc. and licensed to Endo Solutions.

In response to Sandoz’s Certification Notice, on November 19, 2009, Supernus, Endo Solutions and Allergan filed a lawsuit against Sandoz in the United States District Court for the District of Delaware alleging infringement of U.S. Patent No. 7,410,978 by Sandoz’s ANDA. Because the suit was filed within the 45-day period under the Hatch-Waxman Act for filing a patent infringement action, we believe that it triggered an automatic 30-month stay of approval under the Act. We intend, and have been advised by Supernus and Allergan that they too intend, to contest this case vigorously. However, there can be no assurance that we will be successful. Additionally, we cannot predict or determine the timing or outcome of this litigation but will explore all options as appropriate in the best interests of the Company.

On April 26, 2010, the Company received a Paragraph IV Certification Notice under 21 U.S.C. Section 355(j) from Paddock Laboratories, Inc. (Paddock) advising the Company that Paddock had filed an ANDA for a generic version of Sanctura XR^® trospium chloride extended release capsules. The Paragraph IV Certification Notice alleges that U.S. Patent No. 7,410,978, listed in the Orange Book for Sanctura XR^® is invalid, unenforceable, and/or will not be infringed by the commercial manufacture, use, or sale of Paddock’s generic product. This patent expires February 1, 2025 and is owned by Supernus Pharmaceuticals, Inc. and licensed to Endo Solutions.

In response to Paddock’s Certification Notice, on June 9, 2010, Supernus, Endo Solutions and Allergan filed a lawsuit against Paddock in the United States District Court for the District of Delaware alleging infringement of U.S. Patent No. 7,410,978 by Paddock’s ANDA. Because the suit was filed within the 45-day period under the Hatch-Waxman Act for filing a patent infringement action, we believe that it triggered an automatic 30-month stay of approval under the Act. We intend, and have been advised by Supernus and Allergan that they too intend, to contest this case vigorously. However, there can be no assurance that we will be successful. Additionally, we cannot predict or determine the timing or outcome of this litigation but will explore all options as appropriate in the best interests of the Company.

During the second half of 2010, Watson, Sandoz, and Paddock filed additional Paragraph IV certifications pertaining to U.S. Patent Nos. 7,763,635 (the ‘635 patent), 7,759,359 (the ‘359 patent), 7,781,448 (the ‘448 patent), and 7,781,449 (the ‘449 patent). In each case, Supernus, Allergan, and Endo Solutions filed complaints alleging infringement of the ’448 and ’449 patents by each defendant and infringement by Sandoz of the ‘635 and ‘359 patents as well.

On September 21, 2010, the court consolidated the suits against Sandoz and Paddock into the original suit filed against Watson. Trial in these cases is currently set to commence on May 2, 2011.

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MCP Cases

Qualitest Pharmaceuticals (Qualitest), along with several other pharmaceutical manufacturers, has been named as a defendant in numerous lawsuits in various federal and state courts alleging personal injury resulting from the use of the prescription medicine metoclopramide. Plaintiffs in these suits allege various personal injuries including tardive dyskinesia, other movement disorders, and death. Trials in certain of these actions have been scheduled for 2011. Subject to certain terms and conditions, we will be indemnified by the former owners of Qualitest with respect to metoclopramide litigation arising out of the sales of the product by Qualitest between January 1, 2006 and the date on which the acquisition was completed, subject to an overall liability cap of $100 million for all claims arising out of or related to the acquisition, including the claims described above.

Other Legal Proceedings

In addition to the above proceedings, we are involved in, or have been involved in, arbitrations or various other legal proceedings that arise from the normal course of our business. We cannot predict the timing or outcome of these claims and other proceedings. Currently, we are not involved in any arbitration and/or other legal proceeding that we expect to have a material effect on our business, financial condition, results of operations and cash flows.

Leases

We lease automobiles and office and laboratory facilities under certain noncancelable operating leases that expire from time to time through 2018. These leases are renewable at our option. A summary of minimum future rental payments required under operating leases as of December 31, 2010 are as follows (in thousands):

	Operating Leases
2011		12,247
2012		7,888
2013		7,002
2014		6,665
2015		3,414
Thereafter		5,695
Total minimum lease payments	$	42,911

Expense incurred under operating leases was $17.2 million, $12.2 million, and $8.7 million for the years ended December 31, 2010, 2009, and 2008, respectively.

NOTE 15. SAVINGS AND INVESTMENT PLAN AND DEFERRED COMPENSATION PLANS

On September 1, 1997, we established a defined contribution Savings and Investment Plan covering all employees. Employee contributions are made on a pre-tax basis under section 401(k) of the Internal Revenue Code (the Code). We match up to six percent of the participants’ contributions subject to limitations under section 401(k) of the Code. Participants are fully vested with respect to their own contributions. Participants are fully vested with respect to our contributions after one year of continuous service. Contributions by us amounted to $9.8 million, $8.3 million, and $7.2 million for the years ended December 31, 2010, 2009, and 2008, respectively.

In December 2007, the Board of Directors (the Board) of Endo Pharmaceuticals Holdings Inc. adopted the Endo Pharmaceuticals Holdings Inc. Executive Deferred Compensation Plan (the Deferred Compensation Plan) and the Endo Pharmaceuticals Holdings Inc. 401(k) Restoration Plan (the 401(k) Restoration Plan) both effective as of January 1, 2008. Both plans cover employees earning over the Internal Revenue Code plan compensation

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limit, which would include the chief executive officer, chief financial officer and other named executive officers. The Deferred Compensation Plan allows for deferral of up to 50% of the bonus and up to 100% of restricted stock units granted, with payout to occur as elected either in lump sum or installments. Under the 401(k) Restoration Plan the participant may defer the amount of base salary and bonus that would have been deferrable under the Company’s Savings and Investment Plan (up to 50% of salary and bonus) if not for the qualified plan statutory limits on deferrals and contributions, and also provides for a company match on the first six percent of deferrals to the extent not provided for under the Savings and Investment Plan. Payment occurs after separation from service either in lump sum or installments as elected by the participant.

Also in December 2007, the Board adopted the Endo Pharmaceuticals Holdings Inc. Directors Deferred Compensation Plan, effective January 1, 2008. The purpose of the Plan is to promote the interests of the Company and the stockholders of the Company by providing non-employee Directors the opportunity to defer up to 100% of meeting fees, retainer fees, and restricted stock units, with payout to occur as elected either in lump sum or installments. Payment occurs after separation from service either in lump sum or installments as elected by the participant.

NOTE 16. NET INCOME PER SHARE

The following is a reconciliation of the numerator and denominator of basic and diluted net income per share for the years ended December 31 (in thousands, except per share data):

	2010		2009		2008
Numerator:
Net income attributable to Endo Pharmaceuticals Holdings Inc. common stockholders	$	259,006	$	266,336	$	255,336
Denominator:
For basic per share data—weighted average shares		116,164		117,112		123,248
Dilutive effect of common stock equivalents		1,202		403		472
Dilutive effect of 1.75% Convertible Senior Subordinated Notes		585		—		—
For diluted per share data—weighted average shares		117,951		117,515		123,720
Basic net income per share attributable to Endo Pharmaceuticals Holdings Inc	$	2.23	$	2.27	$	2.07
Diluted net income per share attributable to Endo Pharmaceuticals Holdings Inc	$	2.20	$	2.27	$	2.06

Basic net income per share is computed based on the weighted average number of common shares outstanding during the period. Diluted income per common share is computed based on the weighted average number of common shares outstanding and, if there is net income during the period, the dilutive impact of common stock equivalents outstanding during the period. Common stock equivalents are measured under the treasury stock method.

The 1.75% Convertible Senior Subordinated Notes due April 15, 2015 were only included in the dilutive earnings per share calculation using the treasury stock method during periods in which the average market price of our common stock was above the applicable conversion price of the Convertible Notes, or $29.20 per share. In these periods, under the treasury stock method, we calculated the number of shares issuable under the terms of these notes based on the average market price of the stock during the period, and included that number in the total diluted shares figure for the period.

We have entered into convertible note hedge and warrant agreements that, in combination, have the economic effect of reducing the dilutive impact of the Convertible Notes. However, we separately analyze the impact of the convertible note hedge and warrant agreements on diluted weighted average shares. As a result, the purchases of the convertible note hedges are excluded because their impact would be anti-dilutive. The treasury

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stock method will be applied when the warrants are in-the-money with the proceeds from the exercise of the warrant used to repurchase shares based on the average stock price in the calculation of diluted weighted average shares. Until the warrants are in-the-money, they have no impact to the diluted weighted average share calculation. The total number of shares that could potentially be included if the warrants were exercised is approximately 13 million.

The following reconciliation shows the shares excluded from the calculation of diluted earnings per share as the inclusion of such shares would be anti-dilutive for the years ended December 31 (in thousands):

	2010		2009		2008
Weighted average shares excluded:
1.75% Convertible senior subordinated notes due 2015 and warrants(1)		25,408		25,993		25,993
Employee stock-based awards		2,721		4,681		3,596
		28,129		30,674		29,589

(1) Amounts represent the potential total dilution that could occur if our Convertible Notes and warrants were converted to shares of our common stock in excess of the amounts of related dilution included in our calculations of diluted earnings per share.

NOTE 17. COST OF REVENUES

The components of cost of revenues for the years ended December 31 (in thousands) were as follows:

	2010		2009		2008
Cost of net sales	$	451,096	$	375,058	$	267,235
Cost of device, service and other revenues		53,661		—		—
Total cost of revenues	$	504,757	$	375,058	$	267,235

NOTE 18. DEBT

The components of our total indebtedness for the years ended December 31 (in thousands), were as follows:

	2010			2009
7.00% Senior Notes due 2020		400,000			—
Unamortized initial purchaser’s discount and debt issuance costs		(13,284	)		—
7.00% Senior Notes due 2020, net	$	386,716		$	—
1.75% Convertible Senior Subordinated Notes due 2015		379,500			379,500
Unamortized discount on 1.75% Convertible Senior Subordinated Notes due 2015		(100,578	)		(119,221	)
1.75% Convertible Senior Subordinated Notes due 2015, net	$	278,922		$	260,279
2010 Credit Facility, Term Loan due 2015, net	$	400,000		$	—
16% Non-recourse notes due 2024, net	$	—		$	62,255
Other long-term debt, net	$	5,156		$	—
Total long-term debt, net	$	1,070,794		$	322,534
Less current portion	$	24,993		$	—
Total long-term debt, less current portion, net	$	1,045,801		$	322,534

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Credit Facility

In October 2009, we established a $300 million, three-year senior secured revolving credit facility (the 2009 Credit Facility) with JP Morgan Chase Bank, Barclays Capital and certain other lenders. The 2009 Credit Facility was available for letters of credit, working capital and general corporate purposes. The 2009 Credit Facility also permitted up to $100 million of additional revolving or term loan commitments from one or more of the existing lenders or other lenders.

Financing costs of $5.2 million paid to establish the 2009 Credit Facility were deferred and were being amortized to interest expense over the life of the 2009 Credit Facility. No amounts were drawn under the 2009 Credit Facility in 2009 or 2010.

On November 30, 2010, we terminated the 2009 Credit Facility. Concurrent with the termination of the 2009 Credit Facility, we established a $400 million, five-year senior secured term loan facility (the Term Loan Facility), and a $500 million, five-year senior secured revolving credit facility (the Revolving Credit Facility and, together with the Term Loan Facility, the 2010 Credit Facility) with JP Morgan Chase Bank, Royal Bank of Canada, and certain other lenders. The 2010 Credit Facility was established primarily to finance our acquisition of Qualitest and is available for working capital and general corporate purposes. The agreement governing the 2010 Credit Facility (the 2010 Credit Agreement) also permits up to $200 million of additional revolving or term loan commitments from one or more of the existing lenders or other lenders with the consent of the JP Morgan Chase Bank (the Administrative Agent) without the need for consent from any of the existing lenders under the 2010 Credit Facility.

The obligations of the Company under the 2010 Credit Facility are guaranteed by certain of the Company’s domestic subsidiaries and are secured by substantially all of the assets of the Company and the subsidiary guarantors. The 2010 Credit Facility contains certain usual and customary covenants, including, but not limited to covenants to maintain maximum leverage and minimum interest coverage ratios. Borrowings under the 2010 Credit Facility will bear interest at an amount equal to a rate calculated based on the type of borrowing and the Company’s Leverage Ratio. For term loans and revolving loans (other than Swing Line Loans), the Company may elect to pay interest based on an adjusted LIBOR rate plus between 2.00% and 2.75% or an Alternate Base Rate (as defined in the 2010 Credit Agreement) plus between 1.00% and 1.75%. The Company will also pay a commitment fee of between 35 to 50 basis points, payable quarterly, on the average daily unused amount of the Revolving Credit Facility. As of the date of this filing, the Company has not drawn any amounts under the 2010 Credit Facility.

Financing costs of $16.5 million paid to establish the 2010 Credit Facility were deferred and are being amortized to interest expense over the life of the 2010 Credit Facility. Financing costs associated with the 2009 Credit Facility not yet amortized as of November 30, 2010 totaled approximately $3.2 million on November 30, 2010. In accordance with the applicable accounting guidance for debt modifications, approximately $0.3 million of this amount was written off in proportion to decreased lending capacity provided by certain individual loan syndicates with a corresponding charge to earnings. The remaining $2.9 million was deferred and will be amortized over the life of the 2010 Credit Facility.

We recognized $5.4 million of interest expense related to our 2010 Credit Facility and 2009 Credit Facility for the year ended December 31, 2010.

7.00% Senior Notes Due 2020

In November 2010, we issued $400 million in aggregate principal amount of 7.00% Senior Notes due 2020 (the Senior Notes) at an issue price of 99.105%. The Senior Notes were issued in a private offering for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The Senior Notes are senior unsecured obligations of the Company and are guaranteed on a senior unsecured basis by certain

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of the Company’s domestic subsidiaries. Interest on the Senior Notes is payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2011. The Senior Notes will mature on December 15, 2020, subject to earlier repurchase or redemption in accordance with the terms of the Indenture incorporated by reference herein. We received proceeds of approximately $386.6 million from the issuance, net of the initial purchaser’s discount and certain other costs of the offering.

On or after December 15, 2015, the Company may on any one or more occasions redeem all or a part of the Senior Notes, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest and additional interest, if any, if redeemed during the twelve-month period beginning on December 15 of the years indicated below:

Payment Dates (between indicated dates)	Redemption Percentage
From December 15, 2015 to and including December 14, 2016		103.500	%
From December 15, 2016 to and including December 14, 2017		102.333	%
From December 15, 2017 to and including December 14, 2018		101.167	%
From December 15, 2018 and thereafter		100.000	%

In addition, at any time prior to December 15, 2013, the Company may redeem up to 35% of the aggregate principal amount of the Senior Notes at a specified redemption price set forth in the Indenture, plus accrued and unpaid interest and additional interest, if any. If the Company experiences certain change of control events, it must offer to repurchase the Senior Notes at 101% of their principal amount, plus accrued and unpaid interest and additional interest, if any.

The Indenture contains covenants that, among other things, restrict the Company’s ability and the ability of its restricted subsidiaries to incur certain additional indebtedness and issue preferred stock, make restricted payments, sell certain assets, agree to any restrictions on the ability of restricted subsidiaries to make payments to the Company, create certain liens, merge, consolidate, or sell substantially all of the Company’s assets, or enter into certain transactions with affiliates. These covenants are subject to a number of important exceptions and qualifications, including the fall away or revision of certain of these covenants upon the Senior Notes receiving investment grade credit ratings.

We recognized $3.1 million of interest expense related to our Senior Notes for the year ended December 31, 2010.

1.75 % Convertible Senior Subordinated Notes Due 2015

In April 2008, we issued $379.5 million in aggregate principal amount of 1.75% Convertible Senior Subordinated Notes due April 15, 2015 (the Convertible Notes) in a private offering for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.

We received proceeds of approximately $370.7 million from the issuance, net of the initial purchaser’s discount and certain other costs of the offering. Interest is payable semi-annually in arrears on each April 15 and October 15 with the first interest payment being made on October 15, 2008. The Convertible Notes will mature on April 15, 2015, unless earlier converted or repurchased by us.

Holders of the Convertible Notes may convert their notes based on a conversion rate of 34.2466 shares of our common stock per $1,000 principal amount of notes (the equivalent of $29.20 per share), subject to adjustment upon certain events, only under the following circumstances as described in the Indenture for the Convertible Notes (the Indenture): (1) during specified periods, if the price of our common stock reaches specified thresholds; (2) if the trading price of the Convertible Notes is below a specified threshold; (3) at any time after October 15, 2014; or (4) upon the occurrence of certain corporate transactions. We will be permitted to

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deliver cash, shares of Endo common stock or a combination of cash and shares, at our election, to satisfy any future conversions of the Convertible Notes. It is our current intention to settle the principal amount of any conversion consideration in cash.

Concurrently with the issuance of the Convertible Notes, we entered into a privately-negotiated convertible note hedge transaction with affiliates of the initial purchasers. Pursuant to the hedge transaction we purchased common stock call options intended to reduce the potential dilution to our common stock upon conversion of the Convertible Notes by effectively increasing the initial conversion price of the Notes to $40.00 per share, representing a 61.1% conversion premium over the closing price of our common stock on April 9, 2008 of $24.85 per share. The call options allow us to purchase up to approximately 13.0 million shares of our common stock at an initial strike price of $29.20 per share. The call options expire on April 15, 2015 and must be net-share settled. The cost of the call option was approximately $107.6 million. In addition, we sold warrants to affiliates of certain of the initial purchasers whereby they have the option to purchase up to approximately 13.0 million shares of our common stock at an initial strike price of $40.00 per share. The warrants expire on various dates from July 14, 2015 through October 6, 2015 and must be net-share settled. We received approximately $50.4 million in cash proceeds from the sale of these warrants. The warrant transaction could have a dilutive effect on our earnings per share to the extent that the price of our common stock exceeds the strike price of the warrants at exercise.

As part of our broader share repurchase program described in Note 13, we also entered into a privately-negotiated accelerated share repurchase agreement with the same counterparty. We used approximately $314 million of the net proceeds from the Convertible Notes, together with approximately $11 million of cash on hand, to repurchase a variable number of shares of our common stock pursuant to the accelerated share repurchase agreement entered into as part of our broader share repurchase program. Pursuant to the accelerated share repurchase agreement, the counterparty delivered 11.9 million shares of our common stock to the Company on the day that the Convertible Note offering closed, April 15, 2008. On August 14, 2008, Endo received approximately 1.4 million additional shares of our common stock based on the volume-weighted average price of our common stock during a specified averaging period set forth by the accelerated share repurchase agreement.

The Company has reserved previously authorized shares of common stock for issuance pursuant to the aforementioned Convertible Notes transaction, the convertible note hedge transaction, and the warrant.

We accounted for the call options, warrants, and accelerated share repurchase agreement in accordance with the guidance regarding the accounting for convertible debt instruments that may be settled in cash upon conversion. The call options, warrants, and accelerated share repurchase agreement meet the requirements to be accounted for as equity instruments. The cost of the call options and the proceeds related to the sale of the warrants are included in additional paid-in capital in our Consolidated Balance Sheets as of December 31, 2010 and 2009. The common stock acquired through the accelerated share repurchase agreement has been included in treasury stock in our Consolidated Balance Sheets as of December 31, 2010 and 2009.

As discussed in Note 2, on January 1, 2009 the Company retrospectively adopted the provisions of the authoritative guidance relating to the accounting for convertible debt instruments. The guidance requires that issuers of convertible debt instruments that may be settled in cash or other assets on conversion to separately account for the liability and equity components of the instrument in a manner that will reflect the entity’s nonconvertible debt borrowing rate on the instrument’s issuance date when interest cost is recognized in subsequent periods.

As a result of our adoption, we separated the debt portion of our Convertible Notes from the equity portion at their fair value retrospective to the date of issuance and are amortizing the resulting discount into interest expense over the life of the Convertible Notes.

In order to determine the fair value of the debt portion and equity portion of our Convertible Notes, we first attempted to use a market approach by identifying prices and other relevant information generated by market

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transactions at or near the issuance date of our Convertible Notes, that involved comparable companies issuing nonconvertible debt with similar embedded features (other than the conversion feature). We were unable to identify any such transactions. As a result, the Company determined that an expected present value technique, or income approach that maximizes the use of observable market inputs is the preferred approach to measure the fair value of the debt and equity components of our Convertible Notes. Specifically, the Company used an income approach known as the binomial lattice model.

To calculate the fair value of the debt and equity components of our Convertible Notes, the Company constructed a binomial lattice to model future changes in the equity value of the Company, and a convertible bond lattice for the Convertible Notes, which incorporated certain inputs and assumptions, including scheduled coupon and principal payments, the conversion feature inherent in the Convertible Notes, the put feature inherent in the Convertible Notes, and a stock price volatility of 36% that was based on historic volatility of the Company’s common stock and other factors.

An implied credit spread of 6.12% was calculated based on the results of the convertible bond lattice described above. The fair value of the debt component was then calculated by discounting the coupon and principal payments of the Convertible Notes with a risk free interest rate of 2.97% and the implied credit spread of 6.12%, which collectively represent the Company’s estimated nonconvertible debt borrowing rate of 9.09%. As a result of this analysis, the fair value of the debt component of our Convertible Notes was determined to be $237.3 million on the date of issuance.

As a result of the retrospective adoption, we recorded an adjustment to our Consolidated Balance Sheet as of April 15, 2008 to separate the debt and equity components of our Convertible Notes. This adjustment resulted in a reclassification out of Convertible Senior Subordinated Notes Due 2015 into Additional Paid-In Capital of $142.2 million, which represents the fair value of the equity component of our Convertible Notes on the date of issuance.

In addition, we were required to reclassify the portion of the initial purchaser’s discount and certain other costs of the offering that were attributable to the equity component of our Convertible Notes. The initial purchaser’s discount and certain other costs of the offering were originally recorded as a contra-liability account applied to the face amount of the Convertible Notes and were being amortized to interest expense utilizing the effective interest method. Upon adoption, we recorded an adjustment out of the contra- liability account and into Additional Paid-In Capital of $3.3 million, which represents the portion of the original purchaser’s discount and certain other costs of the offering that are relate to the equity component of our Convertible Notes.

The adoption resulted in the recognition of an additional $10.4 million of interest expense and a reduction to our income tax expense of $4.0 million for the year ended December 31, 2008. Accordingly, we recorded a $6.4 million adjustment to beginning retained earnings in our December 31, 2009 Consolidated Balance Sheet.

The carrying values of the debt and equity components of our Convertible Notes at December 31, 2010 and December 31, 2009 are as follows (in thousands):

	December 31, 2010			December 31, 2009
Principal amount of Convertible Notes	$	379,500		$	379,500
Unamortized discount related to the debt component(1)		(100,578	)		(119,221	)
Net carrying amount of the debt component	$	278,922		$	260,279
Carrying amount of the equity component	$	142,199		$	142,199

(1) Represents the unamortized portion of the original purchaser’s discount and certain other costs of the offering as well as the unamortized portion of the discount created from the separation of the debt portion of our Convertible Notes from the equity portion. This discount will be amortized to interest expense over the term of the Convertible Notes.

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We recognized $28.0 million of interest expense related to our Convertible Notes for the year ended December 31, 2010, $9.3 million of which related to the contractual interest payments and $18.6 million of which related to the amortization of the debt discount and certain other costs of the offering. During the year ended December 31, 2009, we recognized $23.8 million of interest expense related to our Convertible Notes, $6.6 million of which related to the contractual interest payments and $17.2 million of which related to the amortization of the debt discount and certain other costs of the offering.

Convertible Notes Due July 2009

As a result of our acquisition of Indevus, the Company assumed Indevus’ 6.25% Convertible Senior Notes due July 2009 (the Indevus Notes). Pursuant to the Indenture governing the Indevus Notes, within 30 days of the effective date of the Merger, holders of the Indevus Notes had the right to tender their notes for the principal amount of the Indevus Notes plus any accrued and unpaid interest. During this 30-day period, approximately $3.6 million in aggregate principal amount of Indevus Notes were tendered and the Company paid this amount in April 2009.

The Notes matured on July 15, 2009. Accordingly, the Company paid the remaining $68.3 million in outstanding principal to satisfy the Notes in their entirety.

Non-recourse Notes

On August 26, 2008, Indevus closed a private placement to institutional investors of $105.0 million in aggregate principal amount of 16% non-convertible, non-recourse, secured promissory notes due 2024 (Non-recourse notes). The Non-recourse notes were issued by Ledgemont Royalty Sub LLC (Royalty Sub), which was a wholly-owned subsidiary of Indevus at the time of the Non-recourse note issuance and subsequently became a wholly-owned subsidiary of the Company upon our acquisition of Indevus. As of the Indevus Acquisition Date, the Company recorded these notes at their fair value of approximately $115.2 million and began amortizing these notes to their face value of $105.0 million at maturity in 2024.

In August 2009, the Company commenced a cash tender offer for any and all outstanding Non-recourse notes. The purpose of the tender offer was to acquire any and all Notes to reduce our consolidated interest expense. The tender offer included an early tender deadline, whereby holders of the Non-recourse notes could early tender and receive the total early consideration of $1,000 per $1,000 principal amount of the Non-recourse notes. Holders who tendered their Non-recourse notes after such time and at or prior to the expiration of the tender offer period were eligible to receive the tender offer consideration of $950 per $1,000 principal amount of Non-recourse notes, which was the total early consideration less the early tender payment. The tender offer expired on September 24, 2009, at 5:00 p.m., New York City time (the Expiration Time). As of the Expiration Time, $48 million in Non-recourse notes had been validly tendered and not withdrawn. The Company accepted for payment and purchased Non-recourse notes at a purchase price of $1,000 per $1,000 principal amount, for a total amount of approximately $48 million (excluding accrued and unpaid interest up to, but not including, the payment date for the Non-recourse notes, fees and other expenses in connection with the tender offer). The aggregate principal amount of Non-recourse notes purchased represents approximately 46% of the $105 million aggregate principal amount of Non-recourse notes that were outstanding prior to the Expiration Time. Accordingly, the Company recorded a $4.0 million gain on the extinguishment of debt, net of transaction costs. The gain was calculated as the difference between the aggregate amount paid to purchase the Non-recourse notes and their carrying amount.

During the third quarter of 2010, Endo notified the holders of its intent to exercise its option to redeem the remaining $57 million of principal at 108% of the principal amount for approximately $62 million (amount excludes accrued and unpaid interest) on November 5, 2010. The notes were redeemed in November 2010.

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Other Debt

In connection with our acquisition of HealthTronics, we assumed $40 million in outstanding debt drawn under the HealthTronics Senior Credit Facility. The Company repaid those amounts, including unpaid interest, on July 2, 2010 and the HealthTronics Senior Credit Facility was terminated as a result of the acquisition.

Upon our acquisition of HealthTronics, we also assumed $4.6 million in notes related to equipment purchased by HealthTronics’ limited partnerships, which indebtedness we believe will be repaid from the cash flows of the partnerships. Since our acquisition in July of 2010, our partnerships repaid certain of these notes and financed additional purchases of equipment by obtaining additional similar notes. The carrying amount of our partnership’s notes associated with the purchase of equipment is $5.2 million at December 31, 2010. These notes bear interest at either a fixed rate of five to eight percent or LIBOR or prime plus a certain premium and are due over the next four years.

Maturities

Maturities on long-term debt for each of the next five years as of December 31, 2010 are as follows (in thousands):

	December 31, 2010
2011	$	24,993
2012		34,246
2013		40,344
2014		45,154
2015		260,033

NOTE 19. SUBSEQUENT EVENTS

Long-Term Incentive Compensation

In early 2011, long-term incentive compensation in the form of approximately 1.4 million stock options, 0.7 million restricted stock units and 0.2 million performance shares were granted to employees. Stock options will generally vest over four years and expire ten years from the date of the grant. Restricted stock units will vest over four years and the performance shares will vest at the end of the cumulative 3-year performance period. The exercise price of the options granted was equal to the closing price on the dates of grant. The grant date fair value of the stock options, restricted stock units, and performance shares granted was approximately $45.1 million.

NOTE 20. QUARTERLY FINANCIAL DATA (UNAUDITED)

	Quarter Ended
	March 31,		June 30,		September 30,		December 31,
	(in thousands, except per share data)
2010(1)
Total revenues	$	364,412	$	396,524	$	444,103	$	511,190
Gross profit	$	270,339	$	289,308	$	310,183	$	341,642
Operating income	$	106,307	$	93,605	$	115,932	$	149,522
Net income attributable to Endo Pharmaceuticals Holdings Inc.	$	60,355	$	51,460	$	54,206	$	92,985
Net income per share attributable to Endo Pharmaceuticals Holdings Inc. (basic)	$	0.51	$	0.44	$	0.47	$	0.80
Net income per share attributable to Endo Pharmaceuticals Holdings Inc. (diluted)	$	0.51	$	0.44	$	0.46	$	0.77
Weighted average shares (basic)		117,347		116,060		115,469		115,781
Weighted average shares (diluted)		118,031		116,660		116,597		120,516

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	Quarter Ended
	March 31,		June 30,		September 30,		December 31,
	(in thousands, except per share data)
2009(2)
Total revenues	$	335,300	$	373,108	$	361,027	$	391,406
Gross profit	$	252,291	$	278,039	$	263,720	$	291,733
Operating income	$	77,466	$	64,916	$	84,314	$	163,328
Net income attributable to Endo Pharmaceuticals Holdings Inc.	$	39,037	$	30,029	$	49,422	$	147,848
Net income per share attributable to Endo Pharmaceuticals Holdings Inc. (basic)	$	0.33	$	0.26	$	0.42	$	1.26
Net income per share attributable to Endo Pharmaceuticals Holdings Inc. (diluted)	$	0.33	$	0.26	$	0.42	$	1.25
Weighted average shares (basic)		116,822		117,158		117,207		117,261
Weighted average shares (diluted)		117,209		117,350		117,643		117,859

Quarterly and year to date computations of per share amounts are made independently; therefore, the sum of the per share amounts for the quarters may not equal the per share amounts for the year.

(1) Operating income for the year ended December 31, 2010 was impacted by milestone payments to collaborative partners of $3.0 million, $15.9 million, $0.3 million and $4.7 million in the first, second, third and fourth quarters, respectively. Operating income for the year ended December 31, 2010 was also impacted by (1) the acquisition-related costs (income) of $1.5 million, $4.8 million, $25.0 million and $(12.3) million during the first, second, third and fourth quarters, respectively (2) impairment charges of $13.0 million relating to pagoclone during the second quarter and impairment charges of $22.0 million relating to octreotide during the fourth quarter (3) inventory step-up of $1.3 million and $5.0 million during the third and fourth quarters, respectively (4) amortization expense relating to intangible assets of $17.3 million, $17.3 million, $19.6 million and $30.4 million during the first, second, third and fourth quarters, respectively.

(2) Operating income for the year ended December 31, 2009 was impacted by milestone payments to collaborative partners of $9.4 million, $21.0 million, $30.7 million and $16.0 million in the first, second, third and fourth quarters, respectively. Operating income for the year ended December 31, 2009 was also impacted by (1) the Indevus acquisition-related costs (income) of $26.4 million, $35.0 million, ($20.2) million and ($134.3) million during the first, second, third and fourth quarters, respectively (2) impairment charges of $69.0 million relating to Pro2000 and Aveed^TM during the fourth quarter (3) inventory step-up of $1.6 million, $3.6 million, $5.9 million and $0.2 million during the first, second, third and fourth quarters, respectively and (4) amortization expense relating to developed technology assets of $11.4 million, $15.6 million, $16.7 million and $19.2 million during the first, second, third and fourth quarters, respectively.

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Exhibit Index

Exhibit No.	Title
3.1	Amended and Restated Certificate of Incorporation of Endo Pharmaceuticals Holdings Inc. (Endo) (incorporated herein by reference to Exhibit 10.32 of the Form 10-Q for the Quarter ended June 30, 2008 filed with the Commission on August 1, 2008)
3.2	Amended and Restated By-laws of Endo (incorporated herein by reference to Exhibit 3.2 of the Form 10-K for the Year ended December 31, 2009 filed with the Commission on March 1, 2010)
10.4	Agreement dated April 29, 2008 between Endo and D. E. Shaw Valence Portfolios, L.L.C. (on behalf of itself and its affiliates that are members of the 13D Group with respect to the Endo common stock) (incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K/A dated May 1, 2008)
10.6	Indenture by and between Endo Pharmaceuticals Holdings Inc. and The Bank of New York dated April 15, 2008 (incorporated herein by reference to Exhibit 4.1 of the Current Report on Form 8-K filed with the Commission on April 15, 2008)
10.7	Convertible Bond Hedge Transaction Confirmation entered into by and between Endo and Deutsche Bank AG, London Branch, dated April 9, 2008 (incorporated herein by reference to Exhibit 10.7 of the Form 10-Q for the Quarter ended March 31, 2008 filed with the Commission on May 2, 2008)
10.8	Issuer Warrant Transaction Confirmation entered into by and between Endo and Deutsche Bank AG, London Branch, dated April 9, 2008 (incorporated herein by reference to Exhibit 10.8 of the Form 10-Q for the Quarter ended March 31, 2008 filed with the Commission on May 2, 2008)
10.9	Issuer Share Repurchase Transaction Confirmation entered into by and between Endo and Deutsche Bank AG, London Branch, dated April 9, 2008 (incorporated herein by reference to Exhibit 10.9 of the Form 10-Q for the Quarter ended March 31, 2008 filed with the Commission on May 2, 2008)
10.10*	Sole and Exclusive License Agreement, dated as of November 23, 1998, by and between Endo Pharmaceuticals Inc. (Endo Pharmaceuticals) and Hind HealthCare, Inc. (incorporated herein by reference to Exhibit 10.10 of the Registration Statement filed with the Commission on June 9, 2000)
10.11	Endo Pharmaceuticals Holdings Inc. Executive Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K dated December 19, 2007)
10.12	Endo Pharmaceuticals Holdings Inc. 401(k) Restoration Plan (incorporated herein by reference to Exhibit 10.2 of the Current Report on Form 8-K dated December 19, 2007)
10.13	Endo Pharmaceuticals Holdings Inc. Directors Deferred Compensation Plan
10.14*	Supply and Manufacturing Agreement, dated as of November 23, 1998, by and between Endo Pharmaceuticals and Teikoku Seiyaku Co., Ltd (incorporated herein by reference to Exhibit 10.14 of the Registration Statement filed with the Commission on June 9, 2000)
10.14.1	First Amendment, dated April 24, 2007, to the Supply and Manufacturing Agreement, dated as of November 23, 1998, by and between Endo Pharmaceuticals and Teikoku Seiyaku Co., Ltd. / Teikoku Pharma USA, Inc. (incorporated herein by reference to Exhibit 10.14.1 of the Current Report on Form 8-K dated April 30, 2007)
10.14.2*	Second Amendment, effective December 16, 2009, to the Supply and Manufacturing Agreement, dated as of November 23, 1998 and as amended as of April 24, 2007, by and between Endo Pharmaceuticals Inc. and Teikoku Seiyaku Co., Ltd. / Teikoku Pharma USA, Inc. (incorporated herein by reference to Exhibit 10.14.2 of the Current Report on Form 8-K dated January 11, 2010)

Exhibit No.	Title
10.14.3*	Third Amendment, effective November 1, 2010, to the Supply and Manufacturing Agreement, dated as of November 23, 1998 and as amended as of December 16, 2009, by and between Endo Pharmaceuticals Inc. and Teikoku Seiyaku Co., Ltd. / Teikoku Pharma USA, Inc. (incorporated herein by reference to Exhibit 10.14.3 of the Form 10-Q for the Quarter ended September 30, 2010 filed with the Commission on November 2, 2010)
10.16	Supply Agreement for Bulk Narcotics Raw Materials, dated as of July 1, 1998, by and between Endo Pharmaceuticals and Mallinckrodt (incorporated herein by reference to Exhibit 10.16 of the Registration Statement filed with the Commission on June 9, 2000)
10.16.1	First Amendment, effective July 1, 2000, to the Supply Agreement for Bulk Narcotics Raw Materials, dated as of July 1, 1998, by and between Endo Pharmaceuticals and Mallinckrodt (incorporated herein by reference to Exhibit 10.16.1 of the Current Report on Form 8-K dated April 14, 2006)
10.16.2	Second Amendment, dated April 10, 2006, to the Supply Agreement for Bulk Narcotics Raw Materials, dated as of July 1, 1998, by and between Endo Pharmaceuticals and Mallinckrodt (incorporated herein by reference to Exhibit 10.16.2 of the Current Report on Form 8-K dated April 14, 2006)
10.17*	Supply Agreement, dated as of January 1, 2001, by and between Vintage Pharmaceuticals, Inc. and Noramco, a division of McNeilab, Inc. (n/k/a Noramco, Inc.)
10.17.1*	First Amendment, effective January 16, 2007, to the Supply Agreement by and between Vintage Pharmaceuticals, LLC and Noramco, Inc.
10.17.2*	Second Amendment, effective May 7, 2008, to the Supply Agreement by and between Vintage Pharmaceuticals, Inc. and Noramco, Inc.
10.17.3*	Third Amendment, effective December 22, 2008, to the Supply Agreement by and between Vintage Pharmaceuticals, LLC and Noramco, Inc.
10.19*	Master Services Agreement, dated as of May 18, 2010, by and between Endo Pharmaceuticals Inc. and UPS Supply Chain Solutions, Inc. (incorporated herein by reference to Exhibit 10.19 of the Current Report on Form 8-K dated May 20, 2010)
10.21	Endo Pharmaceuticals Holdings Inc. 2000 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.21 of the Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2000 filed with the Commission on November 13, 2000)
10.22	Endo Pharmaceuticals Holdings Inc. 2010 Stock Incentive Plan (incorporated herein by reference to Exhibit A of the 2010 Definitive Proxy Statement filed with the Commission on April 29, 2010)
10.27	Executive Employment Agreement between Endo and Ivan Gergel, M.D., dated as of April 29, 2008 (incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K dated March 25, 2009)
10.28	Amended and Restated Employment Agreement, dated as of December 19, 2007, by and between Endo and Nancy J. Wysenski (incorporated herein by reference to Exhibit 10.29 of the Form 10-K for the year ended December 31, 2007 filed with the Commission on February 26, 2008)
10.28.1	Separation Agreement, dated as of August 25, 2009, by and between Endo and Nancy J. Wysenski (incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K dated August 31, 2009)
10.29	Auction-Rate Securities Rights Agreement, dated November 10, 2008, by and between Endo Pharmaceuticals and UBS AG (incorporated herein by reference to Exhibit 10.29 to the Form 10-K for the year ended December 31, 2008 filed with the Commission on March 2, 2009)

Exhibit No.	Title
10.30	Employment Agreement, dated as of April 1, 2008, by and between Endo and David P. Holveck (incorporated herein by reference to Exhibit 10.30 of the Current Report on Form 8-K dated March 12, 2008)
10.31*	License and Supply Agreement by and by and among Novartis, AG, Novartis Consumer Health, Inc. and Endo Pharmaceuticals dated as of March 4, 2008 (incorporated herein by reference to Exhibit 10.31 of the Form 10-Q for the Quarter ended March 31, 2008 filed with the Commission on May 2, 2008)
10.31.1*	Amendment No. 1 to the License and Supply Agreement by and by and among Novartis, AG, Novartis Consumer Health, Inc. and Endo Pharmaceuticals Inc. dated as of March 28, 2008 (incorporated herein by reference to Exhibit 10.31.1 of the Form 10-Q for the Quarter ended March 31, 2008 filed with the Commission on May 2, 2008)
10.32*	Sales and Promotional Services Agreement, dated November 24, 2010 and effective as of October 1, 2010, by and between Ventiv Commercial Services, LLC and Endo Pharmaceuticals, Inc.
10.34	Lease Agreement, dated as of May 5, 2000, by and between Endo Pharmaceuticals and Painters’ Crossing One Associates, L.P. (incorporated herein by reference to Exhibit 10.34 of the Registration Statement filed with the Commission on June 9, 2000)
10.34.1	Amendment to Lease Agreement, dated as of November 6, 2006, by and between Endo Pharmaceuticals and Painters Crossing One Associates, L.P. (incorporated herein by reference to Exhibit 10.34.1 of the Form 10-Q for the quarter ended September 30, 2006 filed with the Commission on November 9, 2006)
10.35	Amended and Restated Employment Agreement, dated as of December 19, 2007, by and between Endo and Caroline B. Manogue (incorporated herein by reference to Exhibit 10.29 of the Form 10-K for the year ended December 31, 2007 filed with the Commission on February 26, 2008)
10.36	Employment Agreement between Endo Pharmaceuticals Holdings Inc. and Julie McHugh (incorporated herein by reference to Exhibit 10.2 of the Current Report on Form 8-K, dated March 12, 2010)
10.37	Endo Pharmaceuticals Holdings Inc. 2004 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.37 of the Form 10-Q for the Quarter ended June 30, 2004 filed with the Commission on August 9, 2004)
10.38	Endo Pharmaceuticals Holdings Inc. Amended and Restated 2007 Stock Incentive Plan (incorporated herein by reference to Exhibit B of the Definitive Proxy Statement on Schedule 14A filed with the Commission on April 29, 2009)
10.39*	Master Development and Toll Manufacturing Agreement, dated as of May 3, 2001, by and between Novartis Consumer Health, Inc. and Endo Pharmaceuticals (incorporated herein by reference to Exhibit 10.39 of the Form 10-Q for the Quarter Ended June 30, 2001 filed with the Commission on August 14, 2001)
10.39.1	First Amendment, effective February 1, 2003, to the Master Development and Toll Manufacturing Agreement between Endo Pharmaceuticals and Novartis Consumer Health, Inc. (incorporated herein by reference to Exhibit 10.39.1 of the Form 10-Q for the Quarter Ended June 30, 2005 filed with the Commission on August 8, 2005)
10.39.2	Second Amendment, effective as of December 1, 2004, to the Master Development and Toll Manufacturing Agreement between Endo Pharmaceuticals and Novartis Consumer Health, Inc. (incorporated herein by reference to Exhibit 10.39.2 of the Form 10-Q for the Quarter Ended June 30, 2005 filed with the Commission on August 8, 2005)

Exhibit No.	Title
10.39.3	Letter of termination of Master Development and Toll Manufacturing Agreement dated February 23, 2011 between Endo Pharmaceuticals Inc. and Novartis Consumer Health, Inc.
10.40	Lease Agreement between Painters’ Crossing Three Associates, L.P. and Endo Pharmaceuticals dated January 19, 2007 (incorporated herein by reference to Exhibit 10.40 of the Annual Report on Form 10-K for the Year Ended December 31, 2006 filed with the Commission on March 1, 2007)
10.40.1	First Amendment to Lease Agreement, dated as of March 3, 2008 by and between Partners’ Crossing Three Associates, L.P. and Endo Pharmaceuticals (incorporated herein by reference to Exhibit 10.40.1 of the Form 10-Q for the Quarter ended March 31, 2008 filed with the Commission on May 2, 2008)
10.41	Policy of Endo Pharmaceuticals Holdings Inc. Relating to Insider Trading in Company Securities and Confidentiality of Information (incorporated herein by reference to Exhibit 10.41 of the Form 10-Q for the Quarter ended March 31, 2005 filed with the Commission on May 10, 2005)
10.42	Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K, dated May 8, 2009)
10.43	Employment Agreement between Endo and Alan G. Levin (incorporated herein by reference to Exhibit 10.2 of the Current Report on Form 8-K, dated May 8, 2009)
10.45	Lease Agreement, dated as of November 13, 2003, by and between Endo Pharmaceuticals and Painters’ Crossing Two Associates, L.P. (incorporated herein by reference to Exhibit 10.45 of the Annual Report on Form 10-K for the Year Ended December 31, 2003 filed with the Commission on March 15, 2004)
10.45.1	Amendment to Lease Agreement, dated as of February 16, 2005, by and between Endo Pharmaceuticals and Painters’ Crossing Two Associates, L.P. (incorporated herein by reference to Exhibit 10.45.1 of the Current Report on Form 8-K dated February 18, 2005)
10.45.2	Amendment to Lease Agreement, dated as of November 6, 2006, by and between Endo Pharmaceuticals and Painters Crossing Two Associates, L.P. (incorporated herein by reference to Exhibit 10.34.1 of the Form 10-Q for the quarter ended September 30, 2006 filed with the Commission on November 9, 2006)
10.48*	License and Co-Promotion Rights Agreement, dated as of July 14, 2004, by and between Endo Pharmaceuticals and Vernalis Development Limited (incorporated herein by reference to Exhibit 10.48 of the Current Report on Form 8-K dated July 19, 2004)
10.48.2*	Second Amendment, dated as of December 12, 2005, to the License Agreement by and between Endo Pharmaceuticals and Vernalis Development Limited (incorporated by reference to Exhibit 10.48.2 of the Current Report on Form 8-K dated December 29, 2005)
10.48.4	Third Amendment, dated as of July 23, 2007, to the License Agreement by and between Endo Pharmaceuticals and Vernalis Development Limited (incorporated by reference to Exhibit 10.48.4 of the Current Report on Form 8-K dated July 27, 2007)
10.48.5*	Fourth Amendment, dated as of February 19, 2008, to the License Agreement by and between Endo Pharmaceuticals and Vernalis Development Limited (incorporated herein by reference to Exhibit 10.48.5 of the Form 10-K for the year ended December 31, 2007 filed with the Commission on February 26, 2008)
10.50	Form of Stock Option Grant Agreement under the 2007 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.50 of the Form 10-K for the year ended December 31, 2008 filed with the Commission on March 2, 2009)
10.51	Form of Restricted Stock Unit Grant Agreement under the 2007 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.51 of the Form 10-K for the year ended December 31, 2008 filed with the Commission on March 2, 2009)

Exhibit No.	Title
10.52	Agreement and Plan of Merger dated January 5, 2009, by and between Endo, BTB Purchaser, and Indevus Pharmaceuticals, Inc. (incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K dated January 5, 2009)
10.52.1	Amendment, dated January 7, 2009 to the Agreement and Plan of Merger, by and between Endo, BTB Purchaser, and Indevus Pharmaceuticals, Inc. (incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K dated January 7, 2009)
10.52.2	Amendment No. 2, dated February 4, 2009, to the Agreement and Plan of Merger, by and among Endo, BTB Purchaser Inc. and Indevus Pharmaceuticals, Inc. (incorporated herein by reference to Exhibit 2.1 of the Current Report on Form 8-K dated February 6, 2009)
10.54	Nebido® (n/k/a AveedTM ) Contingent Cash Consideration Agreement, dated February 23, 2009, by and between Endo and American Stock Transfer and Trust Company (incorporated herein by reference to Exhibit 10.54 of the Form 10-K for the year ended December 31, 2008 filed with the Commission on March 2, 2009)
10.55	Octreotide Contingent Cash Consideration Agreement, dated February 23, 2009, by and between Endo and American Stock Transfer and Trust Company (incorporated herein by reference to Exhibit 10.55 of the Form 10-K for the year ended December 31, 2008 filed with the Commission on March 2, 2009)
10.57	Amended and Restated License, Commercialization and Supply Agreement executed September 18, 2007 between Indevus and Esprit Pharma, Inc. (n/k/a Allergan USA, Inc.) (incorporated herein by reference to Exhibit 10.1 to the Indevus Current Report on Form 8-K dated September 21, 2007)
10.58	First Amendment to Amended and Restated License, Commercialization and Supply Agreement between Indevus Pharmaceuticals, Inc. and Allergan USA, Inc. dated as of January 9, 2009 (incorporated herein by reference to Exhibit 10.1 to the Indevus Current Report on Form 8-K, dated January 15, 2009)
10.59	Form of Restricted Stock Unit Grant Agreement under the 2010 Stock Incentive Plan
10.60	Form of Stock Option Grant Agreement under the 2010 Stock Incentive Plan
10.61	Agreement and Plan of merger, dated as of December 11, 2006, by and among Indevus, Hayden Merger Sub, Inc. and Valera Pharmaceuticals, Inc. (incorporated herein by reference to Exhibit 2.1 to the Indevus Current Report on Form 8-K, dated December 12, 2006)
10.76	Stent Contingent Stock Rights Agreement, dated as of April 17, 2007, between Indevus and American Stock Transfer & Trust Company (incorporated herein by reference to Exhibit 10.2 to the Indevus Current Report on Form 8-K dated April 17, 2007)
10.76.1	Supplemental Stent CSR Agreement, dated as of March 23, 2009, by and between Endo American Stock Transfer & Trust (incorporated herein by reference to Exhibit 10.2 of the Current Report on Form 8-K dated March 23, 2009)
10.77	Octreotide Contingent Stock Rights Agreement, dated as of April 17, 2007, between Indevus and American Stock Transfer & Trust Company (incorporated herein by reference to Exhibit 10.3 to the Indevus Current Report on Form 8-K dated April 17, 2007)
10.77.1	Supplemental Octreotide CSR Agreement, dated as of March 23, 2009, by and between Endo American Stock Transfer & Trust (incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K dated March 23, 2009)
10.80	Purchase and Sale Agreement by and between Ledgemont Royalty Sub LLC and Indevus dated August 26, 2008 (incorporated herein by reference to Exhibit 10.215 to the Indevus Form 10-K for the fiscal year ending September 30, 2008, filed with the Commission on December 11, 2008)

Exhibit No.	Title
10.81	Note Purchase Agreement by and among Ledgemont Royalty Sub LLC, Indevus and the purchasers named therein dated August 26, 2008 (incorporated herein by reference to Exhibit 10.216 to the Indevus Form 10-K for the fiscal year ending September 30, 2008, filed with the Commission on December 11, 2008)
10.82	Indenture by and between Ledgemont Royalty Sub LLC and U.S. Bank National Association dated August 26, 2008 (incorporated herein by reference to Exhibit 10.217 to the Indevus Form 10-K for the fiscal year ending September 30, 2008, filed with the Commission on December 11, 2008)
10.83	Pledge and Security Agreement made by Indevus to U.S. Bank National Association, as Trustee, dated August 26, 2008 (incorporated herein by reference to Exhibit 10.218 to the Indevus Form 10-K for the fiscal year ending September 30, 2008, filed with the Commission on December 11, 2008)
10.88	Termination of Agreement dated September 12, 1990 between National Patent Development Corporation and The Population Council, Inc. dated October 1, 1997 (incorporated herein by reference to Exhibit 10.6 to the Valera Registration Statement on Form S-1 (File No. 333-123288) filed with the Commission on December 9, 2005).
10.88.1	Amendment to the Termination of the Joint Development Agreement between GP Strategies Corporation and The Population Council, Inc. dated November 29, 2001 (incorporated herein by reference to Exhibit 10.7 to the Valera Registration Statement on Form S-1 (File No. 333-123288) filed with the Commission on December 9, 2005).
10.88.2	Amendment No. 2 to Termination Agreement between Valera Pharmaceuticals, Inc. and The Population Council, Inc. dated August 31, 2004 (incorporated herein by reference to Exhibit 10.8 to the Valera Registration Statement on Form S-1 (File No. 333-123288) filed with the Commission on December 9, 2005)
10.89	Credit Agreement dated as of October 16, 2009 among Endo Pharmaceuticals Holdings Inc., the lenders named therein, JPMorgan Chase Bank, N.A., as administrative agent, Barclays Capital as syndication agent, and J.P. Morgan Securities Inc. and Barclays Capital as Joint Bookrunners and Joint Lead Arrangers (incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K dated October 22, 2009)
10.89.1	Credit Facility Amendment dated as of October 25, 2010 among Endo Pharmaceuticals Holdings Inc., the lenders named therein and JPMorgan Chase Bank, N.A., as administrative agent. (incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K dated October 22, 2009)
10.89.2	Credit Agreement dated as of November 30, 2010 among Endo Pharmaceuticals Holdings Inc., the lenders named therein, Barclays Bank PLC, as documentation agent, and J.P. Morgan Securities LLC and RBC Capital Markets as Joint Bookrunners and Joint Lead Arrangers
10.89.3	Pledge and Security Agreement dated as of November 30, 2010 by and among Endo Pharmaceuticals Holdings Inc., the lenders named therein and JPMorgan Chase Bank N.A. as administrative agent
10.90	Pledge and Security Agreement dated as of October 16, 2009 by and among Endo Pharmaceuticals Holdings Inc., the lenders named therein and JPMorgan Chase Bank, N.A., as administrative agent (incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K dated October 22, 2009)
10.91	Agreement and Plan of Merger dated May 5, 2010, by and between Endo, HT Acquisition Corp., and HealthTronics, Inc. (incorporated herein by reference to Exhibit 2.1 of the Current Report on Form 8-K dated May 7, 2010)
10.94	Agreement and Plan of Merger, dated August 9, 2010, by and among Endo Pharmaceuticals Holdings Inc, West Acquisition Corp., and Penwest Pharmaceuticals Co. (incorporated herein by reference to Exhibit 2.1 of the Current Report on Form 8-K dated August 12, 2010)

Exhibit No.	Title
10.96	Stock Purchase Agreement, dated September 28, 2010, by and among Endo Pharmaceuticals Inc., Endo Pharmaceuticals Holdings Inc., Generics International (US Parent), Inc., and Apax Quartz (Cayman) L.P. (incorporated herein by reference to Exhibit 2.1 of the Current Report on Form 8-K dated September 30, 2010)
10.97	Lease Agreement dated May 19, 2008, by and between HealthTronics, Inc. and HEP-Davis Spring, L.P. (incorporated by reference to Exhibit 10.2 to HealthTronics’ Current Report on Form 8-K filed with the Securities and Exchange Commission on June 20, 2008)
10.98	Second Amendment to Lease Agreement, dated as of August 20, 2009, between HEP-Davis Spring, L.P. as landlord and HealthTronics, Inc. as tenant (incorporated by reference to Exhibit 10.2 of HealthTronics’ 10-Q filed with the Securities and Exchange Commission on November 6, 2009)
10.100	Credit Agreement, dated as of December 29, 2009, among HealthTronics, Inc., the lenders party thereto, JPMorgan Chase Bank, National Association, as Administrative Agent, J.P. Morgan Securities, Inc., as Arranger, and Bank of America, N.A., as Syndication Agent (incorporated by reference to Exhibit 10.1 to HealthTronics’ Current Report on Form 8-K filed with the Securities and Exchange Commission on December 29, 2009)
10.101	Indenture among the Company, the guarantors named therein and Wells Fargo Bank, National Association, as trustee, dated November 23, 2010 (incorporated herein by reference to Exhibit 4.1 of the Current Report on Form 8-K filed with the Commission on November 24, 2010)
10.102	Form of 7.00% Senior Notes due 2020 dated November 23, 2010 (incorporated herein by reference to Exhibit 4.1 of the Current Report on Form 8-K filed with the Commission on November 24, 2010)
10.103	Registration Rights Agreement dated November 23, 2010 among the Company, J.P. Morgan Securities LLC, as Representative of the initial purchasers of the 7.00% Senior Notes due 2020 (the Initial Purchasers), and the guarantors named therein (incorporated herein by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Commission on November 24, 2010)
21	Subsidiaries of the Registrant
23	Consent of Independent Registered Public Accounting Firm
24	Power of Attorney
31.1	Certification of the President and Chief Executive Officer of Endo pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer of Endo pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the President and Chief Executive Officer of Endo pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Chief Financial Officer of Endo pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following financial statements from the Endo Pharmaceuticals Holdings Inc. Annual Report on Form 10-K for the year ended December 31, 2010 formatted in Extensive Business Reporting Language (XBRL): (i) consolidated balance sheets, (ii) consolidated statements of operations, (iii) consolidated statements of stockholders’ equity and comprehensive income, (iv) consolidated statements of cash flows, and (v) the notes to the consolidated financial statements.

* Confidential portions of this exhibit (indicated by asterisks) have been redacted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EX-10.13

Exhibit 10.13

ENDO PHARMACEUTICALS HOLDINGS INC.

DIRECTORS DEFERRED COMPENSATION PLAN

(Effective January 1, 2008)

ENDO PHARMACEUTICALS HOLDINGS INC.

DIRECTORS DEFERRED COMPENSATION PLAN

ARTICLE I	INTRODUCTION	1
1.1.	Purpose	1
1.2.	Effective Date	1
1.3.	Type of Plan	1
ARTICLE II	DEFINITIONS	2
2.1.	“Account	2
2.2.	“Administrator:	2
2.3.	“Affiliate:	2
2.4.	“Beneficiary”	2
2.5.	“Board:	2
2.6.	“Change in Control”	2
2.7.	“Code”	3
2.8.	“Committee:	3
2.9.	“Company:	3
2.10.	“Company Stock”	3
2.11.	“Deferrable Compensation”	3
2.12.	“Director”	3
2.13.	“Election Form”	3
2.14.	“Employee”	3
2.15.	“ERISA”	4
2.16.	“Fair Market Value”	4
2.17.	“Fees”	4
2.18.	“Installment Payment”	4
2.19.	“Lump Sum Payment”	4
2.20.	“Participant”	4
2.21.	“Plan”	4
2.22.	“Plan Year”	4
2.23.	“Restricted Stock Unit”	4
2.24.	“Specified Employee”	4
2.25.	“Termination from Service”	5
2.26.	“Unforeseeable Emergency”	5
ARTICLE III	PARTICIPATION BY DIRECTORS	6
3.1.	Participation	6
3.2.	Cessation of Participation	6
3.3.	Ineligible Status	6
ARTICLE IV	PARTICIPANT DEFERRALS	7
4.1.	Deferral Elections – General	7
4.2.	First Year of Eligibility	7
4.3.	Deferral of Cash Fees and Stock Payment Fees	7

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4.4.	Deferral of Restricted Stock Units	7
4.5.	Cessation of Deferral Elections	7
4.6.	Changes to Deferral Elections	8
ARTICLE V	DISTRIBUTIONS	9
5.1.	Time of Payments	9
5.2.	Form of Payment	9
5.3.	Permissible Distribution	9
5.4.	Permissible Acceleration of Payment	10
5.5.	Permissible Delay of Payment	11
5.6.	Payment Deemed Timely	11
5.7.	Valuation of Distributions	11
ARTICLE VI	ACCOUNTS	12
6.1.	Account	12
6.2.	Crediting of Earnings on Non-Stock Compensation	12
6.3.	Crediting of Earnings on Restricted Stock Units and Deferred Stock Payments	12
6.4.	Statement of Account	13
6.5.	Vesting	13
ARTICLE VII	FUNDING AND PARTICIPANTS INTEREST	14
7.1.	Plan Unfunded	14
7.2.	Establishment of Grantor Trust	14
7.3.	Participants’ Interest in Plan	14
ARTICLE VIII	ADMINISTRATION AND INTERPRETATION	15
8.1.	Administration	15
8.2.	Interpretation	15
8.3.	Records and Reports	15
8.4.	Payment of Expenses	15
8.5.	Indemnification for Liability	15
8.6.	Claims Procedure	15
8.7.	Review Procedure	16
8.8.	Legal Claims	16
8.9.	Participant and Beneficiary Information	16
ARTICLE IX	AMENDMENT AND TERMINATION	17
9.1.	Amendment	17
9.2.	Termination of Plan	17
ARTICLE X	MISCELLANEOUS PROVISIONS	19
10.1.	Right of Company to Take Actions	19
10.2.	Alienation or Assignment of Benefits	19
10.3.	Company’s Protection	19
10.4.	Construction	19

ii

10.5.	Headings	19
10.6.	Number and Gender	19
10.7.	Right to Withhold	19

iii

ENDO PHARMACEUTICALS HOLDINGS INC.

DIRECTORS DEFERRED COMPENSATION PLAN

(Effective January 1, 2008)

ARTICLE I

INTRODUCTION

1.1. Purpose. The purpose of the Plan is to promote the interests of the Company and the stockholders of the Company by providing non-employee Directors the opportunity to defer retainer fees, stock payments, and restricted stock units.

1.2. Effective Date. The effective date of the Plan is January 1, 2008.

1.3. Type of Plan. The Plan is intended to be an unfunded plan of non-qualified deferred compensation that meets the requirements of Code Section 409A. In the event that any provision of the Plan is inconsistent with Code Section 409A, the applicable provisions of Code Section 409A shall be deemed to automatically supersede such inconsistent provision and the Plan shall be administered to comply with Code Section 409A.

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ARTICLE II

DEFINITIONS

Where used in the Plan, the following initially capitalized words and terms shall have the meanings specified below, unless the context clearly indicates to the contrary:

2.1. “Account” means the recordkeeping account established by the Administrator for each Participant to which Deferrable Compensation, and earnings thereon, are credited in accordance with Article VI of the Plan. An Account may consist of one or more sub-accounts established by the Administrator, as deemed necessary for efficient operation of the Plan.

2.2. “Administrator” means the Committee or such individuals or entity designated by the Committee to administer the Plan.

2.3. “Affiliate” means an entity, more than fifty percent (50%) of the total voting power of which is owned, directly or indirectly, by the Company.

2.4. “Beneficiary” means such person(s) or legal entity that is designated by a Participant under Section 8.9 to receive benefits hereunder after such Participant’s death.

2.5. “Board” means the board of directors of the Company.

2.6. “Change in Control” means and shall be deemed to occur upon a Change in Ownership, a Change in Effective Control, or a Change in Ownership of Substantial Assets. For this purpose:

(i) A “Change in Ownership” means that a person or group acquires more than fifty percent (50%) of the aggregate fair market value or voting power of the capital stock of the Company, including for this purpose capital stock previously acquired by such person or group; provided, however, that a Change in Ownership shall not be deemed to occur hereunder if, at the time of any such acquisition, such person or group owns more than fifty percent (50%) of the aggregate fair market value or voting power of the Company’s capital stock.

(ii) A “Change in Effective Control” means that (a) a person or group acquires (or has acquired during the immediately preceding twelve (12) month period ending on the date of the most recent acquisition by such person or group) ownership of the capital stock of the Company possessing thirty percent (30%) or more of the total voting power of the Company, or (b) a majority of the members of the Board of the Company is replaced during any twelve (12) month period, whether by appointment or election, without endorsement by a majority of the members of the Board prior to the date of such appointment or election.

2

(iii) A “Change in Ownership of Substantial Assets” means that any person or group acquires (or has acquired during the immediately preceding twelve (12) month period ending on the date of the most recent acquisition) assets of the Company with an aggregate gross fair market value of not less than forty percent (40%) of the aggregate gross fair market value of the assets of the Company immediately prior to such acquisition. For this purpose, gross fair market value shall mean the fair value of the affected assets determined without regard to any liabilities associated with such assets.

The Board shall determine whether a Change in Control has occurred hereunder in a manner consistent with the provisions of Code Section 409A and the regulations and applicable guidance promulgated thereunder.

2.7. “Code” means the Internal Revenue Code of 1986, as amended from time to time, and any regulations and applicable guidance promulgated thereunder. References in the Plan to specific sections of the Code shall be deemed to include any successor provisions thereto.

2.8. “Committee” means the committee appointed by the Board, which shall consist of two or more persons, each of whom, unless otherwise determined by the Board, is an “outside director” within the meaning of Code Section 162(m) and a “non-employee director” within the meaning of Rule 16b-3.

2.9. “Company” means Endo Pharmaceuticals Holdings Inc., a Delaware corporation.

2.10. “Company Stock” means the common stock of the Company, par value $.01 per share.

2.11. “Deferrable Compensation” means one hundred percent (100%) of Fees and Restricted Stock Units that would be payable to a Director during a Plan Year but for the Director’s election to defer such Deferrable Compensation on his or her Election Form in accordance with Article IV of this Plan.

2.12. “Director” means a director on the Board who is not an Employee.

2.13. “Election Form” means such document(s) or form(s), which may be electronic, as prescribed and made available from time to time by the Administrator, whereby a Director enrolls in the Plan as a Participant , elects to defer Deferrable Compensation pursuant to Article IV of this Plan, and/or makes investment elections pursuant to Section 6.2 of the Plan.

2.14. “Employee” means a common law employee of the Company or an Affiliate.

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2.15. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

2.16. “Fair Market Value” means (determined as of the applicable distribution or valuation date hereunder) (i) the closing sales price per share of Company stock on the national securities exchange on which such stock is principally traded on the last preceding date on which there was a sale of such stock on such exchange, or (ii) if the shares of Company stock are not listed or admitted to trading on any such exchange, the closing price as reported by the NASDAQ Stock Market for the last preceding date on which there was a sale of such stock on such exchange, or (iii) if the shares of Company stock are not then listed on a national securities exchange or traded in an over-the-counter market or the value of such shares is not otherwise determinable, such value as determined by the Administrator in good faith upon the advice of a qualified valuation expert.

2.17. “Fees” means the cash retainer fees payable by the Company to the Director.

2.18. “Installment Payment” means a series of substantially equal annual payments of the Participant’s Account paid over a period ranging from two (2) whole years to ten (10) whole years, as elected by the Participant, commencing as of the applicable payment date under the plan. For purposes of Section 4.6, an Installment Payment is treated as a single payment.

2.19. “Lump Sum Payment” means a single sum distribution of the entire value of a Participant’s Account.

2.20. “Participant” means any eligible Director who defers Deferrable Compensation to this Plan by filing an Election Form and for whom an Account is maintained under the Plan.

2.21. “Plan” means the Endo Pharmaceuticals Holdings Inc. Directors Deferred Compensation Plan.

2.22. “Plan Year” means the calendar year.

2.23. “Restricted Stock Unit” means a unit representing a share of Company Stock that has been granted to a Participant pursuant to the terms of a separate agreement or plan maintained by the Company or an Affiliate, and that is subject to a vesting schedule or other substantial risk of forfeiture.

2.24 “Specified Employee” means a Participant who is determined to be a “specified employee” within the meaning of Code Section 409A with respect to a Termination from Service occurring in any twelve (12) month period commencing on April 1 based on the Participant’s compensation with the Employer, as defined in Code Section 416(i)(1)(D), and his or her status at the end of the immediately preceding Plan Year. For purposes of the determining whether a Participant is classified as a Specified

4

Employee, compensation from a nonresident alien’s gross income under Section 1.415(c)-2(g)(5)(ii) on account of the location of the services or the identify of an Employer that is not effectively connected with the conduct of a trade or business within the United States shall be excluded.

2.25. “Termination from Service” means the date the Participant ceases to be a Director on account of a voluntary or involuntary separation from service, within the meaning of Code Section 409A, with the Board for any reason.

2.26 “Unforeseeable Emergency” means with respect to a Participant, his or her spouse, dependents (as defined in Code Section 152, without regard to Sections 152(b)(1), (b)(2), and (d)(1)(B)) or Beneficiary, a non-reimbursable severe financial hardship attributable to (i) a sudden and unexpected illness or accident or (ii) funeral expenses, and also means with respect to the Participant (i) a property loss due to casualty that is not otherwise covered by insurance, (ii) imminent foreclosure or eviction from the Participant’s primary residence, or (iii) a similar extraordinary and unforeseeable circumstance beyond the control of the Participant, as determined by the Administrator. For purposes of this Plan, the purchase of a home and the payment of college tuition are not Unforeseeable Emergencies.

5

ARTICLE III

PARTICIPATION BY DIRECTORS

3.1. Participation. Participation in this Plan is voluntary and is limited to eligible Directors who file Election Forms in accordance with Article IV.

3.2. Cessation of Participation. A Director shall remain eligible to file deferral elections under the Plan until the earlier of (i) the date the Administrator informs the Director that he or she is no longer eligible to participate in the Plan, i.e., “Ineligible Status,” or (ii) the date such Director incurs a Termination from Service.

3.3. Ineligible Status. If the Administrator determines that a Director has “Ineligible Status,” effective as of the date of such determination, said ineligible Director shall no longer be eligible to file deferral elections under the Plan. The Account of an ineligible Director shall be paid in accordance with Sections 5.1 and 5.2 of the Plan, except to the extent all or part of such Account is eligible for distribution of accelerated payment as permitted in Sections 5.3 and 5.4.

6

ARTICLE IV

PARTICIPANT DEFERRALS

4.1. Deferral Elections – General. A Participant’s deferral election for a Plan Year is irrevocable for such Plan Year; except to the extent a cessation of deferrals hereunder is required under Section 4.5. Amounts deferred under the Plan shall not be distributed to a Participant except as expressly provided in Article V or as otherwise permitted under Code Section 409A. A deferral election hereunder shall be made on an Election Form and comply with the applicable requirements of this Article IV. A Participant’s initial deferral election under the Plan shall designate the amount of Deferrable Compensation that is being deferred and the form of distribution (as permitted in Section 5.2(a)). Once effective under the Plan, a Participant’s deferral election shall remain in effect under the Plan until it is terminated by operation of the Plan or changed by the Participant in accordance with Section 4.6 herein. The Administrator may establish procedures for deferral elections as it deems necessary to comply with the requirements of this Article IV and Code Section 409A.

4.2. First Year of Eligibility. Notwithstanding the timing requirements of Sections 4.3 and 4.4, a Director may elect to defer Deferrable Compensation by completing and executing an Election Form that specifies the amount or percentage of compensation to be deferred within the thirty (30) day period immediately following the date he or she first becomes a Director, provided, that the compensation being deferred relates to services performed after the date of such election.

4.3. Deferral of Cash Fees and Stock Payment Fees. A Director may elect to defer Fees payable for services performed during a subsequent Plan Year by completing and executing an Election Form that specifies the amount or percentage of Fees to be deferred and filing it with the Administrator before expiration of the election period establish by the Administrator, which period shall end no later than December 31 of the calendar year immediately preceding such Plan Year. The provision under this Section for the deferral of Fees shall apply both to Fees payable in cash and to Fees payable in shares of Company Stock (“Stock Payments”) pursuant to the Endo Pharmaceuticals Inc. Directors Stock Election Plan (the “Directors Stock Election Plan”).

4.4. Deferral of Restricted Stock Units. A Director may elect to defer Restricted Stock Units by completing and executing an Election Form that specifies the amount or percentage of Restricted Stock Units to be deferred and filing it with the Administrator on or before expiration of the election period established by the Administrator, which period shall end no later than December 31 of the calendar year immediately preceding the Plan Year in which such Restricted Stock Units are granted.

4.5. Cessation of Deferral Elections. To the extent provided for under Code Section 409A, a Participant’s deferral election(s) in effect under the Plan for a Plan Year in which a Participant is granted an Unforeseeable Emergency distribution in accordance with Section 5.3(b) hereof may be terminated by the Administrator, effective as

7

soon as practicable following the grant of such emergency distribution. If a Participant’s deferral elections under the Plan are terminated in accordance with the foregoing sentence, such Participant shall be ineligible to make deferrals of compensation to the Plan for the six (6) month period following his or her receipt of the emergency distribution. Subject to the foregoing six (6) month limitation, the Participant may make new deferral elections for Deferrable Compensation payable in subsequent Plan Years in accordance with this Article IV.

4.6. Changes to Deferral Elections. A Participant shall be permitted a one-time election to change the form of payment relating to the distribution of his or her Account to the extent permitted by the Administrator and in accordance with the requirements of Code Section 409A(a)(4)(C), including the requirements that such redeferral election (a) may not take effect until at least twelve (12) months after such redeferral election is filed with the Administrator; (b) must result in the first distribution subject to the redeferral election being made at least five (5) years after the Termination from Service; and (c) must be filed with the Administrator at least twelve (12) months before such Termination from Service.

8

ARTICLE V

DISTRIBUTIONS

5.1. Time of Payment.

a. A Participant’s Account shall be distributed on the first day of the calendar month next following the Participant’s Termination from Service.

b. Notwithstanding the foregoing, with respect to a Specified Employee, a payment upon Termination from Service shall not be made earlier than the date that is at least six (6) months after the date of such Specified Employee’s Termination from Service.

5.2. Form of Payment.

a. Except as otherwise provided under the Plan, a Participant’s Account shall be paid as a Lump Sum Payment or an Installment Payment, as elected by the Participant on his or her Election Form.

b. In the absence of Participant’s election as to the form of payment, as permitted under subsection a, above, a Participant’s Account shall be distributed in the form of a Lump Sum Payment.

c. Deferral of Stock Payments and deferral of Restricted Stock Units shall be paid only in shares of Company Stock.

5.3. Permissible Distributions. No distribution under the Plan shall be permitted except as set forth in this Section 5.3 or as otherwise permitted under the Plan and Code Section 409A(a)(2).

a. Change in Control. Notwithstanding any provision of the Plan or Participant Election Form to the contrary, a Participant who incurs a Termination from Service within the two (2) year period immediately following a Change in Control shall receive a Lump Sum Payment of his or her Account within thirty (30) days following the date of such Termination from Service.

b. Unforeseeable Emergency. If a Participant experiences an Unforeseeable Emergency, such Participant shall be permitted to withdraw all or a portion of his or her Account in the form of an immediate single-sum payment, subject to the limitations set forth below:

(i) A request for withdrawal shall be made to the Administrator in writing and shall set forth the circumstances surrounding the Unforeseeable Emergency. As a condition of and part of such request, the Participant shall provide to the Administrator his or her written representation that (A) the emergency cannot be relieved by

9

insurance or other reimbursement reasonably available to the Participant, (B) the emergency can only be relieved by liquidation of the Participant’s assets and any such liquidation would itself result in severe damage or injury to the Participant, (C) the Participant has no reasonable borrowing capacity to relieve the emergency, and (D) the emergency cannot be relieved by cessation of the Participant’s deferrals under the Plan. The Administrator shall be entitled to request such additional information as may be reasonably required to determine whether an Unforeseeable Emergency exists or the amount of the emergency, and may establish additional conditions precedent to the review or granting of a request for a withdrawal on account of an Unforeseeable Emergency.

(ii) If the Administrator determines that an Unforeseeable Emergency exists, the Administrator shall authorize the immediate distribution of the amount required to meet the financial need created by such Unforeseeable Emergency, including any taxes payable on such amount, and, if required, the cessation of the Participant’s deferrals to the Plan as permitted in Section 4.5.

c. Death Distribution. Notwithstanding any provision of the Plan or Participant Election Form to the contrary, in the event of a Participant’s death before the complete distribution of his or her Account, the distribution of such Participant’s Account shall be made in a Lump Sum Payment to the Participant’s Beneficiary within sixty (60) days after the date of death.

5.4 Permissible Acceleration of Payments. No acceleration of time or schedule of payments under the Plan shall be permitted except as set forth in Section 5.4 or as otherwise permitted under the Plan and Code Section 409A(a)(3).

a. Distribution for Taxes. The Plan may accelerate payment of all or part of a Participant’s Account to pay or withhold state, local, or foreign tax obligations; taxes imposed under the Federal Insurance Contributions Act or the Railroad Retirement Act; and any related federal income tax thereon, arising from a Participant’s participation in the Plan. Such payment of withholding must be limited to the amount necessary to fulfill such tax obligation.

b. Small Payment. Notwithstanding any provision of the Plan to the contrary, if the total value of a Participant’s Account or death benefit payable hereunder is not greater than the applicable dollar amount under Code Section 402(g)(1)(B), and the Participant is not entitled to a benefit from any other plan that is required to be aggregated with this Plan pursuant to Treasury Regulation Section 1.409A-1(c)(2), the Administrator may distribute such amount to the Participant or Beneficiary in the form of a Lump Sum Payment.

c. Income Inclusion under 409A. Notwithstanding any provision of the Plan to the contrary, in the event that the plan fails to meet the requirements of Code Section 409A, the Administrator may distribute to Participants the portion of their Accounts that is required to be included in income as a result of such failure.

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5.5. Permissible Delay of Payment. The Administrator may delay payment to a date after the designated payment date pursuant to any of the following circumstances, provided that payments to similarly situated Participants are made on a reasonably consistent basis.

a. Payments that would violate federal securities laws or other applicable law. A payment may be delayed where the Administrator reasonably anticipates that the making of the payment will violate federal securities laws or other applicable law, provided that the payment is made at the earliest date at which the Administrator reasonably anticipates that the making of the payment will not cause such violation. For purposes of this Section 5.5(a), the making of a payment that would cause inclusion in gross income or the application of any penalty provision or other provision of the Code is not treated as a violation of applicable law.

5.6. Payment Deemed Timely. A payment shall be treated as made upon the date specified under the Plan under the following circumstances:

a. If the payment is made at such date or a later date within the same calendar year or, if later, by the fifteenth (15th) day of the third calendar month following the date specified under the Plan.

b. If calculation of the amount of the payment is not administratively practicable due to events “beyond the control” of the Participant, or the Participant’s Beneficiary (as such phrase is defined under Code Section 409A), the payment will be treated as made upon the date specified under the Plan if the payment is made during the first calendar year in which the calculation of the amount of the payment is administratively practicable.

c. If the Company fails to make a payment, in whole or in part, as of the date specified under the Plan, either, intentionally or unintentionally, the payment will be treated as made upon the date specified under the Plan if (i) the Participant accepts the portion (if any) of the payment that the Company is willing to make (unless such acceptance will result in a relinquishment of the claim to all or part of the remaining amount), (ii) if the Participant files claims pursuant to Sections 8.6 and 8.7 herein to collect the unpaid portion of the payment, and (iii) any further payment (including payment of a lesser amount that satisfies the Company’s obligation to make the entire payment) is made no later than the end of the first calendar year in which the Company and the Participant enter into a legally binding settlement of such dispute, the Company concedes that the amount is payable, or the Company is required to make such payment pursuant to a final and nonappealable judgment or other binding decision.

5.7. Valuation of Distributions. All distributions under this Plan shall be based upon a daily valuation of the Participant’s Account or, where applicable, the Fair Market Value of the shares of Company Stock that relate to the Stock Payments or Restricted Stock Units deferred under the Participant’s Account, as determined by the Administrator.

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ARTICLE VI

ACCOUNTS

6.1. Account. The Administrator shall establish and maintain, or cause to be established and maintained, a separate Account for each Participant hereunder who executes an election pursuant to Article IV. Each such Participant’s Deferrable Compensation deferred pursuant to a Election Form under Article IV shall be separately accounted for and credited with earnings or dividends, as applicable, for recordkeeping purposes only, to his or her Account. A Participant’s Account shall be solely for the purposes of measuring the amounts to be paid under the Plan. Except as provided in Article VII, the Company shall not be required to fund or secure a Participant’s Account in any way, the Company’s obligation to Participants hereunder being purely contractual.

6.2. Crediting of Earnings on Non-Stock Compensation. Except as provided in Section 6.3, a Participant may hypothetically invest his Account in one or more investment alternatives made available by the Administrator, and earnings or losses thereon shall be credited to the Participant’s Account in accordance with the valuation procedures under such investment alternatives. The Participant shall make his or her investment elections, and changes thereto, on an Election Form in accordance with procedures established by the Administrator. Unless the Administrator determines otherwise, the investment alternatives available under the Plan shall mirror the alternatives that are made available under the Code Section 401(k) plan sponsored by the Company.

6.3. Crediting of Earnings on Restricted Stock Units and Deferred Stock Payments. The portion of a Participant’s Account attributable to Restricted Stock Units and deferral of Stock Payments shall be deemed invested solely in stock equivalent units of Company Stock, shall be denominated in numbers of stock units, and shall be valued at any time as the stock equivalent units are credited to such Account multiplied by the then-Fair Market Value of the Company Stock. Whenever a dividend is declared and payable on Company Stock, the number of such stock equivalent units in the Participant’s Account shall be increased by the following calculations:

(i) the number of units in the Participant’s Account multiplied by any cash dividend declared by the Company on a share of Company Stock, divided by the Fair Market Value determined as of the related dividend payment date; and/or

(ii) the number of units in the Participant’s Account on the related dividend payment date multiplied by any stock dividend declared by the Company on a share of Company Stock.

In the event of any change in the number or kind of outstanding shares of Company Stock, including a stock split or splits (other than a stock dividend as provided above), an appropriate adjustment shall be made in the number of units credited to the Participant’s Account.

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6.4. Statement of Account. As soon as practicable after the end of each Plan Year (and at such additional times as the Administrator may determine), the Administrator shall furnish each Participant with a statement of the balance credited to the Participant’s Account.

6.5. Vesting. A Participant is always one hundred percent (100%) vested in his or her Account

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ARTICLE VII

FUNDING AND PARTICIPANTS INTEREST

7.1. Plan Unfunded. This Plan shall at all times be considered entirely unfunded for both federal and state income tax purposes and for purposes of Title I of ERISA, and no trust shall be created by or for the Plan. The crediting to each Participant’s Account shall be made through recordkeeping entries. No actual funds shall be set aside; provided, however, that nothing herein shall prevent the Company from establishing one or more grantor trusts that meet the requirements of IRS Revenue Procedure 92-64 from which benefits due under this Plan may be paid in certain instances

7.2. Establishment of Grantor Trust. Within fifteen (15) days following a Change in Control, the Company shall establish under the Plan a grantor trust that meet the requirements of IRS Revenue Procedure 92-64, and shall transfer assets to such trust in amounts sufficient to fully fund the Plan’s aggregate liability with respect to the Accounts under the Plan on and after the date of the Change in Control.

7.3. Participants’ Interest in Plan. Notwithstanding Section 7.2 or any other provision of the Plan, a Participant has an interest only in the value of the amount credited to his or her Account and has no rights or interests in the specific investment funds, stock, or securities in which his or her Account is hypothetically invested under the Plan. All distributions shall be paid by the Company from its general assets and a Participant (or his or her Beneficiary) shall have the rights of a general, unsecured creditor against the Company for any distributions due hereunder. The Plan constitutes a mere promise by the Company to make benefit payments in the future.

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ARTICLE VIII

ADMINISTRATION AND INTERPRETATION

8.1. Administration. The Administrator shall be in charge of the overall operation and administration of this Plan. The Administrator has, to the extent appropriate and in addition to the powers described elsewhere in this Plan, full discretionary authority to construe and interpret the terms and provisions of the Plan; to adopt, alter and repeal administrative rules, guidelines and practices governing the Plan; to perform all acts, including the delegation of its administrative responsibilities to advisors or other persons who may or may not be Employees; and to rely upon the information or opinions of legal counselor experts selected to render advice with respect to the Plan, as it shall deem advisable, with respect to the administration of the Plan.

8.2. Interpretation. The Administrator may take any action, correct any defect, supply any omission or reconcile any inconsistency in the Plan, or in any election hereunder, in the manner and to the extent it shall deem necessary to carry the Plan into effect or to carry out the Company’s purposes in adopting the Plan. Any decision, interpretation or other action made or taken in good faith by or at the direction of the Company or the Administrator arising out of or in connection with the Plan, shall be within the absolute discretion of each of them, and shall be final, binding and conclusive on the Company, and all Participants and Beneficiaries and their respective heirs, executors, administrators, successors and assigns. The Administrator’s determinations hereunder need not be uniform, and may be made selectively among Directors, whether or not they are similarly situated.

8.3. Records and Reports. The Administrator shall keep a record of proceedings and actions and shall maintain or cause to be maintained all such books of account, records, and other data as shall be necessary for the proper administration of the Plan. Such records shall contain all relevant data pertaining to individual Participants and their rights under this Plan. The Administrator shall have the duty to carry into effect all rights or benefits provided hereunder to the extent assets of the Company are properly available.

8.4. Payment of Expenses. The Company shall bear all expenses incurred by the Administrator in administering this Plan.

8.5. Indemnification for Liability. The Company shall indemnify the Committee, the Administrator and the Employees to whom administrative duties have been delegated under this Plan, against any and all claims, losses, damages, expenses and liabilities arising from their responsibilities in connection with this Plan, unless the same is determined to be due to gross negligence or willful misconduct.

8.6. Claims Procedure. Within ninety (90) days following the date payment was due in accordance with the terms of the Plan, the Participant or the Participant’s duly authorized representative (hereinafter, the “claimant”) may file a written

15

request for payment with the Administrator. If a claim for benefits under the Plan is denied in whole or in part, the claimant will receive written notification within forty-five (45) days following the date of such written request. The notification will include specific reasons for the denial, specific reference to pertinent provisions of this Plan, a description of any additional material or information necessary to process the claim and why such material or information is necessary, and an explanation of the claims review procedure. To the extent a Participant hereunder is a claimant and serves as an Administrator, he or she shall not participate in any determination relating to his or her claim, and the Administrator or the Company may appoint an independent individual to take the place of such Participant for purposes of making such determination.

8.7. Review Procedure. No later than one hundred and eighty (180) days following the date payment was due under the Plan, the claimant may file a written request with the Administrator for a review of his denied claim. The claimant may review pertinent documents that were used in processing his claim, submit pertinent documents, and address issues and comments in writing to the Administrator. The Administrator will notify the claimant of his or her final decision in writing. In his or her response, the Administrator will explain the reason for the decision, with specific references to pertinent Plan provisions on which the decision was based. To the extent a Participant hereunder is a claimant requesting a review and serves as an Administrator, he or she shall not participate in any determination relating to the review, and the Administrator or the Company may appoint an independent individual to take the place of such Participant for purposes of making such determination.

8.8. Legal Claims. In no event may a claimant commence legal action for benefits the claimant believes are due the claimant until the claimant has exhausted all of the remedies and procedures afforded the claimant by this Article VIII. No such legal action may be commenced more than two (2) years after the date of the Administrator’s final review decision, described in Section 8.7 above.

8.9. Participant and Beneficiary Information. Each Participant shall keep the Administrator informed of his or her current address and the current address of his or her designated beneficiary or beneficiaries. A Participant may from time to time change his designated Beneficiary without the consent of such Beneficiary by filing a new designation in writing with the Administrator. If no Beneficiary designation is in effect at the time of the Participant’s death, or if the designated Beneficiary is missing or has predeceased the Participant, distribution shall be made to the Participant’s surviving spouse, or if none, to his surviving children per stirpes, and if none, to his estate. The Administrator shall not be obligated to search for any person. If such person is not located within one year after the date on which payment of the Participant’s death benefit is payable under the Plan, payment shall be made to the Participant’s estate.

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ARTICLE IX

AMENDMENT AND TERMINATION

9.1. Amendment. The Board shall have the right, at any time, to amend the Plan or discontinue deferrals under the Plan in whole or in part provided that such amendment or termination complies with Code Section 409A and does not adversely affect the right of any Participant or Beneficiary to a benefit or payment due under the Plan. The Administrator has the authority, without Board approval, to amend the Plan to comply with the requirements of Code Section 409A, modify the amount or type of compensation that qualifies as Deferrable Compensation, modify the classes of individuals eligible to participate in the Plan, and to change the investment alternatives offered under the Plan. In addition, the Administrator may make such changes to the Plan’s operation and administration as it deems to be in the best interest of the Plan.

9.2. Termination of Plan. The Board may take action to provide for the acceleration of the time and form of a payment, or a payment hereunder, where the acceleration of the payment is made pursuant to a termination and liquidation of the Plan in accordance with one of the following:

a. The termination and liquidation of the Plan pursuant to an irrevocable action taken within the thirty (30) days preceding or the twelve (12) months following a Change in Control, provided that all agreements, methods, programs, and other arrangements sponsored by the Company or a participating Affiliate immediately after the Change in Control event with respect to which deferrals of compensation that, together with the Plan, are treated as a single plan for purposes of Treasury Regulation Section 1.409A-1(c)(2) (the “Aggregated Plans”) are terminated and liquidated with respect to each Participant that experienced the Change in Control event, so that under the terms of the termination and liquidation all such Participants are required to receive all amounts of compensation deferred under the terminated Aggregated Plans within twelve (12) months of the date of the irrevocable action taken to terminate and liquidate such Aggregated Plans.

b. The termination and liquidation of the Plan within twelve (12) months of a corporate dissolution of the Company that is taxed under Code Section 331, or approved by a bankruptcy court pursuant to 11 U.S.C. Section 503(b)(1)(A), provided that the amounts deferred under the Plan are included in the Participants’ gross incomes in the latest of the following years (or, if earlier, the taxable year in which the amount is actually or constructively received):

(i) The calendar year in which Plan termination and liquidation occurs;

(ii) The first calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or

17

(iii) The first calendar year in which the payment is administratively practicable.

c. The termination and liquidation of the Plan, where:

(i) Such termination and liquidation does not occur proximate to a downturn in the financial health of the Company or the Affiliate, as applicable;

(ii) To the extent the same Participant had deferrals of thereunder, all Aggregated Plans are likewise terminated and liquidated;

(iii) No payments in liquidation of the Plan are made within twelve (12) months of the date the irrevocable action is taken to terminate and liquidate the Plan, other than payments that would be payable under the terms of the Plan if the action to terminate and liquidate the Plan had not occurred;

(iv) All payments are made within twenty-four (24) months of the date the irrevocable action is taken to terminate and liquidate the Plan; and

(v) The Company and Affiliate, as applicable, does not adopt a new plan that would be aggregated with the Plan if the Participant participated in both plans, at any time within three years following the date the irrevocable action is taken to terminate and liquidate the Plan.

d. Any other termination and liquidation event that is permissible under Code Section 409A.

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ARTICLE X

MISCELLANEOUS PROVISIONS

10.1. Right of Company to Take Actions. The adoption and maintenance of this Plan shall not be deemed to constitute a contract between the Company and a Director, or to be a consideration for, nor an inducement or condition of, the employment of any person. Nothing herein contained, or any action taken hereunder, shall be deemed to give a Director the right to be retained in the service of the Board or to interfere with the right of the Board to discharge the Director at any time, nor shall it be deemed to give to the Board the right to require the Director to remain in its employ, nor shall it interfere with the Director’s right to terminate his or her service at any time. Nothing in this Plan shall prevent the Company from amending, modifying, or terminating any other benefit plan.

10.2. Alienation or Assignment of Benefits. Except as otherwise provided under the Plan, a Participant’s rights and interest under the Plan shall not be assigned or transferred except as otherwise provided herein, and the Participant’s rights to benefit payments under the Plan shall not be subject to alienation, pledge or garnishment by or on behalf of creditors (including heirs, beneficiaries, or dependents) of the Participant or of a Beneficiary.

10.3. Company’s Protection. By execution of an Election Form, each Participant shall be deemed to have agreed to cooperate with the Company by furnishing any and all information reasonably requested by the Administrator in order to facilitate the payment of benefits hereunder.

10.4. Construction. All legal questions pertaining to the Plan shall be determined in accordance with the laws of the Commonwealth of Pennsylvania; to the extent such laws are not superseded by ERISA or any other federal law.

10.5. Headings. The headings of the Articles and Sections of this Plan are for reference only. In the event of a conflict between a heading and the contents of an Article or Section, the contents of the Article or Section shall control.

10.6. Number and Gender. Whenever any words used herein are in the singular form, they shall be construed as though they were also used in the plural form in all cases where they would so apply, and references to the male gender shall be construed as applicable to the female gender where applicable, and vice versa.

10.7. Right to Withhold. To the extent required by law in effect at the time a distribution is made from the Plan, the Company or its agents shall have the right to withhold or deduct from any distributions or payments any taxes required to be withheld by federal, state or local governments.

* * * * *

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Approved and adopted by the Board of Directors this 13^th day of December, 2007.

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EX-10.17

Exhibit 10.17

The confidential portions of this exhibit have been filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities and Exchange Act of 1934, as amended. REDACTED PORTIONS OF THIS EXHIBIT ARE MARKED BY AN ***.

SUPPLY AGREEMENT

This Agreement made by and between VINTAGE PHARMACEUTICALS, INC., an Alabama corporation (hereinafter “VINTAGE”) and NORAMCO, a division of McNeilab, Inc., a Pennsylvania corporation (hereinafter “NORAMCO”).

In consideration of the mutual promises, covenants and agreements hereinafter set forth, the parties hereto agree as follows:

1. Definitions When used herein, the following terms shall have the meanings specified below:

1.1 “Affiliate” of a party to this Agreement shall mean any corporation or partnership or other entity which directly or indirectly controls, is controlled by or is under common control with such party. “Control” shall mean the legal power to direct or cause the direction of the general management or partners of such entity whether through the ownership of voting securities, by contract or otherwise.

1.2 “Available Requirements” shall be that portion of VINTAGE’S total annual requirements for a Product for which VINTAGE has approval from, and is in good standing with, the FDA to use NORAMCO material and for which NORAMCO is a supplier approved by the Federal Food and Drug Administration.

1.3 “Products” shall mean ***.

1.4 “Term” shall mean the term of this Agreement, which shall be for a period commencing on January 1, 2001, the effective date of this Agreement and terminating unless sooner terminated pursuant to this Agreement, on December 31, 2005.

1.5 “Territory” shall mean the fifty (50) states of the United States of America and the District of Columbia.

2. Purchase and Sale of Products

a) During the term of this Agreement, NORAMCO shall, in a timely manner, supply VINTAGE with those quantities of Products as ordered by VINTAGE pursuant to this Agreement. The Products shall conform to the specifications set forth in Exhibit A, Exhibit B, and Exhibit C to this Agreement and as may subsequently be mutually agreed upon in writing by the parties hereto (the “Product Specifications”).

b) The prices to be charged by NORAMCO to VINTAGE as set forth in Section 4 hereof shall include all delivery costs for F.O.B. destination. The risk of loss with respect to Products shall remain with NORAMCO until Products are delivered to VINTAGE at its facilities or at such other location as shall be designated by VINTAGE as a point of delivery.

1

NORAMCO shall pack all Products ordered hereunder in individual package size quantities as specified by VINTAGE, or as agreed to by the parties, in a manner suitable for safe shipment. Payment terms on all orders shall be net *** days except by mutual consent. VINTAGE shall remit payment for each respective order of Products which it places pursuant to this Agreement within *** days of its receipt of such ordered Products (and applicable invoices therefor), provided that such Products comply with the terms of this Agreement. If at any time, VINTAGE’S payment obligations to NORAMCO are in arrears, NORAMCO shall have the right to refuse to supply any further Product to VINTAGE until the arrearage has been satisfied.

c) (1) In the event VINTAGE wishes to change a specification after execution of the Agreement, NORAMCO will calculate the cost and advise VINTAGE of the one time charge. VINTAGE may either remit or elect not to change the specification.

If NORAMCO is required to change any specification in order to meet then-applicable regulatory requirements, NORAMCO will promptly notify VINTAGE of such changes and the cost of such changes. If VINTAGE is unable or unwilling to make necessary changes as a result of the NORAMCO changes, VINTAGE will have the option of terminating the Agreement.

(2) During the term of this Agreement, NORAMCO agrees to notify VINTAGE of any and all proposed process changes, or specification changes which may materially effect the integrity and/or quality of the Product or which may or shall be considered a material change by the FDA or shall require a supplement to the FDA. NORAMCO further agrees that it will supply VINTAGE with samples of Product which have undergone process or specification changes, described above, permitting VINTAGE the time and opportunity to perform necessary testing, reformulation, filing with the FDA, and receive FDA approval, if required prior to shipment of Product for production batches to VINTAGE. Upon receipt of the new specification samples supplied by NORAMCO, it shall be the duty of VINTAGE to perform all required acts in a timely manner. NORAMCO shall continue to uninterruptedly supply Product to VINTAGE consistent with VINTAGE’S approved Product’s Specification Sheet according to and consistent with VINTAGE purchase orders until approval is received by VINTAGE from the FDA, if required, for the product manufactured under the new process. NORAMCO agrees to supply VINTAGE with Product, which conforms to VINTAGE specification as filed and approved by the FDA, which has not undergone a process or specification change, described above, until such time that VINTAGE has received approval by the FDA, if required, for the new process Product.

(3) NORAMCO shall Provide to VINTAGE, without charge, all statistical, analytical and laboratory testing methods of the product including known impurities, degradents, etc., as needed and required for NDA and ANDA submissions, or other FDA requests and/or requirements.

3. Purchase Agreement During the term of this Agreement and subject to the terms, conditions and limitations herein set forth, and further subject to NORAMCO’S ability to supply VINTAGE’S requirements, VINTAGE shall purchase from NORAMCO at least *** of VINTAGE’S Available Requirements for Products to be sold in the Territory for which VINTAGE has received FDA approval, remains in good standing, and continues to own the ANDA or continues to manufacture the Product(s) as authorized by the NDA or ANDA. If

2

NORAMCO cannot supply VINTAGE’S Available Requirements, VINTAGE shall have the option of sourcing the Product that NORAMCO is unable to supply from another qualified supplier, subject to the terms of Section 5 hereof.

4. Pricing

A. Base Price

The base price to be charged by NORAMCO for each Product during the calendar year 2001 shall be:

***	$	*	**
***	$	*	**
***	$	*	**

When VINTAGE purchases from NORAMCO a quantity of each Product during the calendar year equal to the Qualifying Quantity in the following chart, VINTAGE shall be entitled to a rebate equal to:

((Qualifying Quantity) multiplied by (Amount of Rebate Per Kilogram)) less (any rebates already paid during the calendar year in accordance with this Section of 4A).

The rebate shall be calculated by NORAMCO and paid to VINTAGE within thirty (30) days of the end of each quarter.

	Base Price  Per Kilogram			Rebate Qualifying Quantity			Rebate Per Kilogram
***
0 to 1,000 kg	$	*	**		*	**	$	*	**
1,001 to 2,000	$	*	**		*	**	$	*	**
2,001 to 3,000	$	*	**		*	**	$	*	**
3,001 or more	$	*	**		*	**	$	*	**
***
0 to 2,000 kg	$	*	**		*	**	$	*	**
2,001 to 2,500	$	*	**		*	**	$	*	**
2,501 to 3,500	$	*	**		*	**	$	*	**
3,501 to 5,000	$	*	**		*	**	$	*	**
5,001 or more	$	*	**		*	**	$	*	**
***	$	*	**		*	**		*	**

3

B. Escalation

The Base Price per kilogram of each of the Products is the sum of a “Raw Materials Component” and an “Other Costs Component”. For each product, the Raw Material Component for Base 2001 is shown below:

	Raw Material Component
***	$	*	**
***	$	*	**
***	$	*	**

The other Costs Component is the Base Price less the Raw Material component.

Beginning on January 1, 2002, and on each ensuing January 1, all prices set forth above are subject to automatic changes on an annual basis. Such changes shall be limited to the sum of the following changes:

1) The change in the “Raw Materials Component” shall be in the proportion as the change in the then-current price of *** over the March 2001 *** price as determined by the Government of ***. NORAMCO will have its Certified Public Accountants verify the *** price increases at VINTAGE’S request.

In addition, if during the calendar year, *** prices increase or decrease by a total of ***% or more, an adjustment as described above will be made three (3) months after the effective date of the *** price increase or decrease which is in excess of ***% over the January 1 price for that year.

2) The change in the “Other Costs” component shall be in the same proportion as NORAMCO’S actual cost increase not to exceed the percentage increase in the then current Producer Price Index over the December 2000 Producer Price Index.

C. *** Market Subsidy

Beginning January 1, 2002 if NORAMCO’S total shipments, or VINTAGE purchase orders, of *** exceed *** kilograms during a given calendar year, VINTAGE shall receive a “Market Subsidy” based on VINTAGE’S production of *** SKUs. The amount of this Market Subsidy will be calculated by VINTAGE at the end of the calendar year as follows;

(Subsidized Quantity) times (Subsidy Price)

1. The “5/500 Percentage” shall be defined as the percentage of VINTAGE’S total usage of *** during the calendar year used for production of *** 5/500 SKUs.

2. The “Subsidized Quantity” shall be defined as the lesser of:

A) (VINTAGE’S total purchases of *** from NORAMCO during the calendar year) times (the 5/500 Percentage)

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B) VINTAGE’S total purchases of *** from NORAMCO during the calendar year) times (***):

3. The “Subsidy Price” shall be defined as:

($*** Per Kilogram) less (the Rebate Per Kilogram in Section 4A and 4B which was applicable and has been paid to VINTAGE for the calendar year)

VINTAGE shall invoice NORAMCO for the amount of the Market Subsidy at the end of the calendar year. NORAMCO shall pay the amount within 30 days of receipt of this invoice. VINTAGE will have its Certified Public Accountants verify the 5/500 Percentage at NORAMCO’S request.

The Market Subsidy shall be reviewed at the end of 2003. VINTAGE’S average selling price per bottle of *** *** 5/500 tablets in 2000 was $***. VINTAGE shall calculate the comparable price per bottle for 2003. If it is higher in 2003, the amount of the Market Subsidy shall be reduced during calendar 2004 by $*** per kilogram of *** for every $*** per bottle increases between 2000 and 2003 in the average selling price per bottle. This review will be repeated at the end of 2004.

If VINTAGE identifies other opportunities in which NORAMCO can support its growth, NORAMCO will agree to meet with VINTAGE and review the opportunity for collaboration.

D. Market Price Adjustment

If VINTAGE receives a written quote from a supplier who is approved by DEA as a manufacturer of the Product which meets the following conditions:

1) The supplier is qualified by VINTAGE and approved by the FDA

2) The offer is to supply at least ***% of VINTAGE’S Available Requirements.

3) The quoted price per kilogram (“Quoted Price”) is lower than the price per kilogram after all applicable rebates in Sections 4A, 4B, 4C (“Supply Price”) for the remaining term of this agreement.

4) The quote includes a provision equivalent to the terms in Section 5.

NORAMCO will adjust its Supply Price as follows:

A. If the Quoted Price is for only one Product and it is between ***% less than the Supply Price:

No Adjustment

B. If the Quoted Price is for all Products or more than ***% below the Supply Price for one Product, NORAMCO will reduce its Supply Price by an amount equal to:

(Supply Price) less (Quoted Price) equals (Amount of Rebate Per Unit)

5

NORAMCO will have the right to verify the terms of the written quote and the status of the supplier.

NORAMCO will have the right to cancel all or part of this Agreement if the Section 4D is invoked.

E. Qualification of NORAMCO’s Athens, Georgia Facility to Supply ***

If, at NORAMCO’s request, VINTAGE agrees in writing to qualify *** produced at NORAMCO’s Athens, Georgia facility for use in VINTAGE SKUs whose total usage of *** equals at least ***% of Available Requirements, NORAMCO will reimburse VINTAGE in the amount of *** ($***).

This reimbursement shall be paid on the earlier of:

1) The date NORAMCO successfully validates *** in its Athens, Georgia facility. The *** produced in Athens will meet all specifications in Exhibit B.

2) July 1,2002

This reimbursement shall be returned to NORAMCO if VINTAGE is unable to utilize *** in VINTAGE SKU’s whose total usage of *** equals at least *** (***%) of Available Requirements within twelve months of the date NORAMCO is able to supply *** from three validation batches meeting all specifications in Exhibit B.

5. Failure to Supply Beginning January 1, 2002, failure to supply shall occur if:

A. NORAMCO is unable to deliver within a calendar month an ordered amount of Product equal to ***% of VINTAGE’S Available Requirements divided by twelve.

B. VINTAGE replaces this shortfall by purchasing an amount of product from a third party.

C. Failure to Supply is not due to a Force Majeure event.

The “Shortfall Quantity” shall be the lesser of:

A. ***% of VINTAGE’S Available Requirements) divided by (twelve)) less the (actual shipments of Product during the calendar month) or,

B. The replacement quantity purchased by VINTAGE.

6

The Shortfall Quantity for a calendar year may be changed to a fixed number of kilograms of Product by mutual consent of the parties.

If Failure to Supply occurs, NORAMCO shall reimburse VINTAGE as follows:

((actual price per kilogram as paid to the third party) less (the applicable price VINTAGE would have paid to NORAMCO during the month Failure to Supply occurred under the terms in Section 4)) times (the Shortfall Quantity)

VINTAGE shall use reasonable commercial efforts to minimize the amount of this reimbursement.

The total reimbursements for all Failures to Supply within a calendar quarter shall be calculated by VINTAGE and invoiced to NORAMCO. VINTAGE shall, at NORAMCO’S request, provide documentation supporting the calculation of the reimbursement.

The quantity of the total number of kilograms required to be purchased by VINTAGE from a third party shall be considered a delivery for purposes of determining the total number of kilograms to be used to calculate Rebate Amounts in Section 4C of this amendment.

6. Specifications and Changes

NORAMCO does hereby agree to supply VINTAGE with the Product which shall conform to the attached specifications.

NORAMCO agrees to notify VINTAGE prior to all changes in Product specifications which shall affect the regulatory status of the VINTAGE product. VINTAGE agrees to qualify process changes or site changes which require Changes Being Effected filings with the Food and Drug Administration.

NORAMCO does hereby grant permission to VINTAGE to reference as needed NORAMCO’S Drug Master Files for the Products.

7. *** Price Protection If, as a result of entering into this Agreement, VINTAGE experiences an increase in the price charged to it by its supplier of ***, NORAMCO will apply a credit against the future purchases from it of the Products hereunder. The amount of the credit will be:

(Average Purchase price minus $*** per Kilogram) times (Kilograms of *** purchased by VINTAGE during the calendar year)

The “Average Purchase price” shall be the actual average price per kilogram paid by VINTAGE for *** during a calendar year.

In no event shall the cumulative credit extended during a calendar year under this provision exceed the sum of $***.

7

8. Forecast and Orders (a) On an annual basis, at the beginning of each calendar year during the term of this Agreement, VINTAGE shall provide NORAMCO with a non-binding written forecast of VINTAGE’S expected requirements for Products during that year. This forecast shall be updated at the beginning of each calendar quarter. VINTAGE shall place binding orders for Products which shall include package sizes required by written purchase order to NORAMCO, which shall be placed at least thirty (30) days prior to the desired date of delivery.

b) To the extent of any conflict or inconsistency between this Agreement and any purchase order, purchase order release, confirmation, acceptance or any similar document, the terms of this Agreement shall govern.

c) VINTAGE will notify NORAMCO if it expects to launch new SKUs which are expected to increase VINTAGE’S Available Requirements for *** or *** by more than 1,000 kilograms within the following twelve months. Upon notification, NORAMCO and VINTAGE will work out a mutually acceptable plan to meet VINTAGE requirements.

9. Acceptance of Products: Corrective Actions a) Delivery of any Product by NORAMCO to VINTAGE shall constitute a certification by NORAMCO that the Product has been tested, has been found to conform fully to the Product Specifications and is free from defects in design, material and workmanship. The test methods and data shown on the Certificate of Analysis shall be mutually agreed upon by NORAMCO and VINTAGE.

After delivery of a shipment of any Products to VINTAGE, VINTAGE shall have thirty (30) days to examine the Products to determine if they conform to the Product Specifications and if they are free from defects in design, material and workmanship, and on the basis of such examination, to accept or reject such shipment. Any claims for failure to conform or for such defects (“Claims”) shall be made by VINTAGE in writing to NORAMCO, indicating the nonconforming characteristics in test methods prior to any return of unacceptable Product to NORAMCO. NORAMCO will not accept return of opened containers without a certification from VINTAGE that they were stored and sampled in conformance with Good Manufacturing Practices. NORAMCO shall pay for all shipping costs of returning Products that are subject of Claims.

b) Any shipment of Products for which VINTAGE shall not submit a Claim within thirty (30) days of delivery shall be deemed accepted. Upon acceptance, VINTAGE shall release NORAMCO from all Claims for non-conformity of defects except Claims for latent defects which are not reasonably detectable at the time of acceptance. The acceptance by VINTAGE of such Products shall not constitute a waiver of any rights of VINTAGE or a release of any obligations of NORAMCO except those rights and obligations set forth in Section 9.

10. Representations and Warranties NORAMCO represents and warrants to VINTAGE that all Products supplied in connection with this Agreement shall be of merchantable quality, fit for the purposes intended by this Agreement and free from defects in material and workmanship and shall be manufactured and provided by NORAMCO in accordance and conformity with the Product Specifications and in compliance with this Agreement. All such Products shall meet U.S. Food and Drug Administration and U.S. Drug Enforcement Agency standards and requirements for product to be lawfully shipped and sold.

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NORAMCO will allow VINTAGE to refer to the Drug master Files of the Products in support of any of its applications for the FDA.

11. Inspection of Premises VINTAGE shall have the right, upon reasonable notice to NORAMCO and during regular business hours, to inspect and audit the facilities being used by NORAMCO for production of the Products to assure compliance by NORAMCO with applicable rules and regulations and with other provisions of this Agreement.

12. Indemnification a) NORAMCO shall indemnify and hold harmless VINTAGE and its Affiliates and their officers, directors, and employees from and against any and all claims, losses, damages, judgments, costs, awards, expenses (including reasonable attorneys’ fees) and liabilities of every kind (collectively, “Losses”) arising directly out of or resulting directly from any breach by NORAMCO of any of its warranties, guarantees, representations, obligations or covenants contained herein.

b) VINTAGE agrees to give NORAMCO prompt written notice of any matter upon which VINTAGE intends to base a claim for indemnification (an “Indemnity Claim”). NORAMCO shall have the right to participate jointly with VINTAGE in VINTAGE’S defense, settlement or other disposition of any Indemnity Claim. With respect to any Indemnity Claim relating solely to the payment of money damages and which could not result in VINTAGE’S becoming subject to injunctive or other equitable relief or otherwise adversely affect the business of VINTAGE in any manner, and as to which NORAMCO shall have acknowledged in writing the obligation to indemnify VINTAGE hereunder, NORAMCO shall have the sole right to defend, settle or otherwise dispose of such indemnity Claim, on such terms as NORAMCO, in its sole discretion, shall deem appropriate, provided that NORAMCO shall provide reasonable evidence of its ability to pay any damages claimed and with respect to any such settlement shall have obtained the written release of VINTAGE from the Indemnity Claim. NORAMCO shall obtain the written consent of VINTAGE, which shall not be unreasonably withheld, prior to ceasing to defend, settling or otherwise disposing of any Indemnity Claim if as a result thereof VINTAGE would become subject to injunctive or other equitable relief or the business of VINTAGE would be adversely effected in any manner.

c) This article shall survive any termination of this Agreement.

13. Term After December 31, 2005, this Agreement shall automatically renew for additional one-year terms unless, at least six (6) months prior to the termination date or the closing date of any subsequent renewal period, either party provides written notice to the other of its intention to terminate.

14. Termination a) This Agreement may be terminated, prior to its original termination date or any subsequent renewal period termination date, upon fifteen (15) days notice by either party in the event that the other party hereto shall file a petition or receive service of an involuntary petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment debts.

b) This Agreement may be terminated, prior to its termination date by either party giving notice of its intent to terminate and stating the grounds therefor if the other party shall

9

materially breach or materially fail in the observance or performance of any representation, warranty, guarantee, covenant or obligation under this Agreement. The party receiving the notice shall have sixty (60) days from the date of receipt thereof to cure the breach or failure. In the event such a breach or failure is cured, the notice shall be of no effect.

c) Notwithstanding the termination of this Agreement for any reason, each party hereto shall be entitled to recover any and all damages which such party shall have sustained by reason of the breach by the other party hereto of any of the terms of this Agreement. Termination of this Agreement for any reason shall not release either party hereto from any liability which at such time has already accrued or which thereafter accrues from a breach or default prior to such expiration or termination, nor affect in any way the survival of any other right, duty or obligation of either party hereto which is expressly stated elsewhere in this Agreement to survive such termination.

15. Force Majeure If either party is prevented from performing any of its obligations hereunder due to any cause which is beyond the non-performing party’s reasonable control, including fire, explosion, flood, or other acts of God; acts, regulations, or failure of public utilities or common carriers (a “Force Majeure Event”), such non-performing party shall not be liable for breach of this Agreement with respect to such non-performance to the extent any such non-performance is due to a Force Majeure Event. Such non-performance will be excused for three (3) months or as long as such event shall be continuing (whichever occurs sooner), provided that the non-performing party gives immediate written notice to the other party of the Force Majeure Event. Such non-performing party shall exercise all reasonable efforts to eliminate the Force Majeure Event and to resume performance of its affected obligations as soon as practicable.

16. Taxes VINTAGE shall assume liability for all taxes, excises or other charges which relate to the Products and are imposed by any local, state or federal authority after title to the Products passes to VINTAGE. VINTAGE further agrees to indemnify NORAMCO against any and all such liability for taxes as well as any reasonable legal fees or costs incurred by NORAMCO in connection therewith. To the best of NORAMCO’S knowledge, there are no such taxes, excises or other charges now in effect.

17. Relationship of the Parties The Relationship of VINTAGE and NORAMCO established by this Agreement is that of independent contractors, and nothing contained herein shall be construed to (i) give either party any right or authority to create or assume any obligation of any kind on behalf of the other or (ii) constitute the parties as partners, joint venturers, co-owners or otherwise as participants in a joint or common undertaking.

18. Publicity Neither party shall originate any publicity, news release, or other announcement, written or oral, whether to the public press, the trade, their customers or otherwise, relating to this Agreement or to the existence of any arrangement between the parties without the prior written approval of the other party.

19. Construction This Agreement shall be governed by, and shall be construed in accordance with, the laws of the State of New Jersey.

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20. Entire Agreement This Agreement (i) constitutes the entire agreement and understanding between the parties with respect to the subject matter hereof and there are no promises, representation, conditions, provision or terms related thereto other than those set forth in this Agreement and (ii) supersedes all previous understandings, agreements and representations between the parties, written or oral. No modification, change or amendment to this Agreement shall be effective unless in writing signed by each of the parties hereto.

21. Headings The headings used herein have been inserted for convenience only and shall not affect the interpretation of this Agreement.

22. Notices All notices and other communications hereunder shall be in writing and delivered personally or mailed by overnight, U.S. mail, postage prepaid, or by certified or registered U.S. mail, return receipt requested, postage prepaid, or sent by Federal Express or another internationally recognized courier service (billed to sender), to the following addresses:

if to NORAMCO:	NORAMCO of Delaware, Inc. 824 Marke Street, Suite 860 Wilmington, DE 19801 ATTN: Vice President Administration
if to VINTAGE:	VINTAGE Pharmaceuticals, Inc. 130 Vintage Drive Huntsville, AL 35811 ATTN: William S. Propst, Sr., President
	Telephone:	(256) 859-4011
	Fax:	(256) 859-2903

or to such other place as either party may designate by written notice to the other.

23. Failure to Exercise The failure of either party to enforce at any time for any period any provision hereof shall not be construed to be a waiver of such provision or of the right of such party thereafter to enforce each such provision, nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy. Remedies provided herein are cumulative and not exclusively of any remedies provided at law.

24. Assignment This Agreement may not be assigned by either party without the prior written consent of the other, except that VINTAGE or NORAMCO may assign its rights and/or obligations hereunder to any of its Affiliates. Subject to the foregoing sentence, this Agreement shall bind and inure to the benefit of the parties hereto and respective successors and assigns.

25. Severability Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, to the extent the economic benefits conferred by this Agreement to both parties remain substantially unimpaired, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.

11

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

VINTAGE PHARMACEUTICALS, INC. an Alabama corporation		NORAMCO, a division of McNeilab, Inc. a Pennsylvania corporation
BY:		BY:
NAME:	William S. Propst, Sr.	NAME: Michael B. Kindergan
TITLE:	President	TITLE:	Vice President, Administration

12

EXHIBIT A

***

EXHIBIT B

***

EXHIBIT C

***

EX-10.17.1

Exhibit 10.17.1

The confidential portions of this exhibit have been filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities and Exchange Act of 1934, as amended. REDACTED PORTIONS OF THIS EXHIBIT ARE MARKED BY AN ***.

Amendment to Supply Agreement

This Amendment dated January 16, 2007 is made by and between Noramco, Inc., a Georgia Corporation with its principle office at 500 Swede’s Landing Road, Wilmington, Delaware 19801 and its Affiliates (“NORAMCO”), Vintage Pharmaceuticals, LLC, and Vintage Pharmaceuticals, Inc., an Alabama corporation with its principle office at 130 Vintage Drive, Huntsville Alabama 35811 and its Affiliates (“VINTAGE”).

WHEREAS the parties hereto entered into a Supply Agreement whose effective date was January 1, 2001 and,

WHEREAS the parties have mutually agreed upon certain amendments to extend and modify said Supply Agreement,

NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements hereinafter set forth and those contained in the underlying Supply Agreement and incorporated herein by reference, the parties agree as follows:

I. Article 1.4 of the Supply Agreement is hereby revoked in its entirety and replaced in its entirety with the following Article 1.4:

“1.4 “Term” shall mean the term of the Supply Agreement, whose effective date was January 1, 2001, and this Amendment to the Supply Agreement, whose effective date is January 1, 2007, terminating, unless sooner terminated pursuant to this Agreement, on December 31, 2009.”

II. Article 4 of the Supply Agreement is hereby revoked in its entirety and replaced in its entirety with the following Article 4:

“4. Pricing

A. ***

i. The Base Price to be charged by NORAMCO for *** during the calendar year shall be:

Kilograms Purchased During a Calendar Year	Incremental Price / Kilogram		Average Price /  Kilogram at Example Volumes
0 to 3,000	$	***	$	*** @ 3,000 kilograms
3,001 to 6,000	$	***	$	*** @ 6,000 kilograms
6,001 to 7,000	$	***	$	*** @ 7,000 kilograms
7,001 to 7,500	$	***	$	*** @ 7,500 kilograms
7,500+	$	***	$	*** @ 9,000 kilograms

ii. The invoice price shall be the price applicable to each tier in column one of the table above. By way of example, the invoice price for the first 3,000 kilograms purchased by VINTAGE during a calendar year would be $*** per kilogram and the invoice price for the second 3,000 kilograms purchased during the calendar would be $*** per kilogram.

iii. NORAMCO will qualify a new process to produce ***. VINTAGE agrees to use its best efforts to qualify on a timely basis NORAMCO’s *** produced via the new process for use in SKUs accounting for at least ***% of its total annual requirements.

iv. VINTAGE will notify NORAMCO when it has filed applications with the Food and Drug Administration to use *** in SKUs accounting for at least ***% of its total annual requirements (“*** Filing Notice”). VINTAGE shall provide summary supporting documentation that the required applications have been filed.

NORAMCO will reduce the Base Price defined in 4.A.i. to the amounts in the table shown below eight calendar months after the date of the *** Filing Notice or whenever Vintage receives FDA approval – whichever is sooner:

Kilograms Purchased During a Calendar Year	Incremental Price /  Kilogram		Average Price / Kilogram at Example Volumes
0 to 3,000	$	***	$	*** @ 3,000 kilograms
3,001 to 6,000	$	***	$	*** @ 6,000 kilograms
6,001 to 7,000	$	***	$	*** @ 7,000 kilograms
7,001 to 7,500	$	***	$	*** @ 7,500 kilograms
7,500+	$	***	$	*** @ 9,000 kilograms

By way of example, if at the end of eight months after the date of the *** Filing Notice, VINTAGE had purchased 3,000 kilograms during the calendar year, the next 3,000 kilograms would be invoiced at a price of $*** per kilogram.

v. If the Base Prices in Article 4.A.i are applicable, on January 1, 2008 and on January 1, 2009 the Base Prices In Article 4.A.i shall be adjusted to equal the sum of:

a) (Base Price) times (0.4) times (*** price for 2008 or 2009 as appropriate) divided by (average *** paid in 2007)

b) (Base Price) times (0.6) times (Producer Price Index December 2007 or December 2008 as appropriate) divided by (Producer Price Index for December 2006).

2

NORAMCO will provide supporting documentation for the above calculations at VINTAGE’s request.

vi. VINTAGE will notify NORAMCO (“Competitive Offer Notification”) if, VINTAGE receives a written competitive offer to supply *** during the calendar year 2009 from a third party supplier which meets the following conditions:

a) The supplier’s *** is qualified for use in VINTAGE’s SKUs by FDA,

b) The offer is to supply at least ***% of VINTAGE’s annual requirements,

c) The quoted price per kilogram of *** at the volume equal to VINTAGE’S purchases from NORAMCO during calendar year 2008 (“Quoted Price”) is at least ***% lower than the Base Price per kilogram in the applicable Table in Article 4.A.i or Article 4.A.iv. as adjusted in Article 4.A.V. at the volume equal to VINTAGE’s purchases from NORAMCO during calendar year 2008 (“Supply Price”),

d) The quote includes a provision equivalent to the terms of Article 5 of the Supply Agreement.

Within thirty days of NORAMCO’s receipt of the Competitive Offer Notification, but not before January 1, 2009, NORAMCO will, at its sole discretion, either:

a) reduce the Base Prices in each volume tier of the applicable table in Article 4.A.L or Article 4.A.iv. by an amount *** to the difference between the Supply Price and the Quoted Price.

b) terminate the Supply Agreement.

B. ***

i. Base Price to be charged by NORAMCO for *** shall be $*** per kilogram

ii. Beginning on January 1, 2008 and on each ensuing January 1, the Base Price shall be adjusted to *** the sum of:

3

a) (Base Price) times (***) times (*** price for 2008 or 2009 as appropriate) divided by (average *** paid in 2007)

b) (Base Price) times (***) times (Producer Price Index December 2007 or December 2008 as appropriate) divided by (Producer price Index for December 2006).

NORAMCO will provide supporting documentation for the above calculations at VINTAGE’s request.

iii. If NORAMCO matches a competitive offer for *** in 2009 in accordance with Article 4.A.vi, the Base Price of *** shall be increased to $*** per kilogram.

C. ***

i. Base Price to be charged by NORAMCO for *** shall be $*** per kilogram.

ii. NORAMCO will qualify a new process to produce ***. VINTAGE agrees to use its best efforts to qualify on a timely basis *** produced via the new process for use in SKUs accounting for at least ***% of its total annual requirements.

iii. VINTAGE will notify NORAMCO when it has filed applications with the Food and Drug Administration to use *** in SKUs accounting for at least ***% of its total annual requirements (“*** Filing Notice”). VINTAGE shall provide summary supporting documentation that the required applications have been filed.

NORAMCO will reduce the Base Price defined in 4.A.i. to $*** per kilogram six calendar months after the date of the *** Filing Notice or whenever Vinatge receives FDA approval-whichever is sooner.

D. Volume Discount

If VINTAGE’s total purchases of all Products during a calendar year reach *** ($***), NORAMCO shall give VINTAGE a credit of *** ($***) which it may apply to the next shipments during that calendar year of any Product or combination of Products.”

III. Article 13 of the Supply Agreement is hereby revoked in its entirety and replaced with the following Article 13:

“13. Term

After December 31, 2009, this Agreement shall automatically renew for additional one-year terms unless, at least six (6) months prior to the termination date or the closing date of any subsequent renewal period, either party provides

4

written notice to the other of its intention to terminate”

IV All provisions contained in the original Supply Agreement by and between the parties which are not specifically changed, amended or revoked by this Amendment, shall remain in force and effective.

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

Vintage Pharmaceuticals, Inc.	Noramco, Inc.
By:	By:
Name: Tom Young	Name: Michael B. Kindergan
Date: January 18, 2007	Date: 1/23/07
Title: CEO, Vintage Pharmaceuticals, LLC & Vintage Pharmaceuticals, Inc.	Title: Vice President, Global Sales and Business Development

5

EX-10.17.2

Exhibit 10.17.2

The confidential portions of this exhibit have been filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities and Exchange Act of 1934, as amended. REDACTED PORTIONS OF THIS EXHIBIT ARE MARKED BY AN ***.

Amendment to Supply Agreement

This Amendment dated May 7, 2008 is made by and between Noramco, Inc., a Georgia Corporation with its principle office at 500 Swede’s Landing Road, Wilmington, Delaware 19801 and its Affiliates (“NORAMCO”) and Vintage Pharmaceuticals, Inc., an Alabama corporation with its principle office at 130 Vintage Drive, Huntsville Alabama 35811 and its Affiliates (“VINTAGE”).

WHEREAS the parties hereto entered into a Supply Agreement whose effective date was January 1, 2001 which was amended on January 16, 2007 (“First Amendment”) and,

WHEREAS the parties have mutually agreed upon certain amendments to extend and modify said Supply Agreement and the First Amendment,

NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements hereinafter set forth and those contained in the underlying Supply Agreement and incorporated herein by reference, the parties agree as follows:

I Article 1.4 of the Supply Agreement and the First Amendment are hereby revoked in their entirety and replaced with the following Article 13.

“Term shall mean the term of the Supply Agreement, whose effective date was January 1, 2001 and the First Amendment, whose effective date was January 17, 2007, and this Amendment whose effective date is May 7, 2008, terminating, unless sooner terminated pursuant to this Agreement, on December 31, 2011”

II. Article 3 of the Supply Agreement and the First Amendment are hereby revoked in their entirety and replaced with the following Article 3.

“3. Purchase Agreement.

During the Term of this Agreement and subject to the terms, conditions and limitations herein set forth, and further subject to NORAMCO’s ability to supply VINTAGE’s requirements, VINTAGE shall purchase from NORAMCO at least *** (***%) of VINTAGE’S Available Requirements for ***.

Between January 1, 2008 and December 31, 2009, subject to the terms, conditions and limitations herein set forth, and further subject to NORAMCO’s ability to supply VINTAGE’S requirements, VINTAGE shall purchase from NORAMCO at least *** (***%) of VINTAGE’s Available Requirements for *** and ***. For clarity VINTAGE shall have no obligation to purchase *** or *** from NORAMCO after December 31, 2009

If NORAMCO cannot supply VINTAGE’S Available Requirements of any Product, VINTAGE shall have the option of sourcing the Product that NORAMCO is unable to supply from another qualified supplier, subject to the terms of Section 5.

III. Article 13 of the Supply Agreement and the First Amendment are hereby revoked in their entirety and replaced with the following Article 13.

“13.Term

After December 31, 2011, the Agreement shall automatically renew for additional one year terms unless, at least six (6) months prior to the termination date or the closing date of any subsequent renewal period, either party provides written notice to the other of its intention to terminate.

IV. All provisions contained in the original Supply Agreement and in the First Amendment by and between the parties which are not specifically changed, amended or revoked by this Amendment, shall remain in force and effective.

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

Vintage Pharnaacputicals, Inc.	Noramco, Inc.
By:	By:
Name: Tony Young	Name: Michael B. Kindergan
Date: 5/8/08	Date: 5/9/08
Title: CEO	Title: Vice President, Marketing and Business Development

2

EX-10.17.3

Exhibit 10.17.3

The confidential portions of this exhibit have been filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities and Exchange Act of 1934, as amended. REDACTED PORTIONS OF THIS EXHIBIT ARE MARKED BY AN ***.

Amendment to Supply Agreement

This Third Amendment dated December 22, 2008, is made by and between Noramco, Inc., a Georgia Corporation with its principal office at 500 Swedes Landing Road, Wilmington, Delaware 19801 and its Affiliates (“NORAMCO”) and Vintage Pharmaceuticals, LLC, a Delaware corporation with its principal office at 130 VINTAGE Drive, Huntsville, Alabama 35811 and its Affiliates (“VINTAGE”).

WHEREAS the parties hereto entered into a Supply Agreement whose effective date was January 1, 2001 (“Supply Agreement”) and which was amended on January 16, 2007 (“First Amendment”) and May 7, 2008 (“Second Amendment”),

WHEREAS the parties have mutually agreed upon certain amendments to extend and modify said Supply Agreement and the First and Second Amendments,

NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements hereinafter set forth and those contained in the underlying Supply Agreement and Amendments and incorporated herein by reference, the parties agree as follows:

I. Article 1.3 of the Supply Agreement is hereby revoked in its entirety and replaced in its entirety with the following Article 1.3:

“1.3 “Products” shall mean ***.”

II. Article 3 of the Second Amendment shall be revoked its entirety and replaced with the following Article 3:

“3. Purchase Agreement

During the Term of this Agreement and subject to the terms, conditions and limitations herein set forth, and further subject to NORAMCO’s ability to supply VINTAGE’s requirements, VINTAGE shall purchase from NORAMCO at least *** (***%) of VINTAGE’s Available Requirements for Products to be sold in the Territory, except as noted below.

Between the period of July 1,2011 and December 31, 2011, VINTAGE shall purchase from NORAMCO at least *** (***%) of VINTAGE’s Available Requirements for ***.

If NORAMCO cannot supply VINTAGE’s Available Requirements, VINTAGE shall have the option of sourcing the PRODUCT that NORAMCO is unable to supply from another qualified supplier, subject to the terms of Section 5 hereof.

III. Article 4 of the Supply Agreement and the First amendment is hereby revoked in its entirety and replaced in its entirety with the following Article 4:

“4. Pricing

A. ***

i. The Base Price 2008 to be charged by NORAMCO for *** during the calendar year shall be:

Kilograms Purchased During a Calendar Year	Incremental Price / Kilogram		Average Price / Kilogram at Example Volumes
0 to 3,000	$	***	$	*** @ 3,000 kilograms
3,001 to 6,000	$	***	$	*** @ 6,000 kilograms
6,001 to 7,000	$	***	$	*** @ 7,000 kilograms
7,001 to 7,500	$	***	$	*** @ 7.500 kilograms
7,500+	$	***	$	*** @ 9,000 kilograms

ii. By way of example, the invoice price for the first 3,000 kilograms purchased by VINTAGE during a calendar year would be $*** per kilogram and the invoice price for the second 3,000 kilograms purchased during the calendar would be $*** per kilogram.

iii. NORAMCO has qualified a new process to produce ***. VINTAGE agrees to use its best efforts to qualify on a timely basis NORAMCO’s *** produced via the new process for use in SKUs accounting for at least *** (***%) of its total annual requirements.

iv. VINTAGE will notify NORAMCO when it has filed applications with the Food and Drug Administration to use *** in SKUs accounting for at least ***% of its total annual requirements (“*** Filing Notice”). VINTAGE shall provide summary supporting documentation that the required applications have been filed.

NORAMCO will reduce the Base Price defined in 4.A.i. to the amounts in the table shown below eight calendar months after the date of the *** Filing Notice or whenever VINTAGE receives FDA approval to use *** produced via the new process in SKUs accounting for at least *** (***%) of its total annual requirements – whichever is sooner:

Kilograms Purchased During a Calendar Year	Incremental Price  /Kilogram		Average Price / Kilogram at Example Volumes
0 to 3,000	$	***	$	*** @ 3,000 kilograms
3,001 to 6,000	$	***	$	*** @ 6,000 kilograms
6,000 +	$	***	$	*** @ 9,000 kilograms

By way of example, if at the end of nine months after the date of the ***

2

Filing Notice, VINTAGE had purchased 3,000 kilograms during the calendar year, the next 3,000 kilograms purchased during that calendar year would be invoiced at a price of $*** per kilogram.

v. If the Base Prices 2008 in Article 4.A.i are applicable, on January 1, 2009 or January 1 of subsequent years, the Base Prices In Article 4.A.i shall be adjusted to equal the sum of:

a) (Base Price) times (0.4) times (*** price for 2009 or subsequent year) divided by (average *** paid in 2008)

b) (Base Price) times (0.6) times (Producer Price Index December 2008 or subsequent year) divided by (Producer Price Index for December 2007).

NORAMCO will provide supporting documentation for the above calculations at VINTAGE’s request.

vi. VINTAGE will notify NORAMCO (“Competitive Offer Notification”) if, VINTAGE receives a written competitive offer to supply *** after January 1, 2009 from a third party supplier which meets the following conditions:

a) The supplier’s *** is qualified for use in VINTAGE’s SKUs by FDA,

b) The offer is to supply at least ***% of VINTAGE’s annual requirements,

c) The quoted price per kilogram of *** at the volume equal to VINTAGE’s purchases from NORAMCO during the prior calendar year (“Quoted Price”) is at least ***% lower than the Base Price -2008 in the applicable Table in Article 4.A.i or Article 4.A.iv. as adjusted by:

a) Article 4.A.v. and

b) the percentage of prior year’s rebate in Article D to the prior year’s total purchases of all Products

at the volume equal to VINTAGE’s purchases from NORAMCO during the prior year (“Supply Price”),

d) The quote includes a provision equivalent to the terms of Article 5 of the Supply Agreement.

VINTAGE’s Certified Public Accountants shall verify the Quoted Price.

Within thirty days of NORAMCO’s receipt of the Competitive Offer Notification, NORAMCO will, at its sole discretion, either:

3

a) reduce the Base Prices in each volume tier of the applicable table in Article 4.A.i. or Article 4.A.iv. by an amount equal to the difference between the Supply Price and the Quoted Price. The revised Base Prices would be applicable the later of: a) thirty days after NORAMCO’s receipt of the Competitive Offer Notification or b) January 1, 2009.

b) terminate the Supply Agreement.

B. ***

i. Base Price 2008 to be charged by NORAMCO for *** shall be $*** per kilogram

ii. Beginning on January 1, 2009 and on each ensuing January 1, the Base Price shall be adjusted to equal the sum of:

a) (Base Price) times (0.7) times (*** price for 2009 or subsequent year) divided by (average *** paid in 2008)

b) (Base Price) times (0.3) times (Producer Price Index December 2008 or subsequent year) divided by (Producer price Index for December 2007).

NORAMCO will provide supporting documentation for the above calculations at VINTAGE’s request.

C. ***

i. Base Price -2008 to be charged by NORAMCO for *** during the calendar year shall be:

Kilograms Purchased During a Calendar Year	Incremental Price /Kilogram			Average Price / Kilogram at Example Volumes
0 to 2,000	$	*	**	$*** @ 2,000 kilograms
2,001 to 4,000	$	*	**	$*** @ 4,000 kilograms
4,001 +	$	*	**	$*** @ 6,000 kilograms

By way of example, the invoice price for the first 2,000 kilograms purchased by VINTAGE during a calendar year would be $*** per kilogram and the invoice price for the second 2,000 kilograms purchased during the calendar would be $*** per kilogram

ii. VINTAGE will notify NORAMCO (“Competitive Offer Notification”) if, VINTAGE receives a written competitive offer to supply *** after January 1, 2011 from a third party supplier which meets the following conditions:

4

a) The supplier’s *** is qualified for use in VINTAGE’s SKUs by FDA,

b) The offer is to supply at least ***% of VINTAGE’s annual requirements.

c) The quoted price per kilogram of *** at the volume equal to VINTAGE’s purchases from NORAMCO during the prior calendar year (“Quoted Price”) is at least ***% lower than the Base Price -2008 in the applicable Table in Article 4.C.i. or as adjusted by:

a) the percentage of prior year’s rebate in Article D to the prior year’s total purchases of all Products

b) at the volume equal to VINTAGE’s purchases from NORAMCO during the prior year (“Supply Price”),

d) The quote includes a provision equivalent to the terms of Article 5 of the Supply Agreement.

VINTAGE’S Certified Public Accountants shall verify the Quoted Price.

Within thirty days of NORAMCO’s receipt of the Competitive Offer Notification, NORAMCO will, at its sole discretion, either:

a) reduce the Base Prices in each volume tier of the applicable table in Article 4.C.i. by an amount equal to the difference between the Supply Price and the Quoted Price. The revised Base Prices would be applicable the later of: a) thirty days after NORAMCO’s receipt of the Competitive Offer Notification or b) January 1, 2011.

b) terminate the Supply Agreement.

D. ***

i. Base Price to be charged by NORAMCO shall be $*** per kilogram for all volumes.

ii. VINTAGE will notify NORAMCO (“Competitive Offer Notification”) if, VINTAGE receives a written competitive offer to supply *** after January 1, 2011 from a third party supplier which meets the following conditions:

a) The supplier’s *** is qualified for use in VINTAGE’s SKUs by FDA,

b) The offer is to supply at least ***% of VINTAGE’s annual requirements,

c) The quoted price per kilogram of *** at the volume equal to VINTAGE’s purchases from NORAMCO during the

5

prior calendar year (“Quoted Price”) is at least ***% lower than the Base Price -2008 or as adjusted by:

c) the percentage of prior year’s rebate in Article D to the prior year’s total purchases of all Products

d) at the volume equal to VINTAGE’s purchases from NORAMCO during the prior year (“Supply Price”),

d) The quote includes a provision equivalent to the terms of Article 5 of the Supply Agreement.

VINTAGE’s Certified Public Accountants shall verify the Quoted Price.

Within thirty days of NORAMCO’s receipt of the Competitive Offer Notification, NORAMCO will, at its sole discretion, either:

a) reduce the Base Price by an amount equal to the difference between the Supply Price and the Quoted Price. The revised Base Price would be applicable the later of: a) thirty days after NORAMCO’s receipt of the Competitive Offer Notification orb) January 1, 2011.

b) terminate the Supply Agreement.

E. ***

i. Base Price - 2008 to be charged by NORAMCO shall be $*** per kilogram for all volumes.

ii. Beginning on January 1, 2009 and on each ensuing January 1, the Base Price shall be adjusted to equal the sum of:

c) (Base Price) times (0.5) times (*** price for 2009 or subsequent year) divided by (average *** paid in 2008)

d) (Base Price) times (0.5) times (Producer Price Index December 2008 or subsequent year) divided by (Producer price Index for December 2007).

NORAMCO will provide supporting documentation for the above calculations at VINTAGE’s request.

F. ***

i. Base Price to be charged by NORAMCO shall be:

Kilograms Purchased During a Calendar Year	Incremental Price / Kilogram	Average Price / Kilogram at Example Volumes
0 to 250	$***		$*** @ 2,000 kilograms
251 to 1,000	$***		$*** @ 1,000 kilograms
1,001 +	$***		$*** @ 2,000 kilograms

6

By way of example, the invoice price for the first 250 kilograms purchased by VINTAGE during a calendar year would be $*** per kilogram and the invoice price for the second 7500 kilograms purchased during the calendar would be $*** per kilogram.

ii. VINTAGE will notify NORAMCO (“Competitive Offer Notification”) if, VINTAGE receives a written competitive offer to supply *** after January 1, 2011 from a third party supplier which meets the following conditions:

a) The supplier’s *** is qualified for use in VINTAGE’s SKUs by FDA,

b) The offer is to supply at least ***% of VINTAGE’s annual requirements,

c) The quoted price per kilogram of *** at the volume equal to VINTAGE’s purchases from NORAMCO during the prior calendar year (“Quoted Price”) is at least ***% lower than the Base Price -2008 in the applicable Table in Article 4.F.i. or as adjusted by:

e) the percentage of prior year’s rebate in Article D to the prior year’s total purchases of all Products

f) at the volume equal to VINTAGE’s purchases from NORAMCO during the prior year (“Supply Price”),

d) The quote includes a provision equivalent to the terms of Article 5 of the Supply Agreement.

VINTAGE’s Certified Public Accountants shall verify the Quoted Price.

Within thirty days of NORAMCO’s receipt of the Competitive Offer Notification, NORAMCO will, at its sole discretion, either:

a) reduce the Base Prices in each volume tier of the applicable table in Article 4.F.i. by an amount equal to the difference between the Supply Price and the Quoted Price. The revised Base Prices would be applicable the later of: a) thirty days after NORAMCO’s receipt of the Competitive Offer Notification or b) January 1, 2011.

b) terminate the Supply Agreement.

G. ***

i. Base Price to be charged by NORAMCO shall be:

7

Kilograms Purchased During a Calendar Year	Incremental Price / Kilogram			Average Price / Kilogram at Example Volumes
0 to 500	$	*	**	$*** @    500 kilograms
500+	$	*	**	$*** @ 1,000 kilograms

By way of example, the invoice price for the first 500 kilograms purchased by VINTAGE during a calendar year would be $*** per kilogram and the invoice price for any amounts over 500 kilograms purchased during the calendar would be $*** per kilogram.

ii. VINTAGE will notify NORAMCO (“Competitive Offer Notification”) if, VINTAGE receives a written competitive offer to supply *** after January 1, 2011 from a third party supplier which meets the following conditions:

a) The supplier’s *** is qualified for use in VINTAGE’s SKUs by FDA,

b) The offer is to supply at least ***% of VINTAGE’s annual requirements,

c) The quoted price per kilogram of *** at the volume equal to VINTAGE’s purchases from NORAMCO during the prior calendar year (“Quoted Price”) is at least ***% lower than the Base Price -2008 in the applicable Table in Article 4.G.i. or as adjusted by:

g) the percentage of prior year’s rebate in Article D to the prior year’s total purchases of all Products

h) at the volume equal to VINTAGE’s purchases from NORAMCO during the prior year (“Supply Price”),

d) The quote includes a provision equivalent to the terms of Article 5 of the Supply Agreement.

VINTAGE’s Certified Public Accountants shall verify the Quoted Price.

Within thirty days of NORAMCO’s receipt of the Competitive Offer Notification, NORAMCO will, at its sole discretion, either:

a) reduce the Base Prices in each volume tier of the applicable table in Article 4.G.L by an amount equal to the difference between the Supply-Price and the Quoted Price. The revised Base Prices would be applicable the later of: a) thirty days after NORAMCO’s receipt of the Competitive Offer Notification or b) January 1, 2011.

b) terminate the Supply Agreement.

8

H. Volume Discount

Beginning in calendar year 2009, if VINTAGE’s total purchases of all Products during a calendar year reach *** ($***), NORAMCO shall give VINTAGE a credit of *** ($***) which it may apply to the next shipments of any Product or combination of Products.”

Beginning calendar year 2009, if VINTAGE’s total purchases, including those purchases to which the above credit applied, of all Products during a calendar year reach *** ($***) NORAMCO shall give VINTAGE a credit of *** ($***) which it may apply to the next shipments of any Product or combination of Products.”

Beginning calendar year 2009, if VINTAGE’s total purchases of all Products during a calendar year, including those purchases to which the above two credits applied, reach *** ($***) NORAMCO shall give VINTAGE a credit of *** ($***) which it may apply to the next shipments of any Product or combination of Products.”

IV. All provisions contained in the original Supply Agreement and in the First and Second Amendments by and between the parties which are not specifically changed, amended or revoked by this Amendment, shall remain in force and effective.

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

Vintage Pharmaceuticals, LLC	Noramco, Inc.
By:	By:
Name: Mike Urwin	Name: Michael B. Kindergan
Date: 12-22-2008	Date:
Title: CEO	Title: Vice President, Marketing and Business Development

9

EX-10.32

Exhibit 10.32

The confidential portions of this exhibit have been filed separately with the Securities and

Exchange Commission pursuant to a confidential treatment request in accordance with

Rule 24b-2 of the Securities and Exchange Act of 1934, as amended. REDACTED

PORTIONS OF THIS EXHIBIT ARE MARKED BY AN ***

SALES AND PROMOTIONAL SERVICES AGREEMENT

This Sales and Promotional Services Agreement (this “Agreement”) effective as of October 1, 2010 (the “Effective Date”) is entered into by and between VENTIV COMMERCIAL SERVICES, LLC, a New Jersey limited liability company (“VCS”), and ENDO PHARMACEUTICALS INC., a Delaware corporation (“CLIENT”). VCS and CLIENT are sometimes referred to herein collectively as the “Parties,” and individually as a “Party.”

RECITALS:

WHEREAS, VCS provides integrated outsourced sales and marketing solutions, including client field forces to the healthcare industry, and has certain expertise in the marketing and promotion of pharmaceutical products; and

WHEREAS, CLIENT is an integrated pharmaceutical company that requires the sales and promotional services of VCS as more fully described in this Agreement (the “Services”); and

WHEREAS, VCS and CLIENT originally signed a Sales Representative Services Agreement effective April 1, 2008 that was subsequently amended on May 8, 2009, May 10, 2010 and August 10, 2010 (the “Prior Agreement”); and

WHEREAS, the Prior Agreement shall terminate on the Effective Date, subject to any provision thereof that specifically survives termination; and

WHEREAS, VCS and CLIENT desire to enter into this Agreement under which VCS shall continue to provide the Services to the CLIENT on the terms set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual premises contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereby agree as follows:

ARTICLE I. DEFINITIONS

1.1. “Active Representative Days” means the aggregate number of days that the VCS Sales Representatives are considered “Active Representatives”.

1.2. “Active Representatives” means VCS Sales Representatives who have completed all CLIENT and VCS-required training and are engaged in Detailing or otherwise engaged in CLIENT-required or approved activities pursuant to this Agreement. Any VCS Sales Representative who is on a Time Out of Territory shall not be considered an Active Representative. For clarification, any VCS Sales Representative who otherwise meets the requirements in the definition of “Active Representative” and who is not on a Time Out of Territory shall be considered an Active Representative.

1.3. “Active Territory” means a Territory in which there are Active Representatives.

1.4. “Adverse Event” means any untoward medical occurrence in a patient, consumer or clinical investigation subject associated with the use of a Product that does not necessarily have a causal relationship with this treatment. An Adverse Event can therefore be any unfavorable and unintended sign (including an abnormal laboratory finding), symptom, or disease temporally associated with the use of a Product, whether or not related to such Product. In addition, all cases of apparent drug-drug interaction, pregnancy (with or without outcome), exposure during breastfeeding, paternal exposure, lack of efficacy, overdose, drug abuse and misuse, drug maladministration or accidental exposure and dispensing errors are collected and databased even if no Adverse Event has been reported.

1.5. “Affiliate” means any Person who directly or indirectly controls or is controlled by or is under common control with a Party. For purposes of this definition, “control” or “controlled” shall mean ownership directly or through one or more Affiliates, of more than fifty percent (50%) of the shares of stock entitled to vote for the election of directors, in the case of a corporation, or more than fifty percent (50%) of the equity interests in the case of any other type of legal entity, status as a general partner in any partnership, or any other arrangement whereby a Party controls or has the right to control the Board of Directors or equivalent governing body of a corporation or other entity, or the ability to cause the direction of the management or policies of a corporation or other entity.

1.6. “Agreement” is defined in the preamble of this Agreement.

1.7. “Agreement Territory” means the United States.

1.8. “Agreement Year” means a fiscal year commencing on October 1 and ending September 30.

1.9. “Arbitration” is defined in Section 12.7(c) of this Agreement.

1.10. “Arbitration Request” is defined in Section 12.7(c)(i) of this Agreement.

1.11. “Assigned Vehicles” is defined in Section 3.2(o)(ii) of this Agreement.

1.12. “Arbitrators” is defined in Section 12.7(d)(i) of this Agreement.

1.13. “Auditee” is defined in Section 4.6(b)(i) of this Agreement.

1.14. “Audit Rights Holder” is defined in Section 4.6(b)(i) of this Agreement.

1.15. “Audit Team” is defined in Section 4.6(b)(i) of this Agreement.

1.16. “At-Risk Management Fee” is defined in Section 4.1(a) of this Agreement.

1.17. “Budget” is defined in Section 4.2(a) of this Agreement.

1.18. “Business Day” means any day other than a Saturday, a Sunday, an approved holiday in accordance with CLIENT’s holiday schedule or a day on which commercial banks in Philadelphia, Pennsylvania are authorized or required by Law to remain closed. CLIENT’S holiday schedule may

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be modified by CLIENT from time to time and when modified a copy shall be provided to VCS. The CLIENT’s current holiday schedule has been submitted to VCS.

1.19. “Call” means a face-to-face presentation by a Sales Representative to a Target Prescriber which consists of one or more Details and includes, but is not limited to, having a discussion with the Target Prescriber regarding the features and benefits of the Products, their contraindications, FDA approved uses and other pertinent information, and providing the Target Prescriber Product Literature and samples of the Products.

1.20. “Call Plan” means a plan designed by CLIENT, which is intended to enhance the efficiency and effectiveness of the Sales Representatives in making Calls. The Call Plan may be modified by CLIENT from time to time and when modified a copy shall be provided to VCS.

1.21. “CLIENT” is defined in the preamble of this Agreement.

1.22. “CLIENT Representatives” is defined in Section 10.1 of this Agreement.

1.23. “Client Pass-through Expenses” means those certain “Pass-through Costs” referred to on Schedule B.

1.24. “Competing Product” means the products listed on Schedule A-1A under the caption “Competing Products” as may be amended and updated by mutual agreement of the Parties.

1.25. “Components” is defined in Schedule A-1A to this Agreement.

1.26. “Confidential Information” is defined in Section 6.1(a) of this Agreement.

1.27. “Conversion” is defined in Section 9.2 of this Agreement.

1.28. “DDMAC” means the United States Department of Health and Human Services, Food and Drug Administration Center for Drug Evaluation and Research, Office of Medical Policy, Division of Drug Marketing, Advertising and Communications.

1.29. “Detail” is defined on Schedule A-1 to this Agreement.

1.30. “Detailing” is defined on Schedule A-1 to this Agreement.

1.31. “Direct Marketing Expenses” means the funds (which are part of the Budget) to facilitate the Detailing activities of Sales Representatives to Target Prescribers.

1.32. “Disclosing Party” is defined in Section 6.1(a).

1.33. “Distribution Agent” is defined in Section 3.2(f) of this Agreement.

1.34. “District Manager” means an employee of VCS who is engaged under this Agreement to manage VCS Sales Representatives in specified Territories.

1.35. “Effective Date” is defined in the preamble of this Agreement.

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1.36. “Expected Active Representative Days” means all Business Days in a calendar quarter.

1.37. “FDA” means the United States Food and Drug Administration and any successor agency thereto.

1.38. “Field” means the treatment of pain associated with osteoarthritis in joints amenable to topical treatment.

1.39. “Fixed Management Fee” is defined in Section 4.1(a) of this Agreement.

1.40. “FROVA^®” is defined in Section 1.62 of this Agreement.

1.41. “GAAP” means U.S. Generally Accepted Accounting Principles consistently applied by the applicable Person.

1.42. “Governmental Authority” means any court, agency, authority, department, regulatory body or other instrumentality of any government or country or of any national, federal, state, provincial, regional, county, city or other political subdivision of any such government or any supranational organization of which any such country is a member, which has competent and binding authority to decide, mandate, regulate, enforce, or otherwise control the activities of the Parties or their Affiliates contemplated by this Agreement.

1.43. “IC Crediting Rules” means the incentive compensation crediting rules as established from time to time by CLIENT in its base plan documents.

1.44. “Inactive Territories” means a Territory that does not have an Active Representative. An Inactive Territory that is inactive for at least *** (***) Business Days in a calendar quarter shall be considered an Inactive Territory for the entire calendar quarter. In the event CLIENT conducts a Conversion, the applicable vacated Territory shall not be considered an Inactive Territory until *** (***) days from the date of Conversion so long as VCS has hired a replacement VCS Sales Representative within such period.

1.45. “Information Technology” is defined in Section 3.2(k) of this Agreement.

1.46. “Law” or “Laws” means all laws, statutes, rules, regulations, orders, judgments, injunctions and/or ordinances of any Governmental Authority, including the PhRMA Code and the rules, regulations, guidelines and other requirements of DDMAC.

1.47. “Leased Vehicles” is defined in Section 3.2(o)(i) of this Agreement.

1.48. “LIDODERM^®” is defined in Section 1.62 of this Agreement.

1.49. “Losses” is defined in Section 10.1 of this Agreement.

1.50. “National Sales Director” means, as to each Party, the individual designated by such Party to lead the project to which this Agreement relates, through whom all major communications will be channeled and who will be responsible for high level support within and between the respective Parties’ organizations in relation to this Agreement, including overseeing all significant

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operational and other issues in connection with the Detailing and promotion activities and the Services to be performed hereunder.

1.51. “Novartis” means, collectively, Novartis, AG and Novartis Consumer Health, Inc.

1.52. “Novartis Agreement” means that certain License and Supply Agreement dated March 3, 2008 by and between CLIENT and Novartis, as same may be amended from time to time.

1.53. “NSAID” means a non-steroidal anti-inflammatory drug.

1.54. “OPANA^® ER” is defined in Section 1.62 of this Agreement.

1.55. “OTC Product” means a pharmaceutical product for use in humans that has been approved by the FDA for sale to customers and/or patients in the Agreement Territory without a prescription.

1.56. “Party” or “Parties” is defined in the preamble of this Agreement.

1.57. “PDMA” means the Prescription Drug Marketing Act of 1987, as amended, and the regulations promulgated thereunder.

1.58. “Person” means and includes an individual, partnership, joint venture, limited liability company, a corporation, a firm, a trust, an unincorporated organization and a government or other department or agency thereof.

1.59. “PhRMA Code” means the PhRMA Code on Interactions with Healthcare Professionals, as in effect from time to time.

1.60. “Primary Detail” means a Detail during which one of the Products is the most prominent item presented in the Call and comprises, on the average, approximately two-thirds (67%) of the time and cost of the Call.

1.61. “Primary Detail Equivalent” or “PDE” is calculated as 100% of Primary Details plus 50% of Secondary Details.

1.62. “Products” means VOLTAREN^® Gel (diclofenac sodium topical gel 1%) (“VOLTAREN^®”), LIDODERM^® (lidocaine patch 5%) (“LIDODERM^®”), FROVA^® (frovatriptan succinate tablets) (“FROVA^®”), OPANA^® ER (oxymorphine hydrochloride) Extended Release Tablet CII (“OPANA^® ER”) and any additional products added by CLIENT to be Detailed by the Sales Representatives pursuant to this Agreement and listed on Schedule A-1A to this Agreement from time to time; provided, however, in the event an additional product is added by CLIENT, the IC weighting of the Products as set forth on Schedule B shall be adjusted by CLIENT in its sole discretion.

1.63. “Product Literature” shall mean promotional, informative and other written information concerning a Product.

1.64. “Professionals” means physicians and other health care practitioners who are permitted under the Laws of the United States to prescribe the Products.

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1.65. “Project Manager” means, as to VCS, an employee of VCS who is engaged under this Agreement to assist VCS management and to coordinate administrative support for the VCS Field Force.

1.66. “Representative” or “Representatives” is defined in Section 6.1(b) of this Agreement.

1.67. “Receiving Party” is defined in Section 6.1(a).

1.68. “Rx Sales” means the total number of prescriptions filled with respect to any Product as measured by IMS Prescription Audit or other third party vendor selected by CLIENT from time to time, subject to the application of IC Crediting Rules. Appropriate adjustments in the measurement of Rx Sales agreed to by the Parties shall be made in the event that any third party vendor selected by CLIENT as referred to above uses different measurement metrics than the previous vendor.

1.69. “Sales Representative” means a VCS Sales Representative.

1.70. “Secondary Detail” means a Detail during which one of the Products is the second (2nd) most prominent item presented in the Call and comprises, on average, approximately one third (33%) of the time and cost of the Call.

1.71. “Senior Officers” means the respective Chief Executive or Operating Officers (or any designee thereof) of the Parties.

1.72. “Services” has the meaning given to such term in the Recitals to this Agreement.

1.73. “Significant Loss” is defined in Schedule A-2.

1.74. “Spare Pool Threshold” is defined in Section 3.2(k).

1.75. “State Disclosure Logs” is defined in Section 4.1(c) of this Agreement.

1.76. “Target Prescriber” means, with respect to the Products, one of the specifically identified Professionals within a Sales Representative’s Territory to be Called upon by the Sales Representative based on CLIENT’s proprietary analysis of physician opportunities as set forth in CLIENT’s Call Plan.

1.77. “Term” is defined in Article II of this Agreement.

1.78. “Territories” means the respective towns, cities and other subdivisions and geographical areas located within the Agreement Territory to which the applicable Sales Representatives are assigned.

1.79. “Theft” is defined in Schedule A-2.

1.80. “Threshold 1 Arbitrator” is defined in Section 12.7(d)(i) of this Agreement.

1.81. “Time Out of Territory” means a leave of absence, an unapproved absence, an absence for illness that continues for more than *** (***) Business Days in any calendar month, a

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pre-approved vacation that continues for more than *** (***) Business Days in any calendar month or a combination of illness and pre-approved vacation that continues for more than *** (***) Business Days in any calendar month.

1.82. “VCS” is defined in the preamble of this Agreement.

1.83. “Variant Amount” is defined in Section 4.1(d) of this Agreement.

1.84. “VCS Field Force” means the VCS Sales Representatives, Project Manager, District Managers and National Sales Director providing Services pursuant to this Agreement.

1.85. “VCS Field Force Information” means the information required to be provided by VCS pursuant to Section 4.1(b) with respect to each Member of the VCS Field Force in the form attached hereto as Schedule A-1F.

1.86. “VCS Sales Representative” means an individual employed by VCS who Details the Products to Target Prescribers in accordance with this Agreement.

1.87. “VCS Representatives” is defined in Section 10.1 of this Agreement.

1.88. “VOLTAREN^®” is defined in Section 1.62 of this Agreement.

1.89. “Works” is defined in Schedule A-1A.

ARTICLE II. TERM

Subject to the terms of Article XI, this Agreement shall continue until 12:00am Eastern Daylight Time on October 1, 2011 (as same may be extended as provided herein, the “Term”). CLIENT may extend the Term for an additional period, not to exceed *** (***) days, specified in a written notice delivered by CLIENT to VCS at least sixty (60) days prior to the expiration of the then current Term. In the event CLIENT elects to extend the Term for an additional *** (***) day period, all terms and conditions of this Agreement, ***.

ARTICLE III. SCOPE OF SERVICES, PROFESSIONALISM AND COMPLIANCE

3.1. The Scope of Services. CLIENT hereby continues to engage VCS, and VCS hereby accepts such continued engagement, to provide the Services pursuant to the terms of this Agreement and the Schedules attached to this Agreement. Such engagement shall be on a nonexclusive basis and CLIENT shall at all times have the right to engage any other Person to provide services (including, without limitation, services similar to the Services) that CLIENT, in its sole discretion, deems necessary or appropriate. The Services to be provided under this Agreement are described in this Agreement and the various Schedules hereto, including Schedule A-1 through Schedule A-2.

3.2. Sales Efforts, Professionalism and Compliance.

a. VCS shall maintain an experienced, well-trained VCS Field Force, whose time is dedicated exclusively to the promotion of the Products. The number of Primary Detail Equivalents (PDEs) for each Product shall be as designated by CLIENT from time to time through a

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collaborative Call Plan process in which VCS Sales Representatives and District Managers shall be involved and provide input in the selection of Target Prescribers. The resulting Call Plan and PDE requirements shall be reviewed and approved by VCS. The Rx Sales goal and IC weighting for each Product will be communicated by CLIENT to VCS at the beginning of each IC period. The Primary Detail Equivalents shall be carried out in accordance with the Call Plan and the VCS Field Force shall collectively provide a minimum of *** (***%) percent of the required PDEs for each Product against Call Plan Target Prescribers during each Call Plan period.

b. Commencing October 1, 2010, the VCS Field Force shall consist of 228 Sales Representatives, 24 District Managers, one Project Manager, and one National Sales Director (collectively, the “Initial Total Headcount”). Each District Manager and Sales Representative shall have the qualifications and meet the hiring profile and criteria set forth on Schedule A-1C. The Project Manager and National Sales Director designated by VCS shall be subject to the approval of CLIENT, which approval shall not be unreasonably withheld. CLIENT hereby designates Larry Romaine as its National Sales Director. VCS hereby designates Tom Bonk as its National Sales Director. Each Party may change its National Sales Director upon written notice to the other Party. CLIENT reserves the right, in its sole discretion, *** by delivery of forty-five (45) days’ prior written notice to VCS at any time and from time to time, as CLIENT’s business needs may reasonably require. In the event CLIENT exercises such right: *** (v) the Parties shall discuss and determine in good faith the necessary timing for the implementation of such ***, provided that such implementation shall be completed within forty-five (45) days from the date of VCS’ receipt of CLIENT’s notice; and (vi) the Parties shall promptly enter into an amendment to this Agreement to reflect the foregoing.

c. Intentionally omitted.

d. The VCS Field Force shall have a thorough knowledge of the Products and their associated disease entities in respect to which Products CLIENT has provided training in accordance with this Agreement.

e. VCS shall employ its expertise and best professional judgment to direct the Detailing and promotion activities to Target Prescribers identified from time to time by CLIENT. VCS shall be responsible to ensure that the Sales Representatives Detail the Products in an accurate and compliant manner in an effort to enable Target Prescribers to obtain all information necessary or appropriate in connection with prescribing the Products.

f. All promotional materials (as updated from time to time) to be used by the VCS Field Force pursuant to this Agreement shall be chosen and/or approved by CLIENT and CLIENT shall be responsible to ensure the compliance of such promotional materials with applicable Law. All samples and promotional materials shall be disseminated by CLIENT in compliance with applicable Law and such distribution shall occur directly by CLIENT or through a distribution agent selected by CLIENT from time to time (the “Distribution Agent”) to the VCS Field Force. VCS shall be responsible to secure appropriate physical space (including temperature-controlled storage space for Product samples) for the storage of any and all materials distributed by CLIENT or by the Distribution Agent to the VCS Field Force. VCS shall be responsible to ensure that the VCS Field Force stores and maintains such materials in the designated space.

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g. VCS shall be responsible for ensuring that, upon receipt thereof, all samples, promotional and other materials are handled and distributed by VCS and the VCS Field Force in accordance with, and VCS shall comply and shall be responsible to ensure that the VCS Field Force complies with any and all reporting and other obligations (including, without limitation, all obligations regarding reporting of samples lost in transit, a Significant Loss of samples, a theft of drug samples and all falsification of sample documents) under, CLIENT’s Sample Accountability Policies and Procedures previously provided to VCS by letter dated May 9, 2008 (as they may be amended or otherwise modified from time to time by CLIENT (such amendments and modifications to be provided by CLIENT to VCS in advance and in writing)) and, as more specifically provided below, under all applicable Laws. CLIENT shall be responsible for ensuring that its Sample Accountability Policies and Procedures comply with applicable Law. In connection with its reporting obligations under this Section 3.2(g), VCS shall be responsible for complying with the terms and conditions set forth in Schedule A-2 of this Agreement. The additional terms and conditions regarding sample management and accountability are set forth in Schedule A-2 of this Agreement.

h. VCS shall comply and be responsible to ensure that the VCS Field Force complies with any and all reporting and other obligations imposed by any state or other jurisdiction (including, without limitation, all obligations regarding providing to CLIENT for dissemination to the applicable state or other jurisdiction reports of expenses incurred in the course of the VCS Field Force’s marketing efforts) and as more specifically described in Section 4.1(c).

i. The Services shall be performed by VCS and the VCS Field Force (i) in a professional manner consistent with industry standards; (ii) in conformance with that level of care and skill ordinarily exercised by other professional contract sales organizations; and (iii) in compliance with all applicable Laws. Each VCS Field Force member shall be subject to removal from providing Services to CLIENT pursuant to this Agreement in accordance with the provisions set forth in Schedule A-1. Any such VCS Field Force member who is so removed shall be promptly replaced by VCS. VCS shall retain, in all respects, all liability and obligations of any kind or nature with respect to any employment-related claims arising out of or in connection with the activities contemplated by this Agreement and/or the Services provided by the applicable VCS Field Force member. The previous sentence shall not prevent VCS from seeking indemnification pursuant to Section 10.2(iii).

j. VCS shall promote the Products, and shall cause the VCS Field Force to promote the Products, in strict adherence to applicable Law and professional requirements and CLIENT policies (provided to VCS in advance and in writing) that are applicable to the type of Services contemplated hereunder and which are utilized by CLIENT generally in its business, including ensuring that (i) no member of the VCS Field Force has been (A) convicted of an offense related to any federal or state health care program; (B) excluded or otherwise rendered ineligible for federal or state health care program participation; or (C) debarred under Subsection (a) or (b) of Section 306 of the U.S. Food, Drug and Cosmetic Act, as amended from time to time (21 U.S.C. § 301 et seq.); and (ii) no person on any FDA Clinical Investigator Enforcement lists (including the following: (1) Disqualified/Totally Restricted List, (2) Restricted List and (3) Adequate Assurances List) will participate in the provision of the Services. If at any time VCS becomes aware that any member of the VCS Field Force who participated or is participating in the provision of the Services is on, or is being added to the FDA Debarment List or any FDA Clinical Investigator Enforcement Lists, VCS shall provide written notice of this to CLIENT within 24 hours of VCS having become

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aware of this fact and will immediately terminate such person from conducting any activity under this Agreement, subject to applicable Law. Further, in connection with any activity under this Agreement, VCS shall, and shall cause all members of the VCS Field Force to, comply in all material respects with the Office of Inspector General Compliance Program Guidance for Pharmaceutical Manufacturers, April 2003, PDMA, state Laws governing the storage and distribution of pharmaceutical samples and aggregate spending on physician gifts, entertainment and expenses, the PhRMA Code, as in effect from time to time, Section 1128B(b) of the Social Security Act, the AMA Guidelines on Gifts to Physicians from Industry, HIPAA and all other applicable Laws. CLIENT and VCS shall mutually agree on procedures for auditing, monitoring and training the VCS Field Force to ensure compliance with this Section 3.2(j).

k. CLIENT shall provide all laptops and printers and all necessary software, hardware and related equipment (collectively, “Information Technology”) necessary for the performance of the Services hereunder. VCS shall ensure that the members of the VCS Field Force use the appropriate level of care in the handling and use of all such Information Technology and shall provide a report identifying the location of each VCS Field Force member within fifteen (15) days after the end of each calendar quarter during the Term in order to enable CLIENT to monitor the location of all Information Technology. VCS shall provide CLIENT with all information and applicable verifying documentation (e.g., police reports) identifying any damaged or stolen Information Technology. CLIENT shall use commercially reasonable efforts to ensure that any documented lost, damaged or stolen Information Technology is repaired or replaced within two (2) Business Days after CLIENT receives written notice thereof. CLIENT shall be solely responsible for all costs, damages, losses and liabilities associated with the repair or replacement of damaged, lost or stolen Information Technology (subject to normal wear and tear) (collectively, “Replacement Costs”) *** (***%) percent of the number of computers and other Information Technology provided to VCS for use by the VCS Field Force (the “Replacement Threshold”). VCS shall be solely responsible for all Replacement Costs in excess of the Replacement Threshold, and CLIENT shall, at its sole discretion, either bill VCS for such Replacements Costs or set off such Replacement Costs against other amounts owed to VCS hereunder.

l. VCS shall comply, and shall cause any subcontractor that it is permitted to use hereunder to comply, with the terms and conditions of the Novartis Agreement applicable to it, including all compliance, confidentiality, record keeping, reporting and auditing provisions thereof. VCS shall be responsible for each of its permitted subcontractor’s compliance with the terms of this Agreement.

m. The training responsibilities and obligations of the Parties are set forth on Schedule A-1 under the section captioned “Training.”

n. VCS shall provide the District Managers and the Sales Representatives with fleet vehicles that are comparable to the vehicles provided by CLIENT to its sales force.

3.3. Fleet Vehicles. VCS shall provide vehicles to the VCS Field Force as follows:

a. Assignment and Transfer; Fixed and Reconciled Payments.

i. VCS shall provide to the VCS Field Force those certain eighty eight (88) vehicles that it currently leases under the terms of the Prior Agreement (such vehicles, collectively, the “Leased Vehicles”). CLIENT shall pay to VCS the fixed

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monthly amount set forth in the Budget for the Leased Vehicles, which amount represents costs and expenses associated with the Leased Vehicles, except fuel costs, which shall be treated as a Pass-through Expense pursuant to Schedule B.

ii. VCS shall provide to the VCS Field Force those certain one hundred and seventy-seven (177) vehicles, which were previously leased by CLIENT and for which CLIENT has previously assigned to VCS (and VCS has assumed from CLIENT) all rights and obligations as lessee pursuant to those certain Assignment and Assumption Agreements attached hereto as Schedule D (such vehicles, collectively, the “Assigned Vehicles”). Once an Assigned Vehicle has been assigned to VCS, VCS shall provide insurance that covers such Assigned Vehicle. Fuel costs for the Assigned Vehicles shall be treated as a Pass-through Expense pursuant to Schedule B.

iii. For those certain one hundred and thirty (130) Assigned Vehicles which were previously leased to CLIENT by ***, Inc. (collectively, the “*** Assigned Vehicles”), CLIENT shall pay to VCS a fixed monthly amount set forth in the Budget for the *** Assigned Vehicles, which amount represents: (1) a fixed monthly amount including lease, insurance and maintenance costs (as set forth on Schedule B-Y attached hereto); and (2) an estimate of costs and expenses associated with the *** Assigned Vehicles such as registration fees, taxes associated with the use and transfer of the *** Assigned Vehicles, assignment costs, and short-term rental vehicles for the time any *** Assigned Vehicle is absent from the Territory as a result of maintenance or due to a delay in delivery of the*** Assigned Vehicles to the VCS Field Force (the “Estimated *** Vehicle Costs”). On a monthly basis, VCS shall reconcile the Estimated *** Vehicle Costs for all *** Assigned Vehicles and the actual *** Assigned Vehicle costs (those actual costs identified in this Section 3.3(a)(iii)(2)) for all *** Assigned Vehicles, which reconciliation is subject to CLIENT’s review and approval, and said amount shall be reflected as a credit to CLIENT or an additional amount due from CLIENT in VCS’ monthly invoices.

iv. For those certain forty-seven (47) Assigned Vehicles which were previously leased to CLIENT by *** (collectively, the “*** Assigned Vehicles”), CLIENT shall pay to VCS a fixed monthly amount set forth in the Budget for the *** Assigned Vehicles, which amount represents: (1) a fixed monthly amount including lease and insurance costs (as set forth on Schedule B-Y attached hereto); and (2) an estimate of costs and expenses associated with the *** Assigned Vehicles such as registration fees, maintenance costs, taxes associated with the use and transfer of the *** Assigned Vehicles, assignment costs, and short term rental vehicles for the time any *** Assigned Vehicle is absent from the Territory as a result of maintenance or due to a delay in delivery of the *** Assigned Vehicles to the VCS Field Force (the “Estimated *** Vehicle Costs”). On a monthly basis, VCS shall reconcile the Estimated *** Vehicle Costs for all *** Assigned Vehicles and the actual *** Assigned Vehicle costs (those actual costs identified in this Section 3.3(a)(iv)(2)) for all *** Assigned Vehicles, which reconciliation is subject to CLIENT’s review and approval, and said amount shall be reflected as a credit to CLIENT or an additional amount due from CLIENT in VCS’ monthly invoices.

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b. Condition of Assigned Vehicles. The Assigned Vehicles shall be provided by CLIENT to VCS with no preexisting internal or external physical damage (including, but not limited to, window damage), reasonable wear and tear excepted, at the time each Assigned Vehicle is transferred and assigned to VCS, and VCS will provide CLIENT with a vehicle condition report upon request. In the event the vehicle condition report does not reflect preexisting physical damage and the VCS Field Force member discovers vehicle damage, VCS shall notify CLIENT and the Parties shall agree on an appropriate resolution of the issue. VCS shall seek CLIENT’s advance written approval for all costs associated with the repair, detailing or other related costs incurred in connection with restoring the Assigned Vehicle to the appropriate condition required per the applicable lease agreements, and CLIENT shall be responsible for paying any such pre-approved costs. In the event CLIENT is unable to provide a fleet vehicle, or the Assigned Vehicle as delivered by CLIENT (or its Representatives) is not able to be driven on the date the VCS Field Force member is to commence provision of the Detailing services in the field, VCS shall seek CLIENT’s advance written approval for costs associated with obtaining bridge rental vehicles until such time as the Assigned Vehicle is provided to the VCS Sales Representative(s) in appropriate, working condition, and CLIENT shall be responsible for paying any such pre-approved costs. As used in this Section 3.3(b), “advance written approval” may be satisfied via exchange of emails confirming costs.

c. Indemnification.

i. Indemnification by CLIENT. CLIENT shall be solely responsible, solely liable and shall indemnify, defend and hold VCS Representatives (as defined below) harmless for all claims, personal injury and/or property damages arising from use by CLIENT Representatives (as defined in Article X below), or by any third party authorized by CLIENT Representatives, of each Assigned Vehicle during the period prior to the assignment of such Assigned Vehicle to VCS. For the avoidance of doubt, any indemnification under this Section 3.3(b)(i) shall be made in accordance with the provisions of Section 10.3 of this Agreement. The indemnification obligations of CLIENT under this Section 3.3(b)(i) shall be in addition to CLIENT’s indemnification obligations pursuant to Article X.

ii. Indemnification by VCS. VCS shall be solely responsible, solely liable and shall indemnify, defend and hold CLIENT Representatives (as defined in Article X below) harmless for all claims, personal injury and/or property damages arising from use by VCS Field Force members or by any third party authorized by VCS Representatives, of (1) each Assigned Vehicle during the period commencing as of the date that such Assigned Vehicle is assigned to VCS; and (2) each Leased Vehicle. For the avoidance of doubt, any indemnification under this Section 3.3(b)(ii) shall be made in accordance with the provisions of Section 10.3 of this Agreement. The indemnification obligations of VCS under this Section 3.3(b)(ii) shall be in addition to VCS’ indemnification obligations pursuant to Article X.

d. Vehicle Replacement. CLIENT and VCS shall work in good faith to develop a mutually acceptable standard operating procedure setting forth the process to be followed in the event that an Assigned Vehicle or a Leased Vehicle needs to be replaced during the Term or any extension thereof.

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ARTICLE IV. COMPENSATION, BUDGET AND REIMBURSEMENT; REPORTING; RECORD KEEPING AND AUDIT RIGHTS

4.1. Compensation.

a. Subject to the limitations set forth in this Article IV, CLIENT shall pay VCS compensation for the Services performed under this Agreement as set forth on Schedule B to this Agreement. Such compensation shall include payment of various fees and costs of VCS as described on Schedule B, including a fixed, non-risk related, management fee (the “Fixed Management Fee”) and, if applicable, additional risk-related management fees (collectively, the “At-Risk Management Fee”),***. The Parties shall agree on an incentive compensation plan relating to the VCS Field Force, which among other things will limit participation by members of the VCS Field Force who are on performance improvement plans in incentive compensation for which CLIENT is required to pay/reimburse VCS under this Agreement.

b. CLIENT shall notify VCS of the *** in a calendar quarter within forty-five (45) days after the end of each calendar quarter. Notwithstanding the above, on a monthly basis, CLIENT shall provide VCS with all data it receives concerning *** to monitor achievement of the At-Risk Management Fee. Within fifteen (15) Business Days following the end of each calendar quarter during the Term of this Agreement, CLIENT shall provide to VCS a report summarizing on a calendar quarter and Agreement Year-to-date basis: (i) ***; and (ii) ***. In addition, within fifteen (15) Business Days following the end of each month during the Term of this Agreement, VCS shall provide to CLIENT a report in the form of Schedule A-1F, which shall ***. The At-Risk Management Fee payable to VCS shall be determined by CLIENT and VCS based on the reports made with respect to such matters by CLIENT and VCS in accordance with this Section 4.1 and Schedule B.

c. CLIENT shall advise VCS as to those states or other jurisdictions (including federal) in which marketing reports and other information is required to be disclosed, and VCS shall provide to CLIENT, by the fifteenth (15^th) day of each month during the Term, a report (the “State Disclosure Logs”) disclosing such information requested by CLIENT relating to applicable state or other jurisdictions (including federal) to be reported with respect to, the month immediately preceding such month. Such information shall be provided on the applicable State Disclosure Log, as provided by CLIENT, which may be amended from time to time. The Project Manager shall be the contact at VCS responsible for timely submitting the State Disclosure Logs to CLIENT. CLIENT shall file the requisite state expense reports utilizing the information contained in the State Disclosure Logs.

d. Upon termination or expiration of this Agreement, any applicable earned fees for any calendar quarter or portion thereof prior to such expiration or termination that have not been invoiced shall be paid. VCS shall invoice CLIENT monthly in arrears for fixed monthly fees related to the Services and shall set forth on each invoice the actual headcount of all persons employed by VCS under this Agreement as of the end of the pay period ending in approximately mid-month for the month covered by such invoice. The VCS invoice shall contain a written explanation of the line item amounts referred to in clauses (i) and (ii) of Section 4.1(e) that vary by more than *** (***%) percent, ***, from such particular line item reflected on the Budget for that same period (each a “Variant Amount”). Each VCS invoice shall also separately set forth in reasonable detail the amount of any Client Pass-through Expense for which VCS seeks reimbursement. Subject to receipt

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of a monthly reconciliation report, as described below, CLIENT shall pay the full amount of each VCS invoice, except any Client Pass-through Expense in excess of the amount allowed for such item in the Budget that has not been previously approved by CLIENT. CLIENT and VCS shall work together in good faith to develop a Pass-through Expense budget.

e. The following items are included in the fixed monthly fees and shall be reconciled on a monthly basis and provided by VCS to CLIENT in a monthly reconciliation report satisfactory in form to CLIENT: ***. VCS shall also provide CLIENT with a monthly report, in a form mutually agreed upon by the Parties, regarding the usage by the VCS Field Force of vehicles used in the course of carrying out the Services hereunder (which report shall be based on reports VCS receives from ***, and/or the VCS Field Force members, as applicable, with respect to such matters), summarizing the car mileage. Any amounts due through reconciliation of budgeted amounts (for (i) and (ii) above) and actual costs incurred (for (i) and (ii) above) will be applied as a credit or an additional charge on the month’s invoice from VCS that is submitted with the monthly reconciliation report. VCS shall also provide CLIENT at the end of each calendar quarter, together with the invoice for the month just ended, a reconciliation of the invoiced amounts during such quarter and Agreement Year to date to the quarterly and year to date Budget. VCS and CLIENT shall, in addition, review the aggregate of all Variant Amounts within thirty (30) days of the end of each calendar quarter. In that connection, CLIENT may request additional justification for any Variant Amount and to the extent CLIENT is not reasonably satisfied with such justification, CLIENT may require a credit against future invoices (or, at end of the Term, a refund) equal to the unjustified Variant Amounts. In no event shall the variances from the budgeted amounts exceed in the aggregate the annual budget for such items unless otherwise agreed to in writing by CLIENT.

4.2. Budget

The budget (“Budget”) for the period between the Effective Date and September 30, 2011 is attached to this Agreement as Schedule B-Y. For purposes of clarity and pursuant to Article II, in the event CLIENT extends the Term for *** (***) days, the Budget set forth in Schedule B-Y shall *** (for such *** (***) day period (subject to the provisions of Article II above).

4.3. Client Pass-through Expenses

a. VCS shall request that CLIENT approve particular Client Pass-through Expense items prior to incurrence thereof and once approved by CLIENT in writing, CLIENT shall pay the same when invoiced. Client Pass-through Expenses of the type set forth on Schedule B shall be deemed approved by CLIENT, but only up to, and in no event in excess of, the respective aggregate quarterly limits for such Client Pass-through Expenses set forth on Schedule B-Y. CLIENT may require, on not less than thirty (30) days’ notice, that amounts provided in the Budget for Client Pass-through Expenses be reduced. CLIENT shall, at the written request of VCS, discuss in good faith the reason for the required reduction in Client Pass-through Expenses and the impact of such reduction on VCS and its ability to achieve the At-Risk Management Fee, but CLIENT shall make the final decision with respect to any reduction.

b. Notwithstanding anything herein to the contrary, in no event shall CLIENT be required to pay VCS Client Pass-through Expenses: (i) in excess of the amounts provided for such expenses in the Budget, unless otherwise specifically agreed to by CLIENT in writing; (ii) incurred in an amount or manner that is not compliant with CLIENT’s policies and procedures, as

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may be amended by CLIENT from time to time; or (iii) incurred in connection with travel expenses or services where (1) CLIENT has provided applicable preferred vendor codes to VCS and (2) VCS failed to use or apply such codes.

4.4. Additional Expenses

a. CLIENT may request VCS to incur particular expenses in addition to those already relating to the Services and reflected in the Budget, in which case those expenses will be added to the Client Pass-through Expenses payable by CLIENT. All additional expenses must be agreed to in writing by CLIENT prior to such expenses being incurred.

b. CLIENT reserves the right to add additional Products to be Detailed by the Sales Representatives at no additional cost to CLIENT, except that: (i) CLIENT shall pay documented incremental costs (e.g., training, distribution, sample costs and Detail aids) that have been approved by CLIENT and which are related to such additional Products and (ii) the Parties shall discuss in good faith and determine whether any adjustments to the metrics required for achievement of the At-Risk Management Fee should be made. At such time as CLIENT exercises this right, VCS shall comply with all other provisions of this Agreement applicable to promoting Products in connection with the promotion of such additional Products and the Parties shall enter into appropriate amendments to this Agreement to reflect the same.

4.5. Payment Due

For any payment due to VCS hereunder, VCS shall submit to CLIENT an invoice accompanied by such supporting documentation as CLIENT may reasonably require. Invoices are due and payable within *** (***) days of receipt thereof, except to the extent of any amount disputed by CLIENT. CLIENT shall pay the undisputed amount of each invoice when due. In the event CLIENT disputes an amount set forth on a VCS invoice, it shall send VCS written notice specifying in detail the basis for the dispute. In addition to VCS’ right to terminate this Agreement under Section 11.1 in the case of non-payment of any undisputed amount, if VCS elects not to terminate this Agreement in the case of non-payment of any undisputed amount, CLIENT shall pay VCS a finance charge of *** (***%) percent per month for the undisputed amount on each invoice past due for more than *** (***) days from the applicable payment date. The Parties agree to resolve disputes in good faith and an expeditious manner.

4.6. Books and Records

a. VCS shall keep complete, true and accurate books and records with respect to the Services provided and its other obligations under this Agreement in accordance with GAAP. VCS shall keep such books and records for at least three (3) years following the end of the Agreement Year to which they pertain. Such books and records shall be kept at VCS’ principal place of business. At CLIENT’s sole cost and expense, except as provided below, VCS shall permit auditors, on behalf of CLIENT and Novartis, to visit and inspect, during regular business hours and under the guidance of representatives of VCS, and to examine the books of account of VCS concerning the Services and this Agreement and discuss the affairs, finances and accounts of VCS concerning the Services and this Agreement with, and be advised as to the same by, its officers and independent accountants.

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b. Audits. CLIENT and Novartis shall have audit rights with respect to VCS’ records described in this Section 4.6(b).

i. CLIENT or Novartis (in such capacity, the “Audit Rights Holder”) may, upon request and at its expense (except as provided for herein), cause an internationally-recognized independent accounting firm selected by it, other than one to whom VCS (in such capacity, the “Auditee”) has a reasonable objection (the “Audit Team”), to audit (at CLIENT’s or Novartis’ sole cost and expense, except as otherwise set forth in subsection (v) below) during ordinary business hours the books and records of the Auditee and the correctness of any payment made or required to be made to or by such Auditee, and any report underlying such payment (or lack thereof), pursuant to the terms of this Agreement. Prior to commencing its work pursuant to this Agreement, the Audit Team shall enter into an appropriate confidentiality agreement with the Auditee.

ii. In respect of each audit of the Auditee’s books and records: (i) the Auditee may only be audited once per calendar year, unless a prior audit reveals any material discrepancy, in which case, more frequent audits will be permitted; (ii) no records for any given Agreement Year may be audited more than once for the same purpose, unless a prior audit reveals any material discrepancy, in which case, more frequent audits will be permitted; and (iii) the Audit Rights Holder shall only be entitled to audit books and records of the Auditee from the three (3) Agreement Years prior to the Agreement Year in which the audit request is made.

iii. In order to initiate an audit for a particular Agreement Year, the Audit Rights Holder must provide written notice to the Auditee. The Audit Rights Holder shall provide the Auditee with notice of one or more proposed dates of the audit not less than thirty (30) calendar days prior to the first proposed date. The Auditee will reasonably accommodate the scheduling of such audit. The Auditee shall reasonably cooperate with such audit.

iv. The audit report and basis for any determination by an Audit Team shall be made available for review and comment by the Auditee, and the Auditee shall have the right, at its expense, to request a further determination by such Audit Team as to matters which the Auditee disputes (to be completed no more than thirty (30) calendar days after the first determination is provided to Auditee and to be limited to the disputed matters). If the parties disagree as to such further determination, the Audit Rights Holder and the Auditee shall mutually select an internationally-recognized independent accounting firm that shall make a final determination as to the remaining matters in dispute that shall be binding upon the parties.

v. If the audit shows any under-reporting or underpayment, or overcharging by any party, that under-reporting, underpayment or overcharging shall be reported to the Audit Rights Holder and the underpaying or overcharging party shall remit such underpayment or reimburse such overcompensation to the underpaid or overcharged party within *** (***) calendar days of receiving the audit report. Further, if the audit for an Agreement Year shows an under-reporting or

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underpayment or an overcharge by any party for that period in excess of *** (***%) of the amounts properly determined, the underpaying or overcharging party, as the case may be, shall reimburse the applicable underpaid or overcharged party, for its respective audit fees and reasonable out-of-pocket expenses in connection with said audit, which reimbursement shall be made within *** (***) calendar days of receiving appropriate invoices and other support for such audit-related costs.

vi. Accounting Standards. All costs and expenses and other financial determinations with respect to this Agreement shall be determined in accordance with GAAP.

vii. Taxes. Any withholding or other taxes that either Party or its Affiliates are required by Law to withhold or pay on behalf of the other Party, with respect to any payments to it hereunder, shall be deducted from such payments and paid to the applicable Governmental Authority contemporaneously with the remittance to the other Party; provided, however, that the withholding Party shall furnish the other Party with proper evidence of the taxes so paid. Each Party shall furnish the other Party with appropriate documents to secure application of the most favorable rate of withholding tax under applicable Law.

viii. Payment Currency. All amounts due under this Agreement shall be paid to the designated Party in United States Dollars.

For the purpose of clarity, Novartis’ audit rights under this Section 4.6(b) shall only constitute a right to audit those books and records of VCS relating to the promotion and sale of VOLTAREN^®, to the extent such books and records are separable from VCS’ other books and records relating to Services hereunder.

ARTICLE V. REPRESENTATIONS OF THE PARTIES

5.1. VCS Representations

VCS represents to CLIENT that:

a. It has the requisite expertise, experience and skill to render the Services and it shall use all reasonable efforts to cause the Services to be performed in a competent, efficient and professional manner and no less favorable than the overall manner in which similar services are performed for other parties by VCS.

b. The execution, delivery and performance of this Agreement by VCS and the consummation of the transactions contemplated hereby have been duly authorized by all requisite company action; this Agreement constitutes the legal, valid and binding obligation of VCS, enforceable in accordance with its terms (except to the extent enforcement is limited by bankruptcy, insolvency, reorganization or other Laws affecting creditors’ rights generally and by general principles of equity); and this Agreement and VCS’ performance hereunder does not violate or constitute a breach under any organizational document of VCS or any contract, other form of agreement, or judgment or order to which VCS is a party or by which it is bound.

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c. VCS shall adhere to and comply with, and shall cause the VCS Field Force to adhere to and comply with, all applicable Laws in carrying out its obligations under this Agreement.

d. VCS will maintain insurance with financially sound carriers in the amounts and types (with the deductibles or retentions) as set forth in Schedule C to this Agreement, as the same may be amended or modified from time to time.

5.2. Client Representations

CLIENT represents to VCS that:

a. The execution, delivery and performance of this Agreement by CLIENT and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action; this Agreement constitutes the legal, valid and binding obligation of CLIENT, enforceable in accordance with its terms (except to the extent enforcement is limited by bankruptcy, insolvency, reorganization or other Laws affecting creditors’ rights generally and by general principles of equity); and this Agreement and CLIENT’s performance hereunder does not violate or constitute a breach under any organizational document of CLIENT or any contract, other form of agreement, or judgment or order to which CLIENT is a party or by which it is bound.

b. CLIENT shall adhere to and comply with all applicable Laws in carrying out its obligations under this Agreement.

c. CLIENT will maintain insurance with financially sound carriers or through one or more financially sound self-insurance arrangements in the amounts and types (and with the deductibles or retentions) as set forth in Schedule C to this Agreement, as the same may be amended from time to time.

d. During the Term of this Agreement and for a period of *** (***) months thereafter (except if this Agreement is terminated by CLIENT under Section 11.1(a) or Section 11.1(b), in which case this provision shall not survive termination), CLIENT shall not (i) solicit or hire any VCS Field Force member or pay or offer to pay any VCS Field Force member any compensation or benefits (it being understood that the payments by CLIENT to VCS contemplated by this Agreement will not violate this provision), except, in each case, in connection with a Conversion; (ii) provide any contact information (including name, address, phone number or e-mail address) concerning members of the VCS Field Force to any third party providing (or proposing to provide) contract sales services and promotional services to CLIENT; or (iii) assist actively in any other way such a third party in employing or retaining members of the VCS Field Force. For the purposes of this Agreement, the term “solicit” shall not include general advertising by CLIENT for personnel not specifically directed to a VCS Field Force member.

e. CLIENT has the lawful authority necessary to market and sell the Products in all geographic regions where the Products are to be promoted under this Agreement.

f. CLIENT is solely responsible for reviewing and approving any of its product promotional materials and literature and any other materials or information provided by it to VCS and for ensuring all such materials or information comply with Laws.

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ARTICLE VI. CONFIDENTIALITY AND THIRD PARTY COMMUNICATION

6.1. Confidential Information

a. During the performance of the Services contemplated by this Agreement, each Party may learn confidential, non-public, proprietary or trade secret information of the other Party or its Affiliates, including information relating to their respective research and development efforts, marketing plans and techniques, contacts and customers, business interests, technical and financial information, pricing and costing information and models, clinical data, organization and operations, business development plans (i.e., licensing, supply, acquisitions, divestitures and combined marketing), products, licenses, trademarks, patents, and other types of intellectual property, other contractual rights and interests, product specifications, product development plans and ideas, marketing plans and ideas, manufacturing information and business operations (in whatever form or media such information is contained or disclosed, “Confidential Information”). The Party disclosing Confidential Information shall be referred to as the “Disclosing Party” and the Party receiving Confidential Information shall be referred to as the “Receiving Party.”

b. The Parties shall hold in the strictest confidence any and all of the Confidential Information disclosed by one Party to the other under the terms of this Agreement. The Receiving Party shall neither use nor disclose Confidential Information for any purpose other than to effectuate the purposes of this Agreement, provided that the Receiving Party may disclose Confidential Information to those of its employees, agents, consultants, advisors, directors, officers and other representatives (collectively, “Representatives”) who have a need to know such information in order to effectuate the purposes of this Agreement, so long as such Representatives are informed of the confidentiality obligations contained herein and are bound by confidentiality obligations at least as restrictive as those contained in this Agreement.

c. Upon the written request from the Disclosing Party at the end of the Term or at the earlier termination of this Agreement, the Receiving Party shall return to the Disclosing Party all tangible forms of Confidential Information, including any and all copies and/or derivatives of Confidential Information made by the Receiving Party or its Representatives, as well as all writings, drawings, specifications, manuals or other printed or electronically stored material based on or derived from Confidential Information. Any material or media that is unable to be returned, upon the request of the Disclosing Party, must be destroyed and the destroying Party shall provide the Disclosing Party with a certificate from a Senior Officer certifying that such destruction has occurred. Notwithstanding the foregoing, the legal counsel of each Party may retain one (1) copy of Confidential Information in its confidential files solely for archival purposes.

d. The obligations set forth in this Section 6, including the obligations of confidentiality and non-use, shall be continuing and shall survive the expiration or termination of this Agreement for a period of five (5) years from the date of such expiration or termination.

e. The obligations of confidentiality and non-use set forth herein shall not apply to the following: (i) Confidential Information at or after such time that it is or becomes publicly available through no fault of the Receiving Party; (ii) Confidential Information that is already independently known to the Receiving Party as shown by prior written records; (iii) Confidential Information at or after such time that it is disclosed to the Receiving Party by a third party not subject to any confidentiality obligation; (iv) Confidential Information required to be disclosed pursuant to

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judicial process, court order or administrative request, provided that the Receiving Party shall use commercially reasonable efforts to notify the Disclosing Party sufficiently prior to disclosing such Confidential Information as to permit the Disclosing Party to seek a protective order and provided further that if such protective order cannot be obtained, the Receiving Party shall assist the Disclosing Party in limiting the disclosure of such Confidential Information, except to the extent necessary to comply with such judicial process, court order or administrative request.

f. All Confidential Information disclosed by or on behalf of the Disclosing Party shall be and shall remain the property of the Disclosing Party. The Receiving Party will not be deemed to have been granted any right, including, without limitation, a license, copyright or similar right, with respect to any of the Confidential Information.

6.2. Use of Names.

Subject to each Party’s disclosure obligations under applicable law, including the Securities and Exchange Act of 1934, as amended, for which consent of the other Party to submit shall not be required, neither Party shall make a public announcement regarding the Detailing or promotion activities or use the name of the other in any public announcement, press release or other public document without the written consent of such other Party. Each Party shall provide the other with the proposed submission to be made to the United States Securities and Exchange Commission, in order to allow the other Party a reasonable opportunity to request confidential treatment with respect to certain confidential or proprietary information contained herein. Each Party shall further provide the other Party with the proposed text of a public announcement for review and approval, which approval shall not be unreasonably withheld. Notwithstanding the above, either Party may, with the consent of the other Party, list the name of the other Party in a non-descriptive fashion in a list of the names of other, similarly situated third parties that such Party does business with in connection with its general marketing materials.

6.3. Intentionally omitted.

6.4. Third Party Communications.

a. VCS shall communicate to CLIENT and, to the extent specified below, Novartis, all comments, complaints, requests and inquiries received from the medical profession, Governmental Authorities or other third parties relating to a Product. All responses to such communications shall be handled solely by CLIENT, and VCS shall cooperate with and assist CLIENT to the extent deemed necessary by CLIENT to respond fully to such communications. Product complaint reports received by VCS which are not deemed to be an Adverse Event shall (i) with respect to VOLTAREN^®, be reported by VCS to Novartis (at Novartis Consumer Health, Inc., 200 Kimball Drive, Parsippany, NJ 07054-0622), with a copy to CLIENT, and (ii) with respect to any other Product, be reported by VCS to CLIENT (at Endo Pharmaceuticals, 100 Endo Blvd., Chadds Ford, PA 19317), in each case within fifteen (15) days of receipt by VCS. VCS shall promptly forward to CLIENT any information, including, but not limited to, initial and follow up reports, that becomes known to VCS from any source in any form relating to any Adverse Event or any Adverse Event with an associated product quality complaint for any Product as soon as it becomes available, but in any event within twenty-four (24) hours of becoming aware of such information, by transmitting it to the Endo Triage Line at 1-800-462-3636. VCS shall also (i) in the case of VOLTAREN^®, notify Novartis, with a copy to CLIENT, and (ii) in the case of any other

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Product, notify CLIENT, of any communication received from any Governmental Authority relating to any Adverse Event or other safety issue for any Product, within twenty-four (24) hours of receiving such communication, by transmitting it to the Endo Triage Line at 1-800-462-3636 and by transmitting any written communication documentation and a written synopsis of any oral communication to Novartis’ Global Head, Drug Safety and Pharmacovigilance (to the extent relating to VOLTAREN^®) or Endo’s Pharmacovigilance Group, as applicable. VCS shall provide to Novartis and CLIENT all reasonable assistance and take all actions reasonably requested by Novartis and CLIENT (at CLIENT’s cost) that are necessary to enable Novartis and CLIENT to comply with any Law applicable to the Products and any conditions or obligations relating to any approval. Such assistance and actions will include compliance with the terms of any Pharmacovigilance Agreement entered into by and between CLIENT and Novartis (a copy of which shall be provided by CLIENT to VCS) to the extent that the terms of such agreement supersede the applicable terms of the Novartis Agreement.

b. CLIENT shall reimburse VCS for all reasonable actual out-of-pocket expenses incurred by VCS in connection with responses to subpoenas and other similar legal orders issued to VCS in respect to the Services performed under this Agreement. However, CLIENT shall have no obligation to reimburse VCS for any such expenses (and to the extent paid by CLIENT to VCS, shall be repaid by VCS to CLIENT upon demand) arising out of, in connection with or otherwise relating to actions or omissions of VCS or its employees, officers, directors and/or affiliates that violate this Agreement or applicable Law.

c. CLIENT shall provide VCS with a written policy setting forth all of VCS’ responsibilities and obligations with respect to third party communications, Adverse Events and compliance with any Pharmacovigilance Agreement (as set forth in this Section 6.4). CLIENT shall be solely responsible for securing Novartis’ consent to utilize its Customer Relationship Center and for authorizing VCS’ personnel to contact Novartis as set forth in this Section 6.4 and as shall be provided in the aforementioned written policy. CLIENT shall train VCS’ Personnel regarding compliance with such policy and any modifications or changes to such policy shall be communicated by CLIENT to VCS (in writing). Any additional cost incurred by VCS in connection with complying with a modified or changed policy and additional costs incurred by VCS for training its personnel concerning such modified or changed policy, shall be borne by CLIENT.

ARTICLE VII. INDEPENDENT CONTRACTOR

VCS and its Affiliates, directors, officers and the Persons providing Services under this Agreement are at all times independent contractors with respect to CLIENT. Persons provided by VCS to perform Services shall not, for any purpose, be deemed employees of CLIENT. Except as may otherwise be provided herein, CLIENT shall not be responsible for VCS’ acts or the acts of its Affiliates, officers, agents or employees while performing the Services, whether on CLIENT’s premises or elsewhere. Neither Party shall have any responsibility for the hiring, termination, compensation, benefits or other terms or conditions of employment of the other Party’s employees. VCS is, and at all times shall remain, solely responsible for the human resource and performance management functions of all members of the VCS Field Force. VCS shall be solely responsible and liable for all disciplinary, probationary and termination actions taken by it, and for the formulation, content and dissemination of all employment policies and rules (including written disciplinary, probationary and termination policies) applicable to its employees, agents and contractors. VCS shall obtain and maintain worker’s compensation insurance and other insurances required for

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members of the VCS Field Force. VCS acknowledges that CLIENT does not, and shall not obtain or maintain such insurances, all of which shall be VCS’ sole responsibility. VCS acknowledges and agrees that members of the VCS Field Force are not, and are not intended to be nor shall they be treated as, employees of CLIENT and that no such individual is, or is intended to be, eligible to participate in any benefits programs or in any CLIENT “employee benefit plans” (as defined in Section 3(3) of ERISA). VCS will cause all of the VCS Field Force members to execute and will retain on file an agreement, substantially in the form set forth in VCS’ employee handbook provided to CLIENT, containing an acknowledgement that such VCS employee does not have any rights to or claims of employee status or benefits from or against customers of VCS, such as CLIENT, for whom such person provide services on behalf of VCS.

ARTICLE VIII. OWNERSHIP OF PROPERTY AND DEVELOPMENTS

8.1. Use of Trademarks in Promotion of the Products

a. VOLTAREN^® shall be promoted by VCS and the VCS Field Force under the VOLTAREN^® trademark, U.S. Registration No. 960282, the Man and Path design trademark, U.S. Trademark Application No. 77/258978, the JOY OF MOVEMENT TM, U.S. Trademark Application No. 77/053235, and any accompanying logos, trade dress and/or indicia of origin, including applicable branding, color, palette, typeface, tagline and icon all of which have been licensed by CLIENT pursuant to the Novartis Agreement and shall remain the sole property of Novartis.

b. LIDODERM^® shall be promoted by VCS and the VCS Field Force under the LIDODERM^® trademarks, U.S. Registration Nos. 1597110 and 2870973, the LIDODERM^® design trademark, U.S. Trademark No. 2853072, and any accompanying logos, trade dress and/or indicia of origin, including applicable branding, color, palette, typeface, tagline and icon, all of which shall remain the sole property of CLIENT.

c. FROVA^® shall be promoted by VCS and the VCS Field Force under the FROVA^® trademark, U.S. Registration No. 2828476, the FROVA^® design trademark, U.S. Trademark No. 3281355, and any accompanying logos, trade dress and/or indicia of origin, including applicable branding, color, palette, typeface, tagline and icon, all of which shall remain the sole property of CLIENT.

d. OPANA^® ER shall be promoted by VCS and the VCS Field Force under the OPANA^® Trademarks, U.S. Trademark Registration Nos. 3553676, 3585918, 3252736, and 3060635, and any accompanying logos, trade dress and/or indicia of origin, including applicable branding, color, palette, typeface, tagline and icon, all of which shall remain the sole property of CLIENT.

e. This Agreement does not constitute a grant to VCS of any property right or interest in the Products or the trademarks owned by or licensed to CLIENT or any Affiliate of CLIENT and/or any other intellectual property rights that CLIENT owns now or in the future. VCS recognizes the validity of and title of CLIENT to all of CLIENT’s owned or licensed trademarks, trade names and trade dress in any country in connection with the Products, whether registered or not. To CLIENT’s knowledge, neither the trademarks, trade names and trade dress to be used in the promotion of the Products as referred to in this Section 8.1 nor the promotion of the Products by VCS infringes on any intellectual property right of any other Person.

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8.2. Ownership of Materials

Except as otherwise specifically provided in Schedule A-1A attached to this Agreement, all developments, materials and documents supplied by VCS to CLIENT during the Term of this Agreement that relate to the Services shall be the sole and exclusive property of CLIENT. Each Party shall hold all such property and developments confidential in accordance with Article VI of this Agreement.

ARTICLE IX. SALE OF COMPETING PRODUCT; EMPLOYMENT OF VCS FIELD FORCE AFTER TERMINATION

9.1. Sale of Competing Product

During the Term of this Agreement, no VCS Field Force member shall market, sell or accept orders for the sale of a Competing Product in the Territory. Such restrictions for those VCS Sales Representatives and District Managers who remain employed by VCS following the end of the Term, ***. For the purpose of clarification, CLIENT understands and agrees that the restrictions set forth in this Section 9.1 shall no longer apply once a person ceases to be employed by VCS.

9.2. Employment or Retention by CLIENT

a. In contemplation of any termination of this Agreement in accordance with Article XI, VCS shall negotiate with CLIENT with respect to the terms governing the hiring of all or any of the VCS Sales Representatives or District Managers or the transfer of such members to CLIENT’s internal sales force (each, a “Conversion”). In no event shall CLIENT have any liability or obligation of any nature for or with respect to any member of the VCS Field Force that CLIENT hires prior to the date of such hire. In no event shall VCS have any liability or obligation of any nature for or with respect to any member of the VCS Field Force that CLIENT hires following the date of such hire by CLIENT, except for any liabilities or obligations of VCS that may have arisen or been incurred prior to the date of such hire by CLIENT. Except with respect to periods prior to the effective date of such VCS Field Force member’s employment by CLIENT, VCS shall not have any liability or obligation of any nature for or with respect to any member of the VCS Field Force that CLIENT hires following the effective date of such hire. VCS and CLIENT hereby agree that CLIENT shall pay VCS a fee equal to $*** for every Sales Representative and $*** for every District Manager transferred from the VCS Field Force to CLIENT’s internal sales force pursuant to this Section 9.2.

b. CLIENT understands and acknowledges that VCS cannot guaranty that any VCS Sales Representatives or District Manager will agree to participate in a Conversion.

c. In the event CLIENT implements a Conversion, the Parties agree that any and all VCS training materials made available by VCS to the VCS Sales Representatives will be immediately returned to VCS, it being understood and agreed that the VCS proprietary training modules constitutes valuable and proprietary information of VCS and are subject to the confidentiality obligations set forth in Article VI above. Within five (5) days of implementing a Conversion, CLIENT shall return to VCS any originals and copies of the VCS proprietary training modules which had been in possession of the converted VCS Sales Representatives.

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d. In the event CLIENT conducts a Conversion (and the converted VCS Sales Representative had been provided with use of a fleet automobile leased, rented or owned by VCS and CLIENT wishes to commence an arrangement with the fleet vendor to assume such cars (and all associated costs and liabilities) under CLIENT’s name, the converted VCS Sales Representative may only continue to have access to such automobile following the Conversion if CLIENT either: (i) registers the fleet automobile under its name; or (ii) ensures that VCS remains named as an additional insured under CLIENT’s automobile insurance policies until such time as the vehicle is registered in CLIENT’s name (which shall occur no later than three (3) months following the Conversion). The Parties understand and agree that it is solely CLIENT’s obligation to ensure one of the above actions is taken and CLIENT shall be responsible for indemnifying, defending and holding VCS harmless for all damages resulting from CLIENT’s failure to take such action. The Parties further agree that on the effective date of the Conversion, CLIENT shall destroy the VCS insurance card(s) in the fleet vehicle(s) of the converted VCS Sales Representative.

ARTICLE X. INDEMNIFICATION

10.1. Indemnification by VCS

VCS shall indemnify and hold CLIENT, its Affiliates, officers, directors, agents, representatives and employees (collectively, “CLIENT Representatives”) harmless from and defend against any and all liabilities, losses, proceedings, actions, damages, claims or expenses of any kind, including costs and reasonable attorneys’ fees (collectively, “Losses”), in respect to a claim brought against any Client Representative by a Person other than VCS which results or arises from or is caused by (i) any negligent or willful acts or omissions by VCS or any of its Affiliates, officers, directors, employees, agents or representatives (collectively, “VCS Representatives”) in connection with the Services, (ii) any acts or omissions by any VCS Representatives outside the scope of this Agreement, (iii) any breach of this Agreement by VCS or any VCS Representative in connection with the representations, duties and obligations of VCS under this Agreement, (iv) any claim that any member of the VCS Field Force is an employee of CLIENT; and (v) any employment-related claim, liability or obligation to any member of the VCS Field Force arising out of or in connection with the activities contemplated by this Agreement or the Services provided hereunder. The indemnity obligation set forth in this Section 10.1 shall not apply to the extent CLIENT has an obligation to indemnify VCS in respect to such matter under Section 10.2.

10.2. Indemnification by CLIENT

CLIENT shall indemnify and hold VCS Representatives harmless from and defend against any and all Losses in respect to a claim brought against any VCS Representative by a Person other than CLIENT which results or arises from or is caused by (i) any negligent or willful acts or omissions by the CLIENT Representatives in connection with CLIENT’s program of selling and marketing its Products set forth in this Agreement; (ii) any acts or omissions by any CLIENT Representative outside the scope of this Agreement; (iii) any breach of this Agreement by any CLIENT Representatives in connection with the representations, duties and obligations of CLIENT under this Agreement (including any intentional wrongful acts or illegal acts of any CLIENT Representative in respect of any VCS Field Force member); (iv) products liability claims relating to any Product, whether arising out of warranty, negligence, strict liability (including manufacturing, design, warning or instruction claims) or any other product based statutory claim, and (v) any allegation that the trademarks, trade names and trade dress referred to in Section 8.1 used in the

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promotion of the Products or use of the name “ENDO” in performing Services hereunder infringes any intellectual property rights of any other Person. The indemnity obligation set forth in this Section 10.2 shall not apply to the extent VCS has an obligation to indemnify CLIENT in respect to such matter under Section 10.1.

10.3. Indemnification Process

Any indemnification available hereunder shall be dependent upon the party seeking indemnification providing prompt notice to the indemnitor of any claim or lawsuit by a third party giving rise to an indemnification obligation; provided, however, that failure to comply with this notice requirement shall not reduce the indemnitor’s indemnification obligation except to the extent that the indemnitor is prejudiced as a result thereof. Except in connection with any claim based on actual or alleged violation of Law, the indemnitor shall have exclusive control over the handling of the claim or lawsuit by a third party, and the indemnitee shall provide reasonable assistance to the indemnitor in defending such claim or lawsuit. The indemnitor shall keep indemnitee regularly apprised of the status of such claim or lawsuit by a third party and shall not settle such claim or lawsuit without first obtaining the written consent of the indemnitee.

ARTICLE XI. TERMINATION

11.1. Termination by Either Party

a. Either Party may terminate this Agreement in the event of a material breach by the other Party, which breach is not cured within *** (***) days following written notice thereof by the non-breaching Party.

b. Either Party may terminate this Agreement if the other Party has become insolvent or has been dissolved or liquidated, filed or has filed against it, a petition in bankruptcy and such petition is not dismissed within *** (***) days of the filing; makes a general assignment for the benefit of creditors; or has a receiver appointed for all or substantially all of its assets.

11.2. Termination by CLIENT and VCS

a. CLIENT may terminate this Agreement upon thirty (30) days’ prior written notice if the FDA causes the withdrawal from the market of any Product, approves any topical NSAID OTC Product, restricts the use of any Product other than VOLTAREN^®, or restricts the use of VOLTAREN^® in the Field or any other indication approved by the FDA and for which CLIENT is authorized to commercialize VOLTAREN^® under the Novartis Agreement, or there is an imposition of restrictive federal and/or state price controls such that an obvious and substantial loss of sales for any Product would result.

b. CLIENT may terminate this Agreement in its sole discretion at any time after the first anniversary of the Effective Date upon sixty (60) days’ prior written notice to VCS.

c. CLIENT may terminate this Agreement in its sole discretion upon thirty (30) days’ prior written notice at any time after the FDA approves a freely substitutable generic of any Product.

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d. CLIENT may terminate this Agreement upon ninety (90) days’ written notice if the VCS Field Force fails to meet the required minimum PDEs per calendar quarter as set forth in Section 3.2(a) for two (2) calendar quarters out of any four (4) consecutive calendar quarters.

e. VCS may terminate this Agreement if payment to VCS by CLIENT is not made when due and such payment is not made within ten (10) days from the date of receipt by CLIENT of written notice from VCS advising of such nonpayment.

11.3. Return of Materials. Upon the termination or expiration of this Agreement, VCS shall, at CLIENT’s expense, promptly return to CLIENT all Information Technology, Product samples, promotional and training materials, and any other documents, materials or written information relating to any Product. In addition, upon the removal of any member of the VCS Field Force from providing Services pursuant to this Agreement, VCS shall return all Information Technology associated with such member to CLIENT.

11.4. Effect of Termination.

a. Upon the effective date of termination or expiration of this Agreement, the Parties shall have no further obligation to each other (other than those set forth in Articles VI, VII, VIII, IX, X and XI), except that CLIENT shall: (a) pay the amount of any amounts due under Section 4.1 of this Agreement for Services actually performed by VCS through the date such termination or expiration is effective; and (b) pay any reimbursement amount due under Section 4.3 of this Agreement for Client Pass-through Expenses actually incurred and related to the performance of Services through the date such termination or expiration is effective.

b. In the case of termination of this Agreement by CLIENT (except for termination by CLIENT pursuant to Section 11.1 above, or at the end of Term, or in the event CLIENT conducts a Conversion (as set forth in Section 9.2 above):

(i) With regard to each Leased Vehicle having an open-ended lease arrangement and any vehicle having an open-ended lease arrangement that is supplied by VCS as a replacement of a Leased Vehicle (each an “Open Ended Lease Vehicle”): CLIENT shall (in addition to all other payment obligations under this Agreement) promptly pay (or if paid by VCS, promptly reimburse) VCS for the amount due any lessor or rental agent of the Open Ended Leased Vehicle for any early termination of the applicable lease or rental agreement. In addition, CLIENT may elect to either: (A) transfer the Open Ended Leased Vehicle to CLIENT and CLIENT shall assume the responsibility for all further payments due in connection with such lease (including all costs associated with the transfer), or (B) pay VCS the net loss to VCS on such Open Ended Leased Vehicle determined by the difference between the net book value of such Open Ended Leased Vehicle and the actual net price received by VCS for the disposal of such Open Ended Leased Vehicle, plus any amounts due from VCS in connection with the lease or rental termination and costs associated with the storage and disposal of said Open Ended Leased Vehicle. Any proposed transfer of an Open Ended Leased Vehicle to CLIENT shall be subject to CLIENT establishing its own relationship and credit with the entity that VCS contracted with to lease or rent such Open Ended Leased Vehicle;

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(ii) Any vehicle having a closed-end lease arrangement that is supplied by VCS as a replacement for a Leased Vehicle or an Assigned Vehicle, CLIENT shall pay all remaining lease payments and related costs for the original term of the lease. CLIENT shall pay all fees associated with excess mileage at the time of termination; and

(iii) With regard to the Assigned Vehicles, CLIENT may elect in its sole discretion to either (A) have the Assigned Vehicles transferred back to CLIENT (subject to the last sentence of this Section 11.4(b)(iii)), in which case CLIENT shall assume the responsibility for all further payments due (including costs associated with the transfer) and VCS shall ensure, at its sole cost and expense, that such Assigned Vehicles have no preexisting internal or external physical damage (including, but not limited to, window damage), reasonable wear and tear excepted, at the time each Assigned Vehicle is transferred back to CLIENT, or (B) pay for the amount due any lessor or rental agent for any early termination of the lease or rental agreements covering the Assigned Vehicles. Any proposed transfer of the Assigned Vehicles to CLIENT shall be subject to CLIENT establishing its own relationship and credit with the lessor of the Assigned Vehicles.

ARTICLE XII. MISCELLANEOUS

12.1. Assignment

Neither VCS nor CLIENT may assign this Agreement or any of its rights, duties or obligations hereunder without the other Party’s prior written consent; provided, however, that (a) to the extent this Agreement relates to VOLTAREN^®, this Agreement shall be assignable by CLIENT to Novartis upon the expiration or termination of the Novartis Agreement and, thereupon, Novartis shall be entitled to enforce the terms of this Agreement relating to VOLTAREN^® against VCS; and (b) CLIENT may assign this Agreement (i) to any Affiliate of CLIENT or (ii) to any other Person who acquires all or substantially all of the business of CLIENT by merger, sale of assets or otherwise, provided that the Affiliate or acquiring Person affirmatively assumes and agrees in writing to perform and comply with all of the obligations of CLIENT under this Agreement as they apply to CLIENT and its Affiliates, and in the case of (ii) only, provides a copy thereof to VCS upon consummation of such transaction. In addition, VCS may assign this Agreement to any Person who acquires all or substantially all of the business of VCS by merger, sale of assets or otherwise, provided that the acquiring Person affirmatively assumes and agrees in writing to perform and comply with all of the obligations of VCS under this Agreement as they apply to VCS and provides a copy thereof to CLIENT upon consummation of such transaction. VCS shall remain liable hereunder notwithstanding such assignment. Except as otherwise provided in this Agreement, VCS shall not be permitted to subcontract its rights, duties or obligations under this Agreement. Any attempted assignment or subcontracting in violation hereof shall be void.

12.2. Merger

This Agreement supersedes all prior arrangements and understandings between the Parties related to the subject matter of this Agreement. This Agreement, including all schedules, attachments and exhibits, contain all of the terms and conditions of this Agreement between the

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Parties and constitutes the complete understanding of the Parties with respect to the subject matter hereof.

12.3. Force Majeure

Noncompliance with the obligations of this Agreement by either Party due to events beyond the control of such Party, such as the Laws of any Government Authority hereafter adopted or modified, war, civil commotion, destruction of facilities and materials, fire, flood, earthquake or storm, labor disturbances, shortage of materials, failure of public utilities or common carriers, and any other causes beyond the reasonable control of the applicable Party, shall not constitute a breach of this Agreement.

12.4. Severability

In the event that any part of this Agreement is declared by any court or other judicial or administrative body to be null, void or unenforceable, said provision shall survive to the extent it is not so declared, and all of the other provisions of this Agreement shall remain in full force and effect only if, after excluding the portion deemed to be unenforceable, the remaining terms shall provide for the consummation of the transactions contemplated hereby in substantially the same manner as originally set forth at the later of the date this Agreement was executed or last amended.

12.5. Amendment

Except with regard to [(a) CLIENT’s right to *** and the consequences thereof pursuant to] Section 3.2(b) and (b) CLIENT’s right to extend the Term pursuant to Article II, no modification, waiver or extension of or release from any provision of this Agreement (including the Schedules attached to this Agreement) shall be effected unless the same shall be in writing signed by both Parties.

12.6. Governing Law

This Agreement shall be construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to the conflict of laws provisions thereof.

12.7. Dispute Resolution

In the event of any dispute under this Agreement, the Parties shall refer such dispute to the Senior Officers for attempted resolution by good faith negotiations within thirty (30) days after such referral is made. If the Senior Officers are unable to resolve the dispute within the time allotted, either Party may proceed as set forth below.

a. Alternative Dispute Resolution. Any dispute, controversy or claim arising out of or relating to this Agreement shall be settled by mediation and arbitration in the manner described below:

b. Mediation. The Senior Officers shall select a mediator with appropriate expertise in the subject matter to which the dispute relates, who will be engaged to resolve the dispute. If the Senior Officers cannot agree on a mediator within fifteen (15) days, each Party may seek appropriate resolution through arbitration as described below. If the Parties are unable to

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resolve their dispute through mediation within ninety (90) days after selection of the mediator(s), either Party may seek appropriate resolution through arbitration as described below.

c. Arbitration. Any dispute, controversy or claim arising out of or relating to this Agreement which is not resolved by mediation, including disputes relating to alleged breach or to termination of this Agreement, shall be settled by binding arbitration (“Arbitration”) as follows:

i. If a Party intends to begin an Arbitration to resolve a dispute, such Party shall provide written notice (the “Arbitration Request”) to the other Party informing such other Party of such intention and the issues to be resolved. From the date of the Arbitration Request and until such time as any matter has been finally settled by Arbitration, the running of the time periods contained in Article XI as to which Party must cure a breach of this Agreement shall be suspended as to the subject matter of the dispute. Within ten (10) Business Days after the receipt of the Arbitration Request, the other Party may, by written notice to the Party initiating Arbitration, add additional issues to be resolved.

d. Procedure. The Arbitration shall be conducted pursuant to the then-current JAMS/ENDISPUTE Rules (streamlined for disputes involving $*** or less and comprehensive for disputes involving more than $***). Notwithstanding those rules, the following provisions shall apply to the ADR hereunder:

i. Arbitrator. In the event that the dispute at issue involves an amount less than $***, the Arbitration shall be conducted by one (1) arbitrator (the “Threshold 1 Arbitrator”). In the event, however, that the dispute at issue involves an amount greater than $***, the Arbitration shall be conducted by a panel of three (3) arbitrators (collectively, with the Threshold 1 Arbitrator, the “Arbitrators”). The Arbitrator(s) shall be selected from a pool of retired independent federal judges to be presented to the Parties by JAMS/ENDISPUTE. Neither Party shall engage in ex parte contact with the Arbitrator(s).

ii. Proceedings. The Arbitrator(s) shall render a written opinion setting forth findings of fact and conclusions of law with the reason therefor stated. A transcript of the evidence adduced at the hearing shall be made and, upon request, shall be made available to each Party. The Arbitrator(s) shall, in rendering his decision, apply the substantive law set forth in Section 12.6, except that the interpretation of and enforcement of this Section 12.7 shall be governed by the Federal Arbitration Act. The Arbitrator(s) shall apply the Federal Rules of Evidence to the hearing. The proceeding shall take place in Philadelphia, Pennsylvania and shall be conducted in such a manner so that the written opinion of the Arbitrator(s) is given within one hundred eighty (180) days after the Arbitrator(s) is selected. The fees of the Arbitrator(s) and JAMS/ENDISPUTE shall be paid by the losing Party, which shall be designated by the Arbitrator(s). If the Arbitrator(s) is unable to designate a losing Party, it shall so state and the fees shall be split equally between the Parties.

iii. Award. The Arbitrator(s) is empowered to award any remedy allowed by Law, including money damages, prejudgment interest and attorneys’ fees,

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and to grant final, complete, interim, or interlocutory relief, including injunctive relief.

iv. Costs. Except as set forth in Sections 12.7(d)(ii) and (iii) above, each Party shall bear its own legal fees and costs.

e. Confidentiality. The ADR proceeding shall be confidential and the Arbitrator(s) shall issue appropriate protective orders to safeguard each Party’s Confidential Information. Except as required by Law, no Party shall make (or instruct the Arbitrator(s) to make) any public announcement with respect to the proceedings or decision of the Arbitrator(s) without prior written consent of each other Party. The existence of any dispute submitted to ADR, and the award, shall be kept in confidence by the Parties and the Arbitrator(s), except as required in connection with the enforcement of such award or as otherwise required by applicable law.

f. Judgment; Equitable Remedies. Any court having jurisdiction of this matter may enter judgment upon any award granted under this Section 12.7. Each Party has the right before or during the arbitration to seek and obtain from the appropriate court equitable remedies as provided in Section 12.8.

g. Language. All pleadings, complaints and other documents filed or presented in connection with, and all proceedings in, any dispute resolution proceeding described in this Section 12.7 must be in the English language.

12.8. Injunctive Relief

Money damages may not be a sufficient remedy for breach of this Agreement and the Party that is not in breach shall be entitled to specific performance and injunctive or other equitable relief as a remedy for any such breach without proof of actual damages. In such event, the breaching Party is deemed to waive any requirement for security or posting of any bond in connection with such remedy. Such remedy shall not be deemed to be the exclusive remedy for breach of this Agreement but shall be in addition to all other remedies available at Law or in equity to the non-breaching Party.

12.9. Waiver of Jury Trial

EACH PARTY HERETO WAIVES ITS RIGHT TO TRIAL OF ANY ISSUE BY JURY.

12.10. Third Party Beneficiaries

Except with respect to Novartis pursuant to the provisions of this Agreement that are expressly intended for its benefit, and except as specifically provided in Article X, no other provision of this Agreement is intended to or shall confer upon any third party any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

12.11. Limitation of Liability

IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR LOST PROFITS OR FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, HOWEVER CAUSED, ON ANY THEORY OF LIABILITY AND WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH

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DAMAGES, ARISING UNDER ANY CAUSE OF ACTION AND ARISING IN ANY WAY OUT OF THIS AGREEMENT. THE FOREGOING LIMITATION WILL NOT LIMIT EITHER PARTY’S INDEMNIFICATION OBLIGATIONS TO THE OTHER PARTY UNDER ARTICLE X TO THE EXTENT ARISING OUT OF CLAIMS BY THIRD PARTIES.

12.12. Construction

Unless the context of this Agreement otherwise requires: (a) words of any gender include each other gender; (b) words using the singular or plural number also include the plural or singular number, respectively; (c) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement; (d) the terms “Article,” “Section,” or “Schedule” refer to the specified Article, Section or Schedule of this Agreement; (e) the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or”; and (f) the term “including” or “includes” means “including without limitation” or “includes without limitation.”

12.13. Counterparts

This Agreement may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original and all of which together shall constitute one and the same document. Facsimile signatures and counterparts shall be treated as originals.

12.14. Notices

Any notices required or permitted under this Agreement shall be given in person or sent by first class, certified mail or by facsimile transmission, by overnight courier or by hand delivery to:

VCS:

Ventiv Commercial Services, LLC

Vantage Court North

500 Atrium Drive

Somerset, New Jersey 08873

Attention: Paul Mignon, President, Selling Solutions

Fax #: 732-537-4912

with a copy to:

David S. Blatteis, Esq.

Norris, McLaughlin & Marcus, P.A.

721 Route 202-206

P.O. Box 5933

Bridgewater, NJ 08807-5933

Fax #: (908) 722-0755

CLIENT:

ENDO Pharmaceuticals Inc.

100 Endo Boulevard

Chadds Ford, PA 19317

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Attention: Chief Legal Officer

FAX (610) 558-9684

or to such other address or to such other person as may be designated by written notice given from time to time during the Term of this Agreement by one Party to the other. Notice shall be deemed to have been given immediately in the case of notice delivered by facsimile transmission (if transmission is confirmed) or by hand delivery. Notices shall be deemed given on the next Business Day in the case of notice sent by overnight courier. Notices shall be deemed given five (5) Business Days after sent by mail.

[Signature page follows.]

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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first above written.

VENTIV COMMERCIAL SERVICES, LLC
By:	/s/ Paul Mignon
	Name:	Paul Mignon
	Title:	President, Selling Solutions
ENDO PHARMACEUTICALS INC.
By:	/s/ David Holveck
	Name:	David Holveck
	Title:	President and CEO

[Signature page to Sales Representative Services Agreement.]

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LIST OF SCHEDULES

SCHEDULE	SCHEDULE SUBJECT MATTER
A-1	Detailing to Targets
A-1A	Products
A-1C	Preferred Hiring Profile
A-1D	New Hire Information Package
A-1E	Meetings Included in Agreement
A-1F	VCS Field Force Information Report
A-2	Sampling of Products to Targets
B	Compensation-Fees Payable to VCS
B-Y	Budget
C	Insurance Requirements
D	Lease Assignment and Assumption Agreements

SCHEDULE A-1

DETAILING TO TARGETS

VCS will provide individuals to serve as Sales Representatives to make Calls pursuant to the Call Plan on Target Prescribers.

ESTABLISHMENT OF SALES FORCES

VCS will provide a sales force consisting of Sales Representatives, District Managers, Project Managers, and National Sales Director as provided in this Agreement, which shall be known as the VCS Field Force and shall Call Target Prescribers.

HIRE STATUS AND WORK SCHEDULE

All of the VCS Sales Representatives will be VCS employees. The weekly work schedule for these full-time VCS Sales Representatives will be forty (40) hours per week and each Sales Representative must be present in his or her Territory from 8:00 AM (local time) to 5:00 PM (local time), Monday through Friday. The work schedule of a Sales Representative may also include occasional work scheduled on weekends and evenings to attend meetings or conventions and, when warranted, this time will be in addition to the weekly work schedule set forth above. Attendance at all district and national meetings and all nightly or weekend promotional dinners or events is mandatory.

VCS will provide VCS Sales Representatives as a dedicated field force. As Sales Representatives in a dedicated field force, the VCS Sales Representatives may not Detail any products of any Person other than CLIENT.

CALLS AND TARGETS

Detailing. Each Sales Representative shall conduct face-to-face one-on-one discussions with Target Prescribers during which a promotional message involving the Products is given for the purpose of promoting the Products to such Target Prescribers in accordance with this Agreement (each such discussion being a “Detail” and the holding of such meetings being “Detailing”). For the avoidance of doubt, (i) a reminder presentation or a sample drop shall not constitute a Detail, a Primary Detail or a Secondary Detail; and (ii) presentations to groups, medical conventions or institutions shall not constitute a Detail, a Primary Detail or a Secondary Detail.

VCS shall cause the Sales Representatives to conduct Calls against *** as set forth in this Agreement.

Generally, a VCS Sales Representative is expected to use the Product Literature (and only the Product Literature) when making a Call and to leave one or more copies of the Product Literature and full prescribing information with the Target Prescriber as part of the Call. VCS shall require each VCS Sales Representative to accurately record information concerning each Call and concerning the profile of each Target Prescriber on whom the VCS Sales Representative Calls. Such recorded information shall be deemed to be the property of CLIENT.

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MANAGER HIRE STATUS

VCS will also provide the number of full-time District Managers and Project Managers as specified in this Agreement. All of the managers to be provided will be VCS employees. The District Managers, Project Manager and VCS’ National Sales Director will be dedicated to the VCS Field Force.

As dedicated managers, the VCS managers may not manage persons other than the VCS Field Force.

ALIGNMENTS

The configurations of the sales districts and of the Territories within each district to be serviced by the VCS Field Force have been or will be provided to VCS; will be maintained by VCS at its offices; and may be amended or reconfigured from time to time only upon prior written approval of CLIENT.

HIRING PROFILE

In selecting the Sales Representatives, District Managers, Project Manager and its National Sales Director, VCS will use the preferred hiring profile approved by CLIENT as set forth in Schedule A-1C to this Agreement, as the same may be amended from time to time with the prior written approval of CLIENT. VCS will take reasonable steps to confirm the accuracy of information concerning background and experience received from applicants for positions as Sales Representatives, District Managers, Project Manager and VCS National Sales Director. VCS will review all potential hires with CLIENT and take into consideration all of CLIENT’s recommendations. VCS will be solely responsible for all hiring decisions. VCS will ensure that each Sales Representative, District Manager, Project Manager and VCS National Sales Director receives the appropriate new-hire information package set forth in Schedule A-1D to this Agreement, as the same may be amended from time to time with the prior written approval of CLIENT.

TRAINING

VCS will cause each new Sales Representative, District Manager, Project Manager and VCS National Sales Director to participate in appropriate training (both at-home study and class time). CLIENT and VCS shall collaborate on the scheduling of training for any new hires in the VCS Field Force. If there is a vacancy in the VCS Field Force, VCS shall use commercially reasonable efforts to ensure that the vacancy is filled in a timely fashion so as to complete all required training as soon as possible after hiring. CLIENT will cooperate in providing training aids and personnel useful in the conduct of training. The training responsibilities of the parties are set forth in the following table, which may be amended from time to time upon mutual agreement of the parties:

Initial Training		Training Post October 1st
VCS employee specific training, e.g., HR policies, expense mgmt, etc	VCS	VCS employee specific training, e.g., HR policies, expense mgmt, etc	VCS
Fleet	VCS	Fleet	VCS

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Initial Training		Training Post October 1st
Health Care Compliance	VCS	Health Care Compliance	VCS
PDMA/Sample Accountability	VCS	PDMA/Sample Accountability	VCS
Adverse Event and Reporting	VCS	Adverse Event and Reporting	VCS
Medical Information Requests	CLIENT	Medical Information Requests	VCS
Product and Disease Training	CLIENT	Product and Disease Training	CLIENT
Marketing and Sales Strategy, General Selling Skills	CLIENT	Marketing and Sales Strategy, General Selling Skills	CLIENT
Sales Force Automation tool & other applicable applications and functions	CLIENT	Sales Force Automation tool & other applicable applications and functions	VCS

VCS and/or CLIENT will be responsible for the creation of all training materials and for the content of all training set forth in the “Initial Training” section above.

MEETINGS

The Services provided under this Agreement include the training and sales meeting activities of the Sales Representatives, District Managers, Project Manager, and National Sales Director listed in Schedule A-1E to this Agreement, as the same may be amended from time to time with the prior written approval of CLIENT.

STRATEGIC DIRECTION AND MANAGEMENT OF THE FIELD FORCE

CLIENT, through its regional business directors, will provide strategic direction to the VCS Field Force through the District Managers. In this way, CLIENT shall retain sole responsibility for the formulation and implementation of CLIENT’s marketing and sales strategies. CLIENT shall not, however, have any employment supervisory authority over the VCS Field Force. CLIENT is solely responsible for acts or omissions of its employees.

PERFORMANCE

In the event that CLIENT reasonably believes that a Sales Representative, District Manager, Project Manager or National Sales Director has violated any applicable Law or policy, CLIENT shall so notify VCS and VCS shall, subject to applicable Law, immediately remove such person from providing Services to CLIENT under this Agreement.

In the event CLIENT believes that a Sales Representative, District Manager, Project Manager or National Sales Director has failed to provide satisfactory service to CLIENT, CLIENT shall give written notice to VCS indicating that a failure to provide satisfactory service has occurred and VCS shall, subject to compliance with applicable Law, ***.

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REPRESENTATIONS AND UNDERTAKINGS

In connection with this Schedule A-1:

a. VCS represents and undertakes:

i. that neither VCS nor any Person employed by VCS in connection with any work to be performed for or on behalf of CLIENT has been debarred under Section 306(a) or (b) of the Federal Food, Drug and Cosmetic Act, and that no debarred person will in the future be employed by VCS in connection with any work to be performed for or on behalf of CLIENT. If at any time after execution of this Agreement, VCS becomes aware that VCS or any Person employed by VCS in connection with any work to be performed for or on behalf of CLIENT shall become or shall be in the process of being debarred, VCS shall so notify CLIENT at once and remove such Person from providing Services to CLIENT under this Agreement.

b. VCS will:

i. cause each VCS Sales Representative to make Calls in a professional manner, consistent with the applicable policy and procedure manual, on Target Prescribers and to present only information about the Products which is consistent with the Product Literature. VCS shall not and shall not permit the VCS Sales Representatives to add, delete or modify claims of efficacy or safety of the Products, nor make any changes (including underlining or otherwise highlighting any language or adding any notes thereto) in the Product Literature. VCS shall use and shall permit the VCS Sales Representatives to use only the Product Literature provided by CLIENT. Under no circumstances shall VCS develop, create, or use any other promotional material or literature or alter Product Literature provided by CLIENT. VCS shall immediately cease the use of any Product Literature when instructed to do so by CLIENT. VCS shall use the Product Literature only for the purposes of this Agreement. All copyright and other intellectual property rights therein shall remain vested in CLIENT or (as same relates to VOLTAREN^®) Novartis, as applicable.

ii. use commercially reasonable efforts to replace any VCS Sales Representative terminated by it within no more than *** (***) days of the date of such termination.

iii. As more fully described in the Agreement, and without limiting the provisions of Section 6.4 of the Agreement, inform CLIENT promptly of any reports of any adverse occurrence involving a Product of which VCS becomes aware or of any information VCS shall receive regarding any threatened or pending action by any Governmental Authority which may affect a Product. VCS shall, at the request of CLIENT, cooperate with CLIENT and Novartis (as relates to VOLTAREN^®) in formulating a response regarding any such action.

c. CLIENT will:

i. provide VCS with all Product Literature useful to facilitate the Detailing of the Products.

ii. inform VCS promptly of any changes that CLIENT believes are necessary or appropriate in the Product Literature or in information concerning the Products in order to be in compliance with all applicable federal and state Laws.

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iii. timely respond to any inquiry concerning a Product from any licensed practitioner and directed to VCS.

STATUS OF MEMBERS OF THE VCS FIELD FORCE

VCS officers, agents and employees are independent from all control by CLIENT, except as to how they represent or characterize the Products when Detailing the Products.

They are not now nor will they in the future be considered employees of CLIENT or as eligible for any CLIENT employee benefits or compensation as a result of being employed by VCS to carry out VCS’ obligations under this Agreement.

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SCHEDULE A-1A

PRODUCTS AND COMPETING PRODUCTS

“Products” means VOLTAREN^®, LIDODERM^®, FROVA^®, OPANA^® ER and any additional products added by CLIENT to be Detailed by the Sales Representatives pursuant to this Agreement.

The Products shall be promoted by VCS under trademarks owned by or licensed to CLIENT and the CLIENT has all lawful authority necessary to market and sell the Products in all geographic regions where the Products are to be promoted under this Agreement to which this Schedule is attached. This Agreement does not constitute a grant to VCS of any property right or interest in the Products or the trademarks owned by or licensed to CLIENT or an Affiliate of CLIENT and/or any other intellectual property rights that CLIENT owns now or in the future. VCS recognizes the validity of and the title of CLIENT to all of CLIENT’s owned or licensed trademarks, trade names and trade dress in any country in connection with the Products, whether registered or not. CLIENT represents to VCS that, to its knowledge, neither those trademarks, trade names and trade dress nor the promotion of the Products by VCS infringes on any intellectual property right of any other Person.

All information, data, writings, inventions and other work products, in any form whatsoever, both tangible and intangible, developed as a result of VCS’ performance of the Services, including, without limitation, the Product Literature and all information gathered or developed by the Sales Representatives in the course of the Services (collectively, the “Works”), shall be considered works made for hire pursuant to the Copyright Act of 1976 (if applicable), and/or shall be the sole and exclusive property of CLIENT. CLIENT shall be the sole owner of all the rights to such Works in any form and in all fields of use known or hereafter existing. Notwithstanding the foregoing, intellectual property owned by or licensed to VCS which is used by VCS to develop any Works, shall remain the property of VCS (the “Components”). CLIENT agrees not to assert against VCS and its licensees any ownership interest in the Components. Notwithstanding the foregoing, CLIENT shall have a non-exclusive, irrevocable, perpetual, non-transferable (except to Affiliates and to other Persons CLIENT transfers or authorizes to use the Works), worldwide, royalty-free license to use such Components in conjunction with the Works. Upon the termination of this Agreement, VCS shall return to CLIENT all Works. CLIENT shall own and be entitled to retain all reports, including Call Reports, produced by VCS under this Agreement. However, VCS shall retain all rights in and to the design and formatting of such reports, except formatting of report forms provided by CLIENT to VCS.

“Competing Products” means the competing products listed on the following chart:

Product	Competing Products
LIDODERM®	***
FROVA®	***
OPANA® ER	***
VOLTAREN® Gel	***

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SCHEDULE A-1C

PREFERRED HIRING PROFILE

VCS SALES REPRESENTATIVE

Recruiting Profile:	Four Year Degree Minimum (preferred majors in sciences, business, and healthcare).
	Minimum of two (2) years of previous specialty Pharma sales, biotech sales or medical device sales, including strong results-oriented technical sales experience. Experience preferred in the areas of Pain Management, Neurology, Anesthesiology, Rheumatology, Hospitals, supportive Oncology, Orthopedic audience and key practices, and/or other related fields.
	Proven experience launching products.

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SCHEDULE A-1C

PREFERRED HIRING PROFILE

VCS FIELD FORCE DISTRICT MANAGER

Recruiting Profile:	Four (4) Year Degree Minimum (preferred majors in sciences, business, and healthcare).
	Minimum of three (3) years of previous specialty Pharma sales, biotech or med device sales.
	Minimum three (3) years of industry leadership and direct sales people management experience.
	Pain experience is preferred.

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SCHEDULE A-1D

NEW HIRE INFORMATION PACKAGE

All new hires shall receive CLIENT’s Sample Accountability Policies and Procedures, Product Literature and training materials before training meetings or other training. CLIENT shall designate any additional materials.

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SCHEDULE A-1E

MEETINGS INCLUDED IN AGREEMENT

New hire training meetings.

One Plan of Action meeting per year.

Such other planned meetings as CLIENT sales representatives selling any Products are required to attend, including a National Sales Meeting.

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SCHEDULE A-1F

VCS FIELD FORCE INFORMATION REPORT

Name	Title	Address	Territory	Start Date
	(Sales Representative/ District Manager)

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SCHEDULE A-2

SCOPE OF SERVICES

SAMPLING OF PRODUCTS TO TARGETS

General

As more fully described in this Agreement, VCS shall cause the VCS Field Force to distribute samples of the Products to Target Prescribers as part of the Detailing and promotion activities of the VCS Field Force, utilizing and in compliance with CLIENT’s Sample Accountability Policies and Procedures (as updated by CLIENT from time to time), and otherwise with applicable federal and state Law and regulations, including “PDMA.” CLIENT will provide VCS with CLIENT’s Sample Accountability Policies and Procedures. VCS will review CLIENT’s Sample Accountability Policies and Procedures prior to implementation to assure that VCS is in compliance with said policies and procedures.

Sample Distribution

CLIENT shall make Product samples available to the VCS Field Force at CLIENT’s discretion and expense for use by the VCS Field Force in Detailing Products in accordance with this Agreement. CLIENT shall determine the quantities and types of samples to be made available to the VCS Field Force. CLIENT shall or shall cause its Distribution Agent to ship such samples to the VCS Sales Representatives. The VCS Sales Representatives shall store, handle and transport Product samples in accordance with CLIENT’s Sample Accountability Policies and Procedures.

VCS shall cause the VCS Field Force to store any samples of the Products in compliance with CLIENT’s Sample Accountability Policies and Procedures and otherwise with all applicable legal requirements, including, without limitation, the PDMA and all applicable federal, state, and local Laws governing the marketing, promotion, and sampling of pharmaceutical products that can only be sold with a prescription by a Professional. VCS shall be responsible to secure appropriate physical space (including temperature-controlled storage space) for the storage of all samples. VCS shall at all times cause the VCS Field Force to store and maintain the samples in the designated space.

CLIENT shall be responsible for the shipment of samples directly or through the Distribution Agent to the VCS Sales Representatives. This responsibility shall include design of a delivery verification system and of documentation, which will allow confirmation of each shipment delivered.

VCS will receive a copy of all documents confirming shipments of samples to the VCS Sales Representatives, whether by CLIENT or the Distribution Agent. VCS will, in all cases, reconcile the receipt of samples by each VCS Sales Representative with the samples shipped to that VCS Sales Representative, based upon the shipping records provided to it and acknowledgements of delivery provided by the VCS Sales Representatives. All discrepancies between the sample shipping records and the acknowledgement of delivery by the VCS Sales Representatives shall be investigated by VCS. Upon conclusion of the investigation by VCS, any confirmed discrepancy must be reported to CLIENT pursuant to the procedure as described below under “Notification to CLIENT of FDA Reportable Events,” subsection Samples Lost in Transit.

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CLIENT shall be responsible to ensure that the Distribution Agent is compliant with all applicable federal and state Laws, including the PDMA and the regulations of the FDA. VCS shall be responsible to ensure that any third party vendor that provides any verification services referred to in the previous paragraph is compliant with all applicable federal and state Laws, including the PDMA and the regulations of the FDA. If VCS determines that such third party vendor is not compliant with all applicable federal and state Laws, including the PDMA and the regulations of the FDA, VCS shall notify CLIENT within forty-eight (48) hours.

Sample Accountability

Accountability Training

The Parties recognize that such a sampling program will require incremental training in addition to its new hire training in sample accountability. VCS, with the assistance of CLIENT, will provide all training for Sales Representatives and District Managers, which addresses sampling matters. Upon completion of training, VCS shall administer to its Field Force the required sampling program examination, as agreed to by CLIENT, and VCS shall collect signed Sample Accountability Acknowledgement Forms from all Field Force members. Prior to Sales Representatives receiving their first sample shipment, VCS shall collect Sample Storage Location Forms from all VCS Sales Representatives. VCS must also send confirmation that all new Sales Representatives have completed all necessary exams and paperwork prior to receiving their first sample shipment. Should VCS and/or CLIENT determine that follow-on training is necessary in the future, VCS will be responsible for the reasonable costs associated with such follow-on training.

Monthly Sample Reconciliation

VCS shall comply with the requirements of CLIENT’s Sample Accountability Policies and Procedures as it relates to VCS Sales Representative monthly sample reconciliation. VCS shall provide CLIENT monthly summary reports of sample inventory reconciliations on the tenth business day of the month for the prior month.

Sample Inventory Audits

VCS shall conduct a security and audit program that is consistent with CLIENT’s Sample Accountability Policies and Procedures and otherwise includes allowance for all of: random, for cause and periodic physical inventories of samples delivered to the VCS Sales Representatives consistent with the PDMA and applicable regulations of the FDA (including those adopted under the FDA Modernization Act of 1997).

Prescriber Signature Verification Program

VCS shall conduct a prescriber signature verification program that is consistent with CLIENT’s Sample Accountability Policies and Procedures.

State License Validation

CLIENT is responsible for the validation of State License information for the lists of Prescribers utilized by the VCS Sales Representatives and all costs associated therewith.

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Returns

Sample Distribution Vendor shall be responsible for confirming all returns of samples by VCS or the VCS Field Force. Sample Distribution Vendor will provide VCS with a report of sample returns on a weekly basis. The Parties recognize that VCS will reconcile sample data and account for samples based (in part) on the return confirmations provided by CLIENT. CLIENT shall not remove, destroy or otherwise impair the availability of the returned samples until either VCS confirms the return of samples in the quantities reported by the VCS Field Force or if VCS has not begun such confirmation after the passage of thirty (30) days following notice to VCS. VCS is responsible for entering terminated representatives’ returned samples into the SFA system, if necessary, and must perform a Closeout Inventory Count of terminated sales representatives within thirty (30) days of termination.

Sample Accountability Reporting

VCS shall provide a Monthly Sample Accountability Summary Report to CLIENT which includes, but is not limited to, data related to:

• Annual Audits – schedule for completion will be through calendar year as reasonable and agreed upon with CLIENT.

• For-Cause Audits

• Quarterly Sample Inventory Reconciliation

• Monthly Sample Inventory Reconciliation

• New Hire Weekly Sample Inventory Reconciliation

• SFA Synchronization Statistics

• Sales Representative Terminations

• Sample Shipment Discrepancies - transfers and returns

• Prescriber Signature Verification Results

• Theft, Loss, or Return of Product

VCS and CLIENT will work together to define the details of the Monthly Sample Accountability Summary Report

Notification to CLIENT of FDA Reportable Events

Upon VCS’ discovery that: (i) any Product samples have been stolen, lost in transit, or that there is a Significant Loss of samples or (ii) any sample documents have been falsified, VCS shall report this information to CLIENT in the following manner.

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Samples Lost in Transit

Within twenty-four (24) hours of confirmation of samples lost in transit, VCS shall provide a written report of such loss to CLIENT. The written report of samples lost in transit shall include: (1) Sales Representative name, (2) Product name, (3) Quantity of Product, and (4) explanation of circumstances surrounding the loss.

Upon receipt of the written report from VCS, CLIENT reserves the right to contact VCS directly if additional information is required. CLIENT shall then be responsible for reporting the loss to the FDA (including both five (5) day notice and thirty (30) day follow-up notification).

Significant Loss of Drug Samples

CLIENT shall establish through a documented rationale the following: 1) a corporate loss threshold – value of samples as a loss as units, percent or both for which the sales representative is required to provide a written explanation to explain the loss when this value has been met or exceeded; 2) a significant loss threshold – value of samples lost as units, percent or both for which the sales representative is reported to CLIENT (“Significant Loss”). The Significant Loss threshold shall be greater than or equal to the corporate loss threshold. While the latter shall be used by VCS to require an explanation from sales representatives during reconciliation, the former is used by VCS to identify sales representatives that meet or exceed this value at the completion of the reconciliation process and to report those representatives to CLIENT in the manner as described in the following paragraph.

CLIENT shall be responsible for determining whether a Significant Loss of drug samples has occurred under the PDMA and regulations of the FDA, based upon CLIENT’s Loss Threshold. Within twenty-four (24) hours of discovery by VCS Regulatory that a Significant Loss has occurred, VCS shall provide a written report of the Significant Loss to CLIENT. The written report of the Significant Loss shall include: (1) Sales Representative name, (2) Product name, (3) Quantity of Product, (4) percentage of drug sample inventory lost, and (5) explanation of circumstances surrounding the Significant Loss and subsequent investigation.

Upon receipt of the written report from VCS, CLIENT reserves the right to contact VCS directly if additional information is required. CLIENT shall then be responsible for reporting the Significant Loss to the FDA (including both five (5) day notice and thirty (30) day follow-up notification).

Theft of Drug Samples

CLIENT shall be responsible for determining whether a theft of drug samples has occurred. Within twenty-four (24) hours of discovery of a theft by VCS Regulatory that a theft has occurred, VCS shall provide a written report of the theft to CLIENT. The written report of the theft shall include: (1) Sales Representative name, (2) Product name, (3) Quantity of Product, and (4) explanation of circumstances surrounding the theft of drug samples (including the police report, if available).

Upon receipt of the written report from VCS, CLIENT reserves the right to contact VCS directly if additional information is required. CLIENT shall then be responsible for reporting the theft to the FDA (including both five (5) day notice and thirty (30) day follow-up notification).

15

Falsification of Sample Documents

CLIENT shall be responsible for determining whether sample documents have been falsified. Within twenty-four (24) hours of discovery by VCS Regulatory that sample documents have been falsified, VCS shall provide a written report of the falsification of sample documents to CLIENT. The written report of the falsification of sample documents shall include: (1) Sales Representative name, (2) summary of the investigation conducted, and (3) disciplinary/corrective action taken.

Upon receipt of the written report from VCS, CLIENT reserves the right to contact VCS directly if additional information is required. CLIENT shall then be responsible for reporting the falsification of sample documents to the FDA (including both five (5) day notice and thirty (30) day follow-up notification).

Record Retention and Retrieval

VCS shall provide CLIENT access to any requested records within twenty-four (24) hours following CLIENT’s written request.

Recalls

VCS shall maintain such traceability of records at the product code level on samples of the Products as may be necessary to permit a recall or field correction of the Products. The decision to conduct and the right to control a recall shall be solely CLIENT’s. VCS shall cooperate fully with CLIENT in connection with any recall efforts affecting the Products.

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SCHEDULE B

COMPENSATION - FEES PAYABLE TO VCS

VCS shall invoice CLIENT monthly for all fees and costs payable by CLIENT for Services as set forth in the Budget included as Schedule B-Y.

CLIENT shall pay VCS an implementation fee as set forth in the budget on Schedule B-Y.

CLIENT shall pay VCS a monthly fixed fee during the Term based on the Budget set forth on Schedule B-Y. Included in the fixed monthly fee are certain costs (e.g., VCS Sales Representative and District Manager salaries for those Sales Representatives and District Managers actually employed by VCS for the applicable month and VCS Field Force travel, car expenses (except fuel), cell phone expenses (only to the extent used in the performance of duties pursuant to this Agreement) and other expenses captured on routine expense reports) to be reconciled by the Parties on a monthly basis and the Fixed Management Fee.

In addition, Pass-through Expenses shall be billed by VCS as incurred. Pass-through Expenses shall include:

• ***

• District Manager Bonuses (plus applicable employer portion of taxes)

• Sales Representative Bonuses (plus applicable employer portion of taxes)

• Sales Representative travel subject to compliance with Client travel policies as amended from time to time.

• National Training Meetings (including initial launch meeting) to the extent not paid directly by CLIENT

• POA Meetings to the extent not paid directly by CLIENT

• Direct Marketing Expense (DME) Funds in accordance with specified budget

• Ordinary and reasonable office expenses

Pass-through Expenses are subject to the provisions of Section 4.3 of the Agreement.

During the Term, VCS shall be paid the Fixed Management Fee of $*** (annually) and be eligible to earn the At-Risk Management Fee. All fees referenced in this Schedule B are provided on an annualized basis unless otherwise specified.

The annual At-Risk Management Fee is made up of three separate components:

1. $***

2. $***

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3. $***

***

***

***

***

***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***

***

***

***

***	***
***	***
***	***
***	***
***	***
***	***
***	***
***	***

***

***	***	***	***	***	***	***	***	***
***	***	***	***	***	***	***	***	***
***	***	***	***	***	***	***	***	***
***	***	***	***	***	***	***	***	***
***	***	***	***	***	***	***	***	***
***	***	***	***	***	***	***	***	***

***

***.

18

***

***

***

***

***

***

19

SCHEDULE B-Y

BUDGET

***

20

SCHEDULE C

INSURANCE REQUIREMENTS

VCS shall maintain the following insurance during the Term of this Agreement to which this Schedule is attached:

Comprehensive General Liability - Deductible or SIR	$1 million/occurrence $2 million/aggregate annual limit up to $250,000
Errors and Omissions - Deductible or SIR	$5 million/occurrence $5 million/year up to $250,000
Workers’ Compensation -	Statutory coverage, plus Employer’s Liability Coverage at limits of: $1,000,000 - Bodily Injury by Accident - Each Accident $1,000,000 - Bodily Injury by Disease - Each Employee $1,000,000 - Bodily Injury by Disease - Policy Limit
Automobile Liability Insurance -	$1 million/occurrence $1 million/accident for bodily injury, including death and property damage
Excess Liability	$5,000,000

VCS will provide CLIENT with evidence of VCS’ insurance. VCS will name CLIENT as an additional insured as its interests may arise under this Agreement under VCS’ General Liability and Auto Liability insurance policies, and will provide to CLIENT at least thirty (30) days’ prior written notice of any change or cancellation to the VCS’ insurance program.

CLIENT:

CLIENT shall maintain the following insurance or self- insurance during the Term of this Agreement to which this Schedule is attached:

Comprehensive General Liability - Deductible or SIR	$5 million single/aggregate annual limit up to $50,000
Product Liability -	$25 million/occurrence $25 million/year

21

Automobile Liability Insurance - $1 million/occurrence $1 million/year for bodily injury, including death and property damage

22

SCHEDULE D

LEASE ASSIGNMENT AND ASSUMPTION AGREEMENTS

23

***

(Lease Assumption Agreement)

24

LEASE ASSUMPTION AGREEMENT

THIS AGREEMENT is entered into on September     , 2010 (the “Effective Date”) by and between ENDO PHARMACEUTCIALS INC. (the “Original Lessee”), VENTIV COMMERCIAL SERVICES, LLC (the “Successor Lessee”), and *** (the “Lessor”).

WHEREAS, the Original Lessee leases motor vehicles and equipment from the Lessor under a *** dated *** (the “Lease”); and

WHEREAS in connection with that certain Sales and Promotional Services Agreement to be entered into by and between the Original Lessee and the Successor Lessee (the “Sales Agreement”) the Original Lessee desires to assign its rights and obligations under the Lease with respect to those motor vehicles and equipment that are listed on the attached Schedule A, consisting of         pages (the “Vehicles”), to the Successor Lessee; and

WHEREAS, in connection with the Sales Agreement, the Successor Lessee desires to assume the Original Lessee’s rights and obligations under the Lease with respect to the Vehicles; and

WHEREAS, the Lessor will consent to the assignment and assumption of the Vehicles upon the terms and conditions set forth in this Agreement.

NOW, THEREFORE, the parties hereto agree as follows:

1. The Original Lessee hereby assigns to the Successor Lessee, and the Successor Lessee hereby accepts from the Original Lessee, all of the Original Lessee’s rights and obligations that arise or accrue, or that have arisen or accrued, under the Lease with respect to the Vehicles on or after the Transfer Date, as defined below. The Lessor will transfer the Vehicles in its internal records after it receives signed versions of this Agreement from the Original Lessee and the Successor Lessee and will advise the Original Lessee and the Successor Lessee of the actual date on which Lessor has completed such internal transfer (the “Transfer Date”). Except as set forth in Section 5 and Section 9, as of the Transfer Date, the Original Lessee will be relieved of all obligations with respect to the Vehicles for the period from and after said date but shall remain responsible for obligations with respect to such vehicles prior to said Transfer Date.

2. The Successor Lessee hereby agrees to assume, be bound by, and perform all of the Original Lessee’s obligations that arise or accrue, or that have arisen or accrued, under the Lease with respect to the Vehicles on or after the Transfer Date.

3. The Successor Lessee shall make payment of all invoices by the *** of the month. Payments not received by the *** of the month will be subject to a late payment charge of ***% of the amount billed, retroactive to the first of the month, for each month in which the amount due remains unpaid.

25

4. The Lessor hereby consents to the assignment and assumption of the Original Lessee’s rights and obligations under the Lease with respect to the Vehicles on the terms and conditions set forth in this Agreement.

5. Upon the Effective Date, Original Lessee shall initiate the process of relocating the Vehicles from the Original Lessee to the Sucessor Lessee or its employees, consultants or agents (each, a “Recipient”). Notwithstanding anything to the contrary in this Agreement, the risk of loss for any Vehicle shall remain with the Original Lessee until the date on which such Vehicle is physically delivered to the applicable Recipient, as documented by the Original Lessee’s carrier (the “Delivery Date”). The Delivery Dates for the Vehicles will be documented in writing signed by the Original Lessee and the Successor Lessee and provided to Lessor within three weeks of the date of this Agreement.

6. The Lessor hereby releases the Original Lessee from all of its obligations under the Lease with respect to the Vehicles as of the Transfer Date: PROVIDED, HOWEVER, that the Original Lessee shall remain responsible to the Lessor for all obligations that arose or accrued under the Lease with respect to the Vehicles prior to the Transfer Date; AND FURTHER PROVIDED, HOWEVER, that the Original Lessee shall remain responsible to the Lessor for all obligations with respect to the motor vehicles and equipment under the Lease that are not covered by this Agreement or by any other agreement entered into by the Lessor releasing the Original Lessee from its obligations under the Lease; AND FURTHER PROVIDED, HOWEVER, that, pursuant to Section 5, the Original Lessee shall be responsible for the risk of loss and liability/indemnification obligations under the Lease for each Vehicle until the applicable Delivery Date.

7. Notwithstanding any provision of this Agreement, with regard to the Lease, the Successor Lessee understands and agrees that the Successor Lessee shall be solely responsible for any charges that are billed after the Transfer Date, including but not limited to items such as excess mileage, wear and tear, early termination or any other appropriate charges, regardless of when such charges accrued.

8. Prior to the Transfer Date, the Lessor will continue billing the Original Lessee. The Original Lessee and the Successor Lessee agree to resolve among themselves any reimbursement or cross-billing necessary in keeping with their own agreement.

9. Succesor Lessee shall: (a) prohibit its employees, consultants or agents from using or operating any of the Vehicles prior to the Transfer Date; and (b) indemnify and hold harmless Original Lessee, its affiliates and subsidiaries and their respective directors, officers, employees, consultants and agents from and against all liability, damages, losses, costs and expenses (including, but not limited to, reasonable attorneys’ fees, court costs and other costs of suit) for claims, demands, suits or judgments arising from or relating to any use or operation prohibited in clause (a).

10. Unless the Original Lessee and the Successor Lessee otherwise mutually agree in a writing presented to Lessor, if the Sales Agreement is not fully executed by 8:00am Eastern Time on October 31, 2010, then: (a) this Agreement shall automatically terminate; and (b) all

26

rights and obligations under the Lease with respect to the Vehicles assumed by the Successor Lessee hereunder shall automatically revert back to the Original Lessee as of the Reversion Date, as defined below. In the event of a termination and reversion pursuant to this paragraph: (i) Lessor will transfer the Vehicles back to the Original Lessee in its internal records after it receives notification that the Sales Agreement was not fully executed by the deadline specified in this Section 10, and will advise the Original Lessee and the Successor Lessee of the actual date on which Lessor has completed such internal transfer (the “Reversion Date”); (ii) the Original Lessee shall be responsible for all costs, expenses and liabilities associated with the Vehicles under the Lease (collectively, “Costs”) incurred after the Reversion Date; (iii) the Successor Lessee shall be responsible for all Costs incurred from the Transfer Date through and including the Reversion Date; and (iv) the Original Lessee shall be responsible, at its sole cost and expense, for any pick-up or relocation of the Vehicles in connection with any termination and reversion pursuant to this Section 10.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers on the date first above written.

Original Lessee:	Successor Lessee:
ENDO PHARMACEUTICALS INC.	VENTIV COMMERCIAL SERVICES, LLC
By:	By:
Title:	Title:
Date:	Date:
	Lessor:
	***
	*** as Attorney in Fact
	By:
	Its:
	Date:

27

SCHEDULE A

28

AMENDMENT NO. 1 TO

LEASE ASSUMPTION AGREEMENT

THIS AMENDMENT NO. 1 TO LEASE ASSUMPTION AGREEMENT (this “Amendment”) is made as of October 30, 2010, by and among Endo Pharmaceuticals Inc. (“Endo”), Ventiv Commercial Services, LLC (“Ventiv”) and *** (“***”). All capitalized terms shall have the meaning assigned to such terms in the Assignment Agreement (as defined below) unless otherwise defined herein.

WHEREAS, Endo, Ventiv and *** entered into that certain Lease Assumption Agreement, dated as of September ***, 2010 (the “Assignment Agreement”);

WHEREAS, pursuant to the Assignment Agreement, and in connection with the Sales Agreement, Ventiv assumed certain obligations and responsibilities for certain vehicles being leased to Endo by ***;

WHEREAS, the Assignment Agreement is schedule to terminate as of October 31, 2010 if the Sales Agreement is not executed by such date;

WHEREAS, as of the date hereof, the Sales Agreement is not yet executed, and negotiations thereof continue between Endo and Ventiv; and

WHEREAS, none of Endo, Ventiv or *** wishes the Assignment Agreement to terminate on October 31, 2010;

NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Endo, Ventiv and ***, intending to be legally bound, hereby agree as follows:

1.1 Section 10 of the Assignment Agreement is hereby amended so as to replace “October 31, 2010” with “November 28, 2010”.

29

1.2 This Amendment shall be construed in accordance with, and governed by, the internal laws of the Commonwealth of Pennsylvania, without regard to the choice of law principles of such commonwealth.

1.3 All terms and conditions of the Assignment Agreement not amended by this Amendment are hereby ratified and confirmed.

1.4 This Amendment may be executed in counterparts and by different parties hereto in separate counterparts, each of which, when executed and delivered, shall be deemed to be an original and all of which, when taken together, shall constitute one and the same instrument. A photocopied, facsimile or pdf signature shall be deemed to be the functional equivalent of a manually executed original for all purposes.

1.5 From and after the effective date of this Amendment, any reference to the Assignment Agreement shall be deemed to mean the Assignment Agreement amended by this Amendment and as the same may be further amended, modified or supplemented in accordance with the terms thereof.

[Signature Page Follows]

30

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above stated.

ENDO PHARMACEUTICALS INC.
By:
Name:	Julie H. McHugh
Title:	Chief Operating Officer
VENTIV COMMERCIAL SERVICES, LLC
By:
Name:	Michael P. Ryan
Title:	Chief Financial Officer
***
By ***. as Attorney in Fact
By:
Name:	[                    ]
Title:	[                    ]

[Signature Page to Amendment No. 1 to *** Assignment Agreement]

31

***

(Lease Assumption Agreement)

32

***

PARTIAL ASSIGNMENT OF VEHICLE LEASE AGREEMENT/

FLEET MANAGEMENT SERVICES AGREEMENT

ASSUMPTION OF PERFORMANCE BY ASSIGNEE/

CONSENT TO ASSIGNMENT

THIS AGREEMENT (this “Assignment”) is entered into as of September             , 2010 (hereinafter called the “Assignment Date”) by and between ENDO PHARMACEUTICALS, INC. (hereinafter called “Assignor”), and VENTIV COMMERCIAL SERVICES, LLC. a Delaware corporation (hereinafter called “Assignee”).

WHEREAS, a certain Vehicle Lease Agreement, dated September 24, 2009, by Endo Pharmaceuticals Inc. and subsequent Schedules A (hereinafter called the “Lease”), was entered into by and between Assignor, as Lessee, and *** (“***”), a Georgia corporation, as Lessor, which is hereby incorporated in this Agreement and a copy attached hereto; and

WHEREAS, in connection with that certain Sales and Promotional Services Agreement to be entered by and between Assignor and Assignee (the “Sales Agreement”) Assignor desires to assign the Lease as it relates solely to those certain Leased Vehicles, listed on the attached “Exhibit A,” (the “Vehicles”) leased under the Assignor’s Lease and Assignee desires to secure an assignment as of the Assignment Date.

WHEREAS, a certain Fleet Management Services Agreement, dated September 24, 2009, (hereinafter called the “Agreement”), was entered into by and between Assignor as “Client” and ***, which is hereby incorporated into this Agreement and a copy attached hereto; and

WHEREAS, in connection with the Sales Agreement, Assignor also desires to assign the Agreement as it relates solely to the Vehicles and keep such Vehicles enrolled in the Services under the Agreement and Assignee desires to secure such an assignment as of Assignment Date.

ASSIGNEE AND ASSIGNOR FURTHER STIPULATE that rental payment(s) and other amounts due or to become due (collectively “Rental Obligations”) under the Lease may have been invoiced to and/or paid by the Assignor before the Assignment Date or thereafter. Assignor and Assignee agree to reimburse/invoice each other with respect to any Rental Obligations to accurately reflect any periods from the Assignment Date up to and including Rental Obligations due on or before November 1, 2010.

ASSIGNEE AND ASSIGNOR FURTHER STIPULATE that some transactions and/or fees under the FM Programs which have occurred before the Assignment has been completed will be invoiced to the Assignee. Assignee agrees to reimburse the Lessor for any such charges (and, in turn, should invoice the Assignor for repayment); and Assignee also agrees to reimburse the Assignor for any such invoice credits.

NOW, THEREFORE, in consideration of the foregoing and in further consideration of the sum of ONE DOLLAR ($1.00) and other good and valuable consideration, the receipt of which is hereby acknowledged, Assignor hereby sells, transfers, assigns and conveys to the Assignee all of Assignor’s right, title and interest in and to the Lease and the Agreement as they relate solely to the Vehicles as listed on Exhibit A to this Assignment, it is hereby mutually covenanted and agreed as follows:

Assignor represents and warrants that (a) the Lease and Agreement are genuine, valid, subsisting and in all respects what they purport to be; (b) Assignor has good right to make this Assignment; (c) Assignor has not heretofore alienated, assigned or otherwise disposed of the Lease or Agreement or any interest therein; (d) no event of default as defined in the Lease or Agreement or otherwise has occurred and is continuing as to either party thereunder; (e) this Assignment will convey to Assignee all of Assignor’s right, title, and interest in and to the aforesaid Lease and Agreement, together

33

with all amendments, supplements and vehicle schedules pertaining thereto, on and after the Assignment Date.

Assignee represents and warrants that (a) Assignee hereby assumes the Lease and Agreement as they relate solely to the Vehicles as of the Assignment Date and thereafter agrees to perform and be bound by all the terms, conditions and covenants thereof, with the same force and effect as though originally the Lessee or as Client therein named; (b) Assignee hereby agrees to indemnify and hold harmless, *** and Assignor, their successors and assigns from any and all claims, damages, liabilities, costs and expenses that may be incurred by, or asserted against Assignor or ***, arising out of or from the Lease or the Agreement or the Vehicles on and after the Assignment Date.

Upon the Assignment Date, Assignor shall initiate the process of relocating the Vehicles from the Assignor to the Assignee or its employees, consultants or agents (each, a “Recipient”). Notwithstanding anything to the contrary in this Assignment, the risk of loss for any Vehicle shall remain with Assignor from the Assignment Date until the date on which such Vehicle is physically delivered to the applicable Recipient, as documented by Assignor’s carrier (the “Delivery Date”). The Delivery Dates for the Vehicles will be documented in a writing signed by the Assignor and Assignee and provided to *** within three weeks of the date of this Assignment.

Unless Assignor and Assignee otherwise mutually agree, if the Sales Agreement is not fully executed by 8:00am Eastern Time on October 31, 2010, then: (a) this Assignment shall automatically terminate; and (b) all rights and obligations under the Lease and the Agreement assumed by the Assignee hereunder shall automatically revert back to the Assignor. In the event of a termination and reversion pursuant to this paragraph: (i) Assignor shall be responsible for all fees, costs, expenses and liabilities associated with the Vehicles under the Lease and the Agreement (collectively, “Costs”) incurred after the date of such termination and reversion (the “Reversion Date”); and (ii) the Assignee shall be responsible for all Costs incurred from the Assignment Date through and including the Reversion Date. Assignor agrees to notify *** immediately but not later than November 1, 2010 if the Sales Agreement is not fully executed and shall pay *** a fee of $*** per Vehicle for each Vehicle that reverts hereunder.

IN WITNESS WHEREOF, this Agreement has been duly executed in full on behalf of the parties hereto on the date first above written.

ENDO PHARMACEUTICALS, INC.
Sign:
	(“Assignor”)
Print:
Title:
Date:

VENTIV COMMERCIAL SERVICES, LLC.
Sign:
	(“Assignee”)
Print:
Title:
Date:

34

Hereby acknowledged and agreed to:

***.

Sign:

Print:

Title:

Date:

Also Reviewed & Approved by:

Sign:

Print:

Title:

35

EXHIBIT A

***

36

***

37

AMENDMENT NO. 1 TO

PARTIAL ASSIGNMENT OF VEHICLE LEASE AGREEMENT / FLEET

MANAGEMENT SERVICES AGREEMENT / ASSUMPTION OF PERFORMANCE BY

ASSIGNEE / CONSENT TO ASSIGNMENT

THIS AMENDMENT NO. 1 TO PARTIAL ASSIGNMENT OF VEHICLE LEASE AGREEMENT / FLEET MANAGEMENT SERVICES AGREEMENT / ASSUMPTION OF PERFORMANCE BY ASSIGNEE / CONSENT TO ASSIGNMENT (this “Amendment”) is made as of October 30, 2010, by and between Endo Pharmaceuticals Inc. (“Endo”) and Ventiv Commercial Services, LLC (“Ventiv”). All capitalized terms shall have the meaning assigned to such terms in the Assignment Agreement (as defined below) unless otherwise defined herein.

WHEREAS, Endo and Ventiv entered into that certain Partial Assignment of Vehicle Lease Agreement / Fleet Management Services Agreement / Assumption of Performance by Assignee, dated as of September 22, 2010 (the “Assignment Agreement”);

WHEREAS, pursuant to the Assignment Agreement, and in connection with the Sales Agreement, Ventiv assumed certain obligations and responsibilities for certain vehicles being leased to Endo by ***;

WHEREAS, the Assignment Agreement is schedule to terminate as of October 31, 2010 if the Sales Agreement is not executed by such date;

WHEREAS, as of the date hereof, the Sales Agreement is not yet executed, and negotiations thereof continue between Endo and Ventiv; and

WHEREAS, neither Endo nor Ventiv wishes the Assignment Agreement to terminate on October 31, 2010;

NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Endo and Ventiv, intending to be legally bound, hereby agree as follows:

1.1 The last paragraph of the Assignment Agreement is hereby amended so as to replace “October 31, 2010” with “November 28, 2010” and so as to replace “November 1, 2010” with “November 29, 2010”.

1.2 This Amendment shall be construed in accordance with, and governed by, the internal laws of the Commonwealth of Pennsylvania, without regard to the choice of law principles of such commonwealth.

1.3 All terms and conditions of the Assignment Agreement not amended by this Amendment are hereby ratified and confirmed.

1.4 This Amendment may be executed in counterparts and by different parties hereto in separate counterparts, each of which, when executed and delivered, shall be deemed to be an original

38

and all of which, when taken together, shall constitute one and the same instrument. A photocopied, facsimile or pdf signature shall be deemed to be the functional equivalent of a manually executed original for all purposes.

1.5 From and after the effective date of this Amendment, any reference to the Assignment Agreement shall be deemed to mean the Assignment Agreement amended by this Amendment and as the same may be further amended, modified or supplemented in accordance with the terms thereof.

[Signature Page Follows]

39

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above stated.

ENDO PHARMACEUTICALS INC.
By:
Name:	Julie H. McHugh
Title:	Chief Operating Officer
VENTIV COMMERCIAL SERVICES, LLC
By:
Name:	Michael P. Ryan
Title:	Chief Financial Officer

Acknowledged and Agreed to:

***

By:
Name:	[                    ]
Title:	[                    ]

[Signature Page to Amendment No. 1 to *** Assignment Agreement]

40

EX-10.39.3

Exhibit 10.39.3

February 23, 2011

VIA ELECTRONIC MAIL & OVERNIGHT MAIL

Mr. Greg Tole

General Counsel

Novartis Consumer Health, Inc.

200 Kimball Drive

Parisppany, NJ 07054-0622

Re: Termination of Master Development and Toll Manufacturing Agreement

Dear Mr. Tole:

Pursuant to Section 19.1.2 of that certain Master Development and Toll Manufacturing Agreement, dated May 3, 2001, by and between Novartis Consumer Health, Inc. and Endo Pharmaceuticals Inc. (“Endo”), as amended, this letter shall serve as Endo’s Notice of Termination of such agreement.

Sincerely,

/s/ Julie McHugh

Julie McHugh

Chief Operating Officer

cc: Steven Cowan

EX-10.59

Exhibit 10.59

Grant No.

FORM OF

ENDO PHARMACEUTICALS HOLDINGS INC.

ENDO STOCK AWARD AGREEMENT

UNDER THE 2010 STOCK INCENTIVE PLAN

This Endo Stock Award Agreement (this “Award Agreement”), is made and entered into as of the date of grant set forth below (the “Date of Grant”) by and between Endo Pharmaceuticals Holdings Inc., a Delaware corporation (the “Company”), and the participant named below (the “Participant”). Capitalized terms not defined herein shall have the meanings ascribed to them in the Endo Pharmaceuticals Holdings Inc. 2010 Stock Incentive Plan (the “Plan”). Where the context permits, references to the Company shall include any successor to the Company.

Name of Participant:

Social Security No.:

Address:

Number of Endo Stock Awards:

Date of Grant:

Vesting Dates:

25% of the Endo Stock Awards on first anniversary of Date of Grant

25% of the Endo Stock Awards on second anniversary of Date of Grant

25% of the Endo Stock Awards on third anniversary of Date of Grant

25% of the Endo Stock Awards on fourth anniversary of Date of Grant

1. Grant of Endo Stock Awards. The Company hereby grants to the Participant the total number “Endo” restricted stock units set forth above (the “Endo Stock Awards”), subject to all of the terms and conditions of this Award Agreement and the Plan.

2. Form of Payment and Vesting. Each Endo Stock Award granted hereunder shall represent the right to receive (1) one share of Company Stock as of the date of vesting. Except as provided in Section 7 of the Plan or Paragraph 4 of this Award Agreement, such vesting shall occur on the vesting dates set forth above, provided that the Participant is employed by the Company on the applicable vesting date. Notwithstanding the above, a share of Company Stock shall be treated as delivered on the applicable vesting date provided that it is delivered on a date following the vesting date that is in the same calendar year as the vesting date or, if later, by the fifteenth day of the third calendar month following the vesting date.

3. Restrictions

(a) The Endo Stock Awards granted hereunder may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of or encumbered, and shall be subject to a risk of forfeiture and until any additional requirements or restrictions contained in this Award Agreement or in the Plan have been otherwise satisfied, terminated or expressly waived by the Company in writing.

(b) Except as provided in Section 4, upon vesting of the Endo Stock Awards, the shares subject to the Endo Stock Awards shall be issued hereunder (provided that such issuance is otherwise in accordance with federal and state securities laws) as soon as practicable thereafter, but in any event no later than the end of the taxable year in which such vesting occurs or, if later, by the 15^th day of the third calendar month following the vesting date.

4. Termination of Employment Services; Disability

(a) Termination of Employment For Cause. Upon the Participant’s termination of employment with the Company and its Subsidiaries for Cause all of the Participant’s unvested Endo Stock Awards shall be forfeited as of such date.

(b) Termination of Employment on Account of Death. Upon termination of the Participant’s employment on account of death, all of the Participant’s unvested Endo Stock Awards shall vest immediately.

(c) Termination of Employment on Account of Voluntary Retirement with Consent of Company. If a Participant voluntarily Retires with the consent of the Company, all of the Participant’s unvested Endo Stock Awards as of date of termination shall continue to vest in accordance with the original vesting schedule set forth in Section 2 of this Award Agreement.

(d) Termination of Employment for any Other Reason. Unless otherwise provided in an individual agreement with the Participant, if the Participant has a termination of employment for any reason other than the reasons enumerated in paragraphs (a) through (d) above, Endo Stock Awards that are unvested as of date of termination shall be forfeited.

(e) Disability. If the Participant incurs a Disability that also constitutes a “disability” within the meaning of Section 409A, all of the Participant’s unvested Endo Stock Awards as of the date of such Disability shall continue to vest in accordance with the original four (4) year vesting schedule set forth in Section 2 of this Award Agreement regardless of any subsequent termination of employment.

5. No Shareholder Rights Prior to Vesting. The Participant shall have no rights of a shareholder (including the right to distributions or dividends) until shares of Company Stock are issued pursuant to the terms of this Award Agreement.

6. Endo Stock Award (RSU) Agreement Subject to Plan. This Award Agreement is made pursuant to all of the provisions of the Plan, which is incorporated herein by this reference, and is intended, and shall be interpreted in a manner, to comply therewith. In the event of any conflict between the provisions of this Award Agreement and the provisions of the Plan, the provisions of the Plan shall govern.

7. No Rights to Continuation of Employment. Nothing in the Plan or this Award Agreement shall confer upon the Participant any right to continue in the employ of the Company or any Subsidiary thereof or shall interfere with or restrict the right of the Company or its shareholders (or of a Subsidiary or its shareholders, as the case may be) to terminate the Participant’s employment any time for any reason whatsoever, with or without cause.

8. Tax Withholding. The Company shall be entitled to require a cash payment by or on behalf of the Participant and/or to deduct from other Endo Stock Awards granted hereunder of compensation payable to the Participant any sums required by federal, state or local tax law to be withheld or to satisfy any applicable payroll deductions with respect to the vesting of, lapse of restrictions on, or payment of any Endo Stock Award.

9. Section 409A Compliance. The Endo Stock Award is intended to comply with Code Section 409A to the extent subject thereto and shall be interpreted in accordance with Code Section 409A and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Date of Grant. Notwithstanding any provision in the Plan or Award Agreement to the contrary, no payment or distribution under this Award Agreement that constitutes an item of deferred compensation under Code Section 409A and becomes payable by reason of the Participant’s termination of employment or service with the Company will be made to the Participant until the Participant’s termination of employment or service constitutes a “separation from service” (as defined in Code Section 409A). For purposes of this Award Agreement, each amount to be paid or benefit to be provided shall be construed as a separate identified payment for purposes of Code Section 409A. If a participant is a “specified employee” (as defined in Code Section 409A), then to the extent necessary to avoid the imposition of taxes under Code Section 409A, such Participant shall not be entitled to any payments upon a termination of his or her employment or service until the earlier of: (i) the expiration of the six (6)-month period measured from the date of such Participant’s “separation from service” or (ii) the date of such Participant’s death. Upon the expiration of the applicable waiting period set forth in the preceding sentence, all payments and benefits deferred pursuant to this Section 9 (whether they would have otherwise been payable in a single lump sum or in installments in the absence of such deferral) shall be paid to such Participant in a lump sum as soon as practicable, but in no event later than sixty (60) calendar days, following such expired period, and any remaining payments due under this Award Agreement will be paid in accordance with the normal payment dates specified for them herein.

10. Governing Law. This Award Agreement shall be governed by,

interpreted under, and construed and enforced in accordance with the internal laws, and not the laws pertaining to conflicts or choices of laws, of the State of Delaware applicable to agreements made and to be performed wholly within the State of Delaware.

11. Binding on Successors. The terms of this Award Agreement shall be binding upon the Participant and upon the Participant’s heirs, executors, administrators, personal representatives, transferees, assignees and successors in interest, and upon the Company and its successors and assignees, subject to the terms of the Plan.

12. No Assignment. Notwithstanding anything to the contrary in this Award Agreement, neither this Award Agreement nor any rights granted herein shall be assignable by the Participant.

13. Necessary Acts. The Participant hereby agrees to perform all acts, and to execute and deliver any documents that may be reasonably necessary to carry out the provisions of this Award Agreement, including but not limited to all acts and documents related to compliance with federal and/or state securities and/or tax laws.

14. Entire Endo Stock Award (RSU) Agreement. This Award Agreement and the Plan contain the entire agreement and understanding among the parties as to the subject matter hereof.

15. Headings. Headings are used solely for the convenience of the parties and shall not be deemed to be a limitation upon or descriptive of the contents of any such Section.

16. Counterparts. This Award Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.

17. Notices. All notices and other communications under this Agreement shall be in writing and shall be given by first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given three days after mailing to the respective parties named below:

If to Company:	Endo Pharmaceuticals Holdings Inc. 100 Endo Boulevard Chadds Ford, PA 19317 Attention: Treasurer
If to the Participant:	At the address noted above.

Either party hereto may change such party’s address for notices by notice duly given pursuant hereto.

18. Amendment. No amendment or modification hereof shall be valid unless it shall be in writing and signed by all parties hereto.

19. Acceptance. The Participant hereby acknowledges receipt of a copy of the Plan and this Award Agreement. The Participant has read and understand the terms and provision thereof, and accepts the Endo Stock Awards subject to all the terms and conditions of the Plan and this Award Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Award Agreement as of the date set forth above.

ENDO PHARMACEUTICALS HOLDINGS INC.

By

/S/ DAVID P. HOLVECK

Name: David P. Holveck

Title:   President & Chief Executive Officer

PARTICIPANT

Signature

EX-10.60

Exhibit 10.60

Grant No.

FORM OF

ENDO PHARMACEUTICALS HOLDINGS INC.

2010 STOCK INCENTIVE PLAN

STOCK OPTION AGREEMENT

This Stock Option Agreement (the “Option Agreement”) is made and entered into as of the date of grant set forth below (the “Date of Grant”) by and between Endo Pharmaceutical Holdings Inc., a Delaware corporation (the “Company”), and the optionee named below (the “Optionee”). Capitalized terms not defined herein shall have the meaning ascribed to them in the Company’s 2010 Stock Incentive Plan (the “Plan”).

Name of Optionee:

Social Security No.:

Address:

Shares Subject to Option:

Exercise Price Per Share:

Date of Grant:

Expiration Date:

Vesting Dates:	25% of the Option Shares on first anniversary of Date of Grant
	25% of the Option Shares on second anniversary of Date of Grant
	25% of the Option Shares on third anniversary of Date of Grant
	25% of the Option Shares on fourth anniversary of Date of Grant
Classification of Option
(Check one):	[ ]     Incentive Stock Option [ ]     Non-Qualified Stock Option

1. Number of Shares. The Company hereby grants to the Grantee an option (the “Option”) to purchase the total number of shares of Company Stock set forth above as Shares Subject to Option (the “Option Shares”) at the Exercise Price Per Share set forth above (the “Exercise Price”), subject to all of the terms and conditions of this Option Agreement and the Plan.

2. Incorporation of Plan. The Plan is hereby incorporated by reference and made a part hereof, and the Option and this Option Agreement shall be subject to all terms and conditions of the Plan.

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3. Option Term. The term of the Option and of this Option Agreement (the “Option Term”) shall commence on the Date of Grant set forth above and, unless previously terminated pursuant to Section 7 of the Plan or Paragraph 4 of this Option Agreement, shall terminate upon the Expiration Date set forth above. As of the Expiration Date, all rights of the Optionee hereunder shall terminate.

4. Termination of Employment. Upon termination of the Optionee’s employment, the Option shall be treated in accordance with Section 7 of the Plan;

5. Vesting. Except as provided in Section 7 of the Plan or Paragraph 4 above, the Option shall become exercisable with respect to the number of Option Shares specified on the Exercisability Dates set forth above. Once exercisable, the Option shall continue to be exercisable at any time or times prior to the Expiration Date, subject to the provisions hereof and of the Plan.

6. Authority of the Committee. The Committee shall have full authority to interpret and construe the terms of the Plan and this Option Agreement. The determination of the Committee as to any such matter of interpretation or construction shall be final, binding and conclusive.

7. Notices. All notices and other communications under this Agreement shall be in writing and shall be given by first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given three days after mailing to the respective parties named below:

If to Company:	Endo Pharmaceuticals Holdings Inc.
	100 Endo Boulevard
	Chadds Ford, PA 19317
	Attention: Treasurer
If to the Optionee:	At the address noted above.

Either party hereto may change such party’s address for notices by notice duly given pursuant hereto.

8. Amendments. This Option Agreement may be amended or modified at any time only by an instrument in writing signed by each of the parties hereto.

9. Governing Law. This Option Agreement shall be governed by and construed according to the laws of the State of Delaware without regard to its principles of conflict of laws.

10. Acceptance. The Optionee hereby acknowledges receipt of a copy of the Plan and this Option Agreement. The Optionee has read and understand the terms and provision thereof, and accepts the Option subject to all the terms and conditions of the Plan and this Agreement.

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Option Agreement on the day and year first above written.

ENDO PHARMACEUTICALS HOLDINGS INC.

By

/S/ DAVID P. HOLVECK

Name: David P. Holveck

Title:   President & Chief Executive Officer

Optionee

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EX-10.89.2

Exhibit 10.89.2

EXECUTION COPY

CREDIT AGREEMENT

dated as of

November 30, 2010

among

ENDO PHARMACEUTICALS HOLDINGS INC.

The Lenders Party Hereto

JPMORGAN CHASE BANK, N.A.

as Administrative Agent

ROYAL BANK OF CANADA

as Syndication Agent

and

BARCLAYS BANK PLC

as Documentation Agent

J.P. MORGAN SECURITIES LLC and RBC CAPITAL MARKETS¹

as Joint Bookrunners and Joint Lead Arrangers

¹ RBC Capital Markets is the global brand name for the corporate and investment banking business of Royal Bank of Canada and its affiliates.

TABLE OF CONTENTS

	Page
ARTICLE I Definitions
SECTION 1.01. Defined Terms	1
SECTION 1.02. Classification of Loans and Borrowings	30
SECTION 1.03. Terms Generally	30
SECTION 1.04. Accounting Terms; GAAP; Pro Forma Calculations	31
SECTION 1.05. Status of Obligations	32
ARTICLE II The Credits	32
SECTION 2.01. Commitments	32
SECTION 2.02. Loans and Borrowings	32
SECTION 2.03. Requests for Revolving Borrowings	33
SECTION 2.04. Determination of Dollar Amounts	34
SECTION 2.05. Swingline Loans	34
SECTION 2.06. Letters of Credit	35
SECTION 2.07. Funding of Borrowings	39
SECTION 2.08. Interest Elections	40
SECTION 2.09. Termination and Reduction of Commitments	41
SECTION 2.10. Repayment of Loans; Evidence of Debt	42
SECTION 2.11. Prepayment of Loans	43
SECTION 2.12. Fees	44
SECTION 2.13. Interest	45
SECTION 2.14. Alternate Rate of Interest	46
SECTION 2.15. Increased Costs	46
SECTION 2.16. Break Funding Payments	47
SECTION 2.17. Taxes	48
SECTION 2.18. Payments Generally; Allocations of Proceeds; Pro Rata Treatment; Sharing of Set-offs	49
SECTION 2.19. Mitigation Obligations; Replacement of Lenders	51
SECTION 2.20. Expansion Option	52
SECTION 2.21. Judgment Currency	53
SECTION 2.22. Defaulting Lenders	54
ARTICLE III Representations and Warranties	56
SECTION 3.01. Organization; Powers; Subsidiaries	56
SECTION 3.02. Authorization; Enforceability	56
SECTION 3.03. Governmental Approvals; No Conflicts	56
SECTION 3.04. Financial Condition; No Material Adverse Change	56
SECTION 3.05. Properties	57
SECTION 3.06. Litigation, Environmental and Labor Matters	57
SECTION 3.07. Compliance with Laws and Agreements	58

Table of Contents

(continued)

	Page
SECTION 3.08. Investment Company Status	58
SECTION 3.09. Taxes	58
SECTION 3.10. ERISA	58
SECTION 3.11. Disclosure	58
SECTION 3.12. Federal Reserve Regulations	58
SECTION 3.13. Liens	59
SECTION 3.14. No Default	59
SECTION 3.15. No Burdensome Restrictions	59
SECTION 3.16. Security Interest in Collateral	59
ARTICLE IV Conditions	59
SECTION 4.01. Effective Date	59
SECTION 4.02. Each Credit Event	62
ARTICLE V Affirmative Covenants	62
SECTION 5.01. Financial Statements and Other Information	63
SECTION 5.02. Notices of Material Events	64
SECTION 5.03. Existence; Conduct of Business	65
SECTION 5.04. Payment of Obligations	65
SECTION 5.05. Maintenance of Properties; Insurance	65
SECTION 5.06. Books and Records; Inspection Rights	65
SECTION 5.07. Compliance with Laws and Material Contractual Obligations	66
SECTION 5.08. Use of Proceeds	66
SECTION 5.09. Subsidiary Guarantors; Pledges; Additional Collateral; Further Assurances	66
ARTICLE VI Negative Covenants	67
SECTION 6.01. Indebtedness	67
SECTION 6.02. Liens	69
SECTION 6.03. Fundamental Changes and Asset Sales	71
SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions	73
SECTION 6.05. Swap Agreements	75
SECTION 6.06. Transactions with Affiliates	75
SECTION 6.07. Restricted Payments	75
SECTION 6.08. Restrictive Agreements	76
SECTION 6.09. Amendments to Subordinated Indebtedness Documents	77
SECTION 6.10. Sale and Leaseback Transactions	77
SECTION 6.11. Capital Expenditures	77
SECTION 6.12. Financial Covenants	77

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Table of Contents

(continued)

	Page
ARTICLE VII Events of Default	78
ARTICLE VIII The Administrative Agent	80
ARTICLE IX Miscellaneous	84
SECTION 9.01. Notices	84
SECTION 9.02. Waivers; Amendments	84
SECTION 9.03. Expenses; Indemnity; Damage Waiver	86
SECTION 9.04. Successors and Assigns	88
SECTION 9.05. Survival	91
SECTION 9.06. Counterparts; Integration; Effectiveness	91
SECTION 9.07. Severability	91
SECTION 9.08. Right of Setoff	91
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process	91
SECTION 9.10. WAIVER OF JURY TRIAL	92
SECTION 9.11. Headings	92
SECTION 9.12. Confidentiality	92
SECTION 9.13. Release of Liens and Guarantees	93
SECTION 9.14. USA PATRIOT Act	93
SECTION 9.15. Appointment for Perfection	93
SECTION 9.16. No Fiduciary Relationship	94
Article X Collection Allocation Mechanism Exchange	94

iii

Table of Contents

(continued)

	Page
SCHEDULES:
Schedule 2.01 – Commitments
Schedule 2.02 – Mandatory Cost
Schedule 2.06 – Existing Letters of Credit
Schedule 3.01 – Subsidiaries
Schedule 3.06 – Material Litigation
Schedule 3.07 – Compliance with Laws
Schedule 6.01 – Existing Indebtedness
Schedule 6.02 – Existing Liens
Schedule 6.04 – Existing Investments
Schedule 6.08 – Existing Restrictions
EXHIBITS:
Exhibit A – Form of Assignment and Assumption
Exhibit B – Form of Increasing Lender Supplement
Exhibit C – Form of Augmenting Lender Supplement
Exhibit D – List of Closing Documents

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CREDIT AGREEMENT (this “Agreement”) dated as of November 30, 2010 among ENDO PHARMACEUTICALS HOLDINGS INC., the LENDERS from time to time party hereto, JPMORGAN CHASE BANK, N.A., as Administrative Agent, ROYAL BANK OF CANADA, as Syndication Agent and BARCLAYS BANK PLC, as Documentation Agent.

The parties hereto agree as follows:

ARTICLE I

Definitions

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“ABR”, when used in reference to any Loan or Borrowing, refers to a Loan, or the Loans comprising such Borrowing, bearing interest at a rate determined by reference to the Alternate Base Rate.

“Acquisition Consideration” shall mean the sum of the cash purchase price for any Permitted Acquisition payable at or prior to the closing date of such Permitted Acquisition (and which, for the avoidance of doubt, shall not include any purchase price adjustment, royalty, earnout, contingent payment or any other deferred payment of a similar nature) plus the aggregate amount of Indebtedness assumed on such date in connection with such Permitted Acquisition.

“Adjusted LIBO Rate” means, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next  ¹/16 of 1%) equal to the sum of (i) (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate plus, without duplication and (ii) in the case of Loans by a Lender from its office or branch in the United Kingdom, the Mandatory Cost.

“Administrative Agent” means JPMorgan Chase Bank, N.A. (including its branches and affiliates), in its capacity as administrative agent for the Lenders hereunder.

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“Aggregate Available Revolving Commitment” means, at any time, the aggregate Revolving Commitments then in effect minus the Revolving Credit Exposure of all the Lenders at such time.

“Agreed Currencies” means (i) Dollars, (ii) euro, (iii) Japanese Yen, (iv) Pounds Sterling and (v) any other Foreign Currency agreed to by the Administrative Agent and each of the Lenders.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus  ¹/2 of 1% and (c) the Adjusted LIBO Rate for a one month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1%, provided that, for the avoidance of

doubt, the Adjusted LIBO Rate for any day shall be based on the rate appearing on Reuters Screen LIBOR01 Page (or on any successor or substitute page of such page) at approximately 11:00 a.m. London time on such day. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate, respectively.

“Applicable Lender” is defined in Section 2.06(d).

“Applicable Percentage” means, (a) with respect to any Multicurrency Tranche Lender in respect of a Multicurrency Tranche Credit Event, its Multicurrency Tranche Percentage, (ii) with respect to any Dollar Tranche Lender in respect of a Dollar Tranche Credit Event, its Dollar Tranche Percentage and (c) with respect to any Term Lender, a percentage equal to a fraction the numerator of which is such Lender’s Term Loan Commitment or, after funding the Term Loans, the outstanding principal amount of the Term Loans and the denominator of which is the aggregate outstanding amount of the Term Loans of all Term Lenders; provided that in the case of Section 2.22 when a Defaulting Lender shall exist, any such Defaulting Lender’s Term Loan Commitment shall be disregarded in the calculation.

“Applicable Pledge Percentage” means 100% but only 65% in the case of a pledge by the Borrower or any Domestic Subsidiary of its Equity Interests in (a) a Foreign Subsidiary or (b) a Foreign Holdco.

“Applicable Rate” means, for any day, with respect to any Eurocurrency Revolving Loan, any Eurocurrency Term Loans, any ABR Revolving Loan, any ABR Term Loan or with respect to the commitment fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption “Eurocurrency Spread for Revolving Loans”, “Eurocurrency Spread for Term Loans”, “ABR Spread for Revolving Loans”, “ABR Spread for Term Loans” or “Commitment Fee Rate”, as the case may be, based upon the Leverage Ratio applicable on such date:

	Leverage Ratio:	Commitment Fee Rate			Eurocurrency Spread for Revolving Loans			ABR Spread for Revolving Loans			Eurocurrency Spread for Term Loans			ABR Spread for Term Loans
Category 1:	£ 0.75x		0.35	%		2.00	%		1.00	%		2.00	%		1.00	%
Category 2:	> 0.75x but £ 1.50x		0.40	%		2.25	%		1.25	%		2.25	%		1.25	%
Category 3:	> 1.50x but £ 2.25x		0.50	%		2.50	%		1.50	%		2.50	%		1.50	%
Category 4:	> 2.25x		0.50	%		2.75	%		1.75	%		2.75	%		1.75	%

For purposes of the foregoing,

(i) if at any time the Borrower fails to deliver the Financials on or before the date the Financials are due pursuant to Section 5.01, Category 4 shall be deemed applicable for the period commencing three (3) Business Days after the required date of delivery and ending on the date which is three (3) Business Days after the Financials are actually delivered, after which the Category shall be determined in accordance with the table above as applicable;

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(ii) adjustments, if any, to the Category then in effect shall be effective three (3) Business Days after the Administrative Agent has received the applicable Financials (it being understood and agreed that each change in Category shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change); and

(iii) notwithstanding the foregoing, Category 3 shall be deemed to be applicable until the Administrative Agent’s receipt of the applicable Financials for the Borrower’s second full fiscal quarter ending after the Effective Date (unless such Financials demonstrate that Category 4 should have been applicable during such period, in which case such other Category shall be deemed to be applicable during such period) and adjustments to the Category then in effect shall thereafter be effected in accordance with the preceding paragraphs.

“Approved Fund” has the meaning assigned to such term in Section 9.04.

“Assignment and Assumption” means an assignment and assumption agreement entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent.

“Augmenting Lender” has the meaning assigned to such term in Section 2.20.

“Available Revolving Commitment” means, at any time with respect to any Lender, the Revolving Commitments of such Lender then in effect minus the Revolving Credit Exposure of such Lender at such time; it being understood and agreed that any Lender’s Swingline Exposure shall not be deemed to be a component of the Revolving Credit Exposure for purposes of calculating the commitment fee under Section 2.12(a).

“Availability Period” means the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of termination of all of the Revolving Commitments.

“Banking Services” means each and any of the following bank services provided to the Borrower or any Subsidiary by any Lender or any of its Affiliates: (a) credit cards for commercial customers (including, without limitation, “commercial credit cards” and purchasing cards), (b) stored value cards and (c) treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services).

“Banking Services Agreement” means any agreement entered into by the Borrower or any Subsidiary in connection with Banking Services.

“Banking Services Obligations” means any and all obligations of the Borrower or any Subsidiary, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) in connection with Banking Services.

“Bankruptcy Event” means, with respect to any Person, such Person becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in,

3

any such proceeding or appointment, provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority or instrumentality thereof, provided, further, that such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“Borrower” means Endo Pharmaceuticals Holdings Inc., a Delaware corporation.

“Borrowing” means (a) Revolving Loans of the same Class, Type and currency made, converted or continued on the same date and, in the case of Eurocurrency Loans, as to which a single Interest Period is in effect, (b) a Term Loan made on the same date and, in the case of Eurocurrency Loans, as to which a single Interest Period is in effect or (c) a Swingline Loan.

“Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.03.

“Burdensome Restrictions” means any consensual encumbrance or restriction of the type described in clause (a) or (b) of Section 6.08.

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurocurrency Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in the relevant Agreed Currency in the London interbank market or the principal financial center of the country of such Agreed Currency (and, if the Borrowings or LC Disbursements which are the subject of a borrowing, drawing, payment, reimbursement or rate selection are denominated in euro, the term “Business Day” shall also exclude any day on which the TARGET payment system is not open for the settlement of payments in euro).

“CAM” means the mechanism for the allocation and exchange of interests in the Specified Obligations and collections thereunder established under Article X.

“CAM Exchange” means the exchange of the Lenders’ interests provided for in Article X.

“CAM Exchange Date” means the first date on which there shall occur (a) any event referred to in (h), (i) or (j) of Article VII in respect of the Borrower or (b) an acceleration of Loans pursuant to Article VII.

“CAM Percentage” means, as to each Lender, a fraction, expressed as a decimal, of which (a) the numerator shall be the aggregate Dollar Amount (determined on the basis of Exchange Rates on the CAM Exchange Date) of the Specified Obligations owed to such Lender immediately prior to the CAM Exchange Date and (b) the denominator of which shall be the Dollar Amount (as so determined) of the Specified Obligations owed to all the Lenders.

“Capital Expenditures” means, without duplication, any expenditures for any purchase or other acquisition of any asset which would be classified as a fixed or capital asset on a consolidated

4

balance sheet of the Borrower and its Subsidiaries prepared in accordance with GAAP but excluding (i) expenditures made in connection with any replacement, substitution or restoration of property as a result of any involuntary loss of title, any involuntary loss of, damage to or any destruction of, or any condemnation or other taking (including by any Governmental Authority) of, any property of the Borrower or any of its Subsidiaries, (ii) expenditures constituting consideration for any Permitted Acquisitions, (iii) expenditures constituting interest capitalized during such period, (iv) expenditures that are accounted for as capital expenditures of such Person and that actually are paid for by a third party and for which no Loan Party has provided or is required to provide or incur, directly or indirectly, any consideration or obligation to such third party or any other person and (v) the purchase price of equipment that is purchased substantially contemporaneously with the trade in of existing equipment to the extent that the gross amount of such purchase price is reduced by the credit granted by the seller of such equipment for the equipment being traded in at such time.

“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“Cash Collateralized” shall mean, with respect to any Letter of Credit, as of any date, that Borrower shall have deposited in the LC Collateral Account, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to 105% of the LC Exposure as of such date plus any accrued and unpaid interest thereon pursuant to such documentation and arrangements as are reasonably satisfactory to the Administrative Agent. “Cash Collateralize” shall have the correlative meaning.

“Change in Control” means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof), of Equity Interests representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower; (b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the board of directors of the Borrower nor (ii) appointed by directors so nominated; or (c) the occurrence of a change in control, or other similar provision, as defined in any agreement or instrument evidencing any Material Indebtedness (triggering a default or mandatory prepayment, which default or mandatory prepayment has not been waived in writing) other than Indebtedness permitted under Section 6.01(q).

“Change in Law” means (a) the adoption of any law, rule or regulation (including any rules or regulations issued under or implementing any existing law) after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender’s or the Issuing Bank’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

“Class”, when used in reference to (a) any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Multicurrency Tranche Revolving Loans, Dollar Tranche Revolving Loans, Term Loans or Swingline Loans and (b) any Commitment, refers to whether such Commitment is a Multicurrency Tranche Commitment, a Dollar Tranche Commitment or a Term Loan Commitment.

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“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Collateral” means any and all property owned, leased or operated by a Person covered by the Collateral Documents and any and all other property of any Loan Party, now existing or hereafter acquired and wherever located, that may at any time be or become subject to a security interest or Lien in favor of Administrative Agent, on behalf of itself and the Secured Parties, to secure the Secured Obligations; provided that Collateral shall exclude Excluded Assets.

“Collateral Documents” means, collectively, the Security Agreement, the Mortgages and all other agreements, instruments and documents executed in connection with this Agreement that are intended to create, perfect or evidence Liens to secure the Secured Obligations, and shall also include, without limitation, all other security agreements, pledge agreements, mortgages, deeds of trust, loan agreements, notes, guarantees, subordination agreements, intercreditor agreements, pledges, powers of attorney, consents, assignments, contracts, fee letters, notices, leases, financing statements and all other written matter whether heretofore, now, or hereafter executed by the Borrower or any of its Subsidiaries and delivered to the Administrative Agent.

“Commitment” means, with respect to each Lender, the sum of such Lender’s Multicurrency Tranche Revolving Commitment, Dollar Tranche Commitment and Term Loan Commitment. The initial amount of each Lender’s Commitment is set forth on Schedule 2.01, or in the Assignment and Assumption or other documentation contemplated hereby pursuant to which such Lender shall have assumed its Commitment, as applicable.

“Computation Date” is defined in Section 2.04.

“Consolidated EBITDA” means Consolidated Net Income plus, to the extent deducted from revenues in determining Consolidated Net Income, (i) Consolidated Interest Expense, (ii) expense for taxes paid or accrued, (iii) depreciation, (iv) amortization, (v) extraordinary, unusual or non-recurring non-cash expenses or losses incurred other than in the ordinary course of business, (vi) non-cash expenses related to stock based compensation, (vii) fees and expenses directly incurred or paid in connection with the Transactions, the acquisition of Qualitest or, any other Permitted Acquisition to the extent (A) not in excess of $40,000,000 for each such Permitted Acquisition and (B) the aggregate amount of all such fees and expenses does not exceed $200,000,000 during any fiscal year, (viii) any non-recurring charges, costs, fees and expenses directly incurred or paid directly as a result of discontinued operations (other than such charges, costs, fees and expenses to the extent constituting losses arising from such discontinued operations), (ix) all settlement payments paid to Governmental Authorities in connection with any investigation (to the extent in effect on, and disclosed in the Borrower’s public filings with the SEC, on the Effective Date) of the United States Department of Health and Human Services, Office of Inspector General (OIG), (x) any unrealized losses in respect of Swap Agreements, (xi) any other extraordinary, unusual or non-recurring cash charges or expenses incurred outside of the ordinary course of business to the extent not in excess of $25,000,000 during any fiscal year, (xii) Permitted Acquisition Milestone Payments and Qualified Milestone Payments and (xiii) the aggregate amount of all other non-cash charges, expenses or losses reducing Consolidated Net Income during such period, minus, to the extent included in Consolidated Net Income, (1) interest income, (2) income tax credits and refunds (to the extent not netted from tax expense), (3) any cash payments made during such period in respect of items described in clauses (v), (vi) or (xiii) above subsequent to the fiscal quarter in which the relevant non-cash expenses or losses were incurred, (4) any non-recurring income or gains directly as a result of discontinued operations, (5) any unrealized income or gains in respect of Swap Agreements and (6) extraordinary, unusual or non-recurring income or gains realized other than in the ordinary course of business, all calculated for the Borrower and its Subsidiaries in accordance with GAAP on a consolidated basis. For the avoidance of doubt, the foregoing additions to, and subtractions from, Consolidated

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EBITDA shall not give effect to any items attributable to the JV Subsidiaries. For the purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters (each, a “Reference Period”), (i) if at any time during such Reference Period the Borrower or any Subsidiary shall have made any Material Disposition, the Consolidated EBITDA for such Reference Period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the property that is the subject of such Material Disposition for such Reference Period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such Reference Period, and (ii) if during such Reference Period the Borrower or any Subsidiary shall have made a Material Acquisition, Consolidated EBITDA for such Reference Period shall be calculated after giving pro forma effect thereto in accordance with Section 1.04(b) as if such Material Acquisition occurred on the first day of such Reference Period.

“Consolidated Interest Expense” means, with reference to any period, the interest expense (including without limitation interest expense under Capital Lease Obligations that is treated as interest in accordance with GAAP) of the Borrower and its Subsidiaries (other than the JV Subsidiaries) calculated on a consolidated basis for such period with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries allocable to such period in accordance with GAAP (including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers acceptance financing and net costs and benefits under interest rate Swap Agreements to the extent such net costs and benefits are allocable to such period in accordance with GAAP) but shall exclude, to the extent otherwise included in the calculation of Consolidated Interest Expense for the applicable period, without duplication, (i) to the extent directly related to the Transactions, debt issuance costs, debt discount or premium and other financing fees and expenses shall be excluded from the calculation of Consolidated Interest Expense, (ii) unrealized gains and losses with respect to any Swap Agreement related to interest rates, (iii) non-cash interest expense arising from the accretion of debt discount or pay-in-kind interest expense with respect to any Indebtedness permitted under Section 6.01 and (iv) any interest expense of Ledgemont for any period prior to the Effective Date. In the event that the Borrower or any Subsidiary shall have completed a Material Acquisition (other than a Drug Acquisition) or a Material Disposition since the beginning of the relevant period, Consolidated Interest Expense shall be determined for such period on a pro forma basis as if such acquisition or disposition, and any related incurrence or repayment of Indebtedness, had occurred at the beginning of such period.

“Consolidated Net Income” means, with reference to any period, the net income (or loss) of the Borrower and its Subsidiaries (other than the JV Subsidiaries) calculated in accordance with GAAP on a consolidated basis (without duplication) for such period plus the aggregate amount of cash dividends or other cash distributions actually paid to the Borrower or any Subsidiary (other than a JV Subsidiary) by the JV Subsidiaries during such period; provided that there shall be excluded (i) any income (or loss) of any Person other than the Borrower or a Subsidiary, but any such income so excluded may be included in such period or any later period to the extent of any cash dividends or distributions actually paid in the relevant period to the Borrower or any wholly-owned Subsidiary of the Borrower and (ii) any income (or loss) of Ledgemont for any period prior to the Effective Date.

“Consolidated Net Tangible Assets” means the aggregate amount of assets of the Borrower and its Subsidiaries (other than the JV Subsidiaries) (less applicable reserves and other properly deductible items) after deducting therefrom (to the extent otherwise included therein) (a) all current liabilities (other than Borrowings under this Agreement or current maturities of long-term Indebtedness), and (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other intangible assets, all computed on a consolidated basis in accordance with GAAP.

“Consolidated Total Assets” means, as of the date of any determination thereof, total assets of the Borrower and its Subsidiaries (other than the JV Subsidiaries) calculated in accordance with GAAP on a consolidated basis as of such date.

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“Consolidated Total Indebtedness” means at any time the sum, without duplication, of (a) the aggregate Indebtedness of the Borrower and its Subsidiaries (other than the JV Subsidiaries) that is of a type that would be reflected on a consolidated balance sheet of the Borrower prepared as of such time in accordance with GAAP and (b) Indebtedness of the type referred to in clause (a) hereof of another Person guaranteed by the Borrower or any of its Subsidiaries.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

“Credit Event” means a Borrowing, the issuance of a Letter of Credit, an LC Disbursement or any of the foregoing.

“Credit Exposure” means, as to any Lender at any time, the sum of (a) such Lender’s Revolving Credit Exposure at such time, plus (b) an amount equal to the aggregate principal amount of its Term Loans outstanding at such time.

“Credit Party” means the Administrative Agent, the Issuing Bank, the Swingline Lender or any other Lender.

“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“Defaulting Lender” means any Lender that (a) has failed, within three (3) Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its participations in Letters of Credit or Swingline Loans or (iii) pay over to any Credit Party any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Lender notifies the Administrative Agent in writing that such failure is the result of such Lender’s good faith determination that a condition precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, (b) has notified the Borrower or any Credit Party in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Lender’s good faith determination that a condition precedent (specifically identified and including the particular default, if any) to funding a loan under this Agreement cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within three (3) Business Days after request by a Credit Party, acting in good faith, to provide a certification in writing from an authorized signatory of such Lender that it will comply with its obligations (and is financially able to meet such obligations) to fund prospective Loans and participations in then outstanding Letters of Credit and Swingline Loans under this Agreement, provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon such Credit Party’s receipt of such certification in form and substance satisfactory to it and the Administrative Agent, or (d) has become the subject of a Bankruptcy Event.

“Disposition Consideration” means (i) for any sale, transfer, lease or disposition (other than an Exclusive License), the aggregate fair market value of any assets sold, transferred, leased or otherwise disposed of and (ii) for any Exclusive License, the aggregate cash payment paid to the Borrower or any Subsidiary on or prior to the consummation of the Exclusive License (and which, for the avoidance of doubt, shall not include any royalty, earnout, contingent payment or any other deferred payment that may be payable thereafter).

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“Disqualified Equity Interest” means, with respect to any Person, any Equity Interest in such Person that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable, either mandatorily or at the option of the holder thereof), or upon the happening of any event or condition:

(a) matures or is mandatorily redeemable (other than solely for Equity Interests in such Person that do not constitute Disqualified Equity Interests and cash in lieu of fractional shares of such Equity Interests), whether pursuant to a sinking fund obligation or otherwise;

(b) is convertible or exchangeable at the option of the holder thereof for Indebtedness or Equity Interests (other than solely for Equity Interests in such Person that do not constitute Disqualified Equity Interests and cash in lieu of fractional shares of such Equity Interests); or

(c) is or may be redeemable (other than solely for Equity Interests in such Person that do not constitute Disqualified Equity Interests and cash in lieu of fractional shares of such Equity Interests) or is or may be required to be repurchased by such Person or any of its Affiliates, in whole or in part, at the option of the holder thereof;

in each case, on or prior to the date that occurs 91 days after the Maturity Date.

“Documentation Agent” means Barclays Bank plc in its capacity as documentation agent for the credit facility evidenced by this Agreement.

“Dollar Amount” of any currency at any date shall mean (i) the amount of such currency if such currency is Dollars or (ii) the equivalent in such currency of Dollars if such currency is a Foreign Currency, calculated on the basis of the Exchange Rate for such currency, on or as of the most recent Computation Date provided for in Section 2.04.

“Dollar Tranche Commitment” means, with respect to each Dollar Tranche Lender, the commitment, if any, of such Dollar Tranche Lender to make Dollar Tranche Revolving Loans and to acquire participations in Dollar Tranche Letters of Credit and Swingline Loans hereunder, as such commitment may be (a) reduced or terminated from time to time pursuant to Section 2.09, (b) increased from time to time pursuant to Section 2.20 and (c) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Dollar Tranche Lender’s Dollar Tranche Commitment is set forth on Schedule 2.01, or in the Assignment and Assumption (or other documentation contemplated by this Agreement) pursuant to which such Dollar Tranche Lender shall have assumed its Dollar Tranche Commitment, as applicable. The aggregate principal amount of the Dollar Tranche Commitments on the Effective Date is $56,944,447.

“Dollar Tranche Credit Event” means a Dollar Tranche Revolving Borrowing, the issuance of a Dollar Tranche Letter of Credit, an LC Disbursement with respect to a Dollar Tranche Letter of Credit or any of the foregoing.

“Dollar Tranche LC Exposure” means, at any time, the sum of (a) the aggregate undrawn Dollar Amount of all outstanding Dollar Tranche Letters of Credit at such time plus (b) the aggregate Dollar Amount of all LC Disbursements in respect of Dollar Tranche Letters of Credit that have not yet been reimbursed by or on behalf of the Borrower at such time. The Dollar Tranche LC Exposure of any Dollar Tranche Lender at any time shall be its Dollar Tranche Percentage of the total Dollar Tranche LC Exposure at such time.

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“Dollar Tranche Lender” means a Lender with a Dollar Tranche Commitment or holding Dollar Tranche Revolving Loans.

“Dollar Tranche Letter of Credit” means any letter of credit issued under the Dollar Tranche Commitments pursuant to this Agreement.

“Dollar Tranche Percentage” the percentage equal to a fraction the numerator of which is such Lender’s Dollar Tranche Commitment and the denominator of which is the aggregate Dollar Tranche Commitments of all Dollar Tranche Lenders (if the Dollar Tranche Commitments have terminated or expired, the Dollar Tranche Percentages shall be determined based upon the Dollar Tranche Commitments most recently in effect, giving effect to any assignments); provided that in the case of Section 2.22 when a Defaulting Lender shall exist, any such Defaulting Lender’s Dollar Tranche Commitment shall be disregarded in the calculation.

“Dollar Tranche Revolving Borrowing” means a Borrowing comprised of Dollar Tranche Revolving Loans.

“Dollar Tranche Revolving Credit Exposure” means, with respect to any Dollar Tranche Lender at any time, and without duplication, the sum of the outstanding principal amount of such Dollar Tranche Lender’s Dollar Tranche Revolving Loans and its Dollar Tranche LC Exposure and its Swingline Exposure at such time.

“Dollar Tranche Revolving Loan” means a Loan made by a Dollar Tranche Lender pursuant to Section 2.01(a). Each Dollar Tranche Revolving Loan shall be a Eurocurrency Revolving Loan denominated in Dollars or an ABR Revolving Loan denominated in Dollars.

“Dollars” or “$” refers to lawful money of the United States of America.

“Domestic Subsidiary” means a Subsidiary organized under the laws of a jurisdiction located in the United States of America.

“Drug Acquisition” means any acquisition (including any license or any acquisition of any license) solely or primarily of all or any portion of the rights in respect of one or more drugs or pharmaceutical products, whether in development or on market, (including related intellectual property), but not of Equity Interests in any Person or any operating business unit.

“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02).

“Effective Date Representations” the meaning assigned to such term in Section 4.01(m).

“Environmental Laws” means all laws, rules, regulations, codes, ordinances, or binding orders, decrees, judgments, injunctions, notices or agreements issued, promulgated or entered into by any Governmental Authority, relating to pollution or protection of the environment, including management or reclamation of natural resources, and the management, Release or threatened Release of any Hazardous Material or to occupational health and safety matters, as such occupational health and safety matters relate to exposure or handling of Hazardous Materials.

“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any

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Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any of the foregoing; provided that “Equity Interests” shall not include Indebtedness for borrowed money which is convertible into Equity Interests.

“Equivalent Amount” of any currency with respect to any amount of Dollars at any date shall mean the equivalent in such currency of such amount of Dollars, calculated on the basis of the Exchange Rate for such other currency at 11:00 a.m., London time, on the date on or as of which such amount is to be determined.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan other than the PBGC premiums due but not delinquent under Section 4007 of ERISA; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal of the Borrower or any of its ERISA Affiliates from any Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition upon the Borrower or any of its ERISA Affiliates of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

“EU” means the European Union.

“euro” and/or “EUR” means the single currency of the participating member states of the EU.

“Eurocurrency”, when used in reference to a currency means an Agreed Currency and when used in reference to any Loan or Borrowing, means that such Loan, or the Loans comprising such Borrowing, bears interest at a rate determined by reference to the Adjusted LIBO Rate.

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“Eurocurrency Payment Office” of the Administrative Agent shall mean, for each Foreign Currency, the office, branch, affiliate or correspondent bank of the Administrative Agent for such currency as specified from time to time by the Administrative Agent to the Borrower and each Lender.

“Event of Default” has the meaning assigned to such term in Article VII.

“Exchange Rate” means, on any day, with respect to any Foreign Currency, the rate at which such Foreign Currency may be exchanged into Dollars, as set forth at approximately 11:00 a.m., Local Time, on such date on the Reuters World Currency Page for such Foreign Currency. In the event that such rate does not appear on any Reuters World Currency Page, the Exchange Rate with respect to such Foreign Currency shall be determined by reference to such other publicly available service for displaying exchange rates as may be reasonably selected by the Administrative Agent or, in the event no such service is selected, such Exchange Rate shall instead be calculated on the basis of the arithmetical mean of the buy and sell spot rates of exchange of the Administrative Agent for such Foreign Currency on the London market at 11:00 a.m., Local Time, on such date for the purchase of Dollars with such Foreign Currency, for delivery two Business Days later; provided, that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent, after consultation with the Borrower, may use any reasonable method it deems appropriate to determine such rate, and such determination shall be conclusive absent manifest error.

“Excluded Assets” means (a) motor vehicles and other equipment subject to a certificate of title statute, (b) leasehold interests in real property, (c) assets subject to a Lien securing Capital Lease Obligations, Synthetic Lease Obligations or purchase money debt obligations, in each case permitted hereunder, if the contract or other agreement in which such Lien is granted prohibits the creation of any other Lien on such assets (other than to the extent that any such prohibition would be rendered ineffective pursuant to the UCC of any relevant jurisdiction or any other applicable law); provided that such asset (i) will be an Excluded Asset only to the extent and for so long as the consequences specified above will result and (ii) will cease to be an Excluded Asset and will become subject to the Lien granted under the Security Agreement, immediately and automatically, at such time as such consequences will no longer result, (d) any fee-owned real property with an appraised value of less than $20,000,000, (e) any lease, license, contract, property right or agreement to which any Loan Party is a party or any of its rights or interests thereunder if and only for so long as the grant of a Lien hereunder is prohibited by any law, rule or regulation or will constitute or result in a breach, termination or default, or requires any consent not obtained, under any such lease, license, contract, property right or agreement (other than to the extent that any such applicable law, rule, regulation or term would be rendered ineffective pursuant to the UCC of any relevant jurisdiction or any other applicable law); provided that such lease, license, contract, property right or agreement will be an Excluded Asset only to the extent and for so long as the consequences specified above will result and will cease to be an Excluded Asset and will become subject to the Lien granted under the Security Agreement, immediately and automatically, at such time as such consequences will no longer result, (f) any portion of the issued and outstanding Equity Interests of a Pledge Subsidiary not required to be subject to a perfected lien in favor of the Administrative Agent in accordance with Section 5.09(b), (g) any applications for trademarks or service marks filed in the United States Patent and Trademark Office (“PTO”), or any successor office thereto pursuant to 15 U.S.C. §1051 Section 1(b) unless and until evidence of use of the mark in interstate commerce is submitted to the PTO pursuant to 15 U.S.C. §1051 Section 1(c) or Section 1(d) and (h) Equity Interests in entities where a Loan Party holds 50% or less of the outstanding Equity Interests of such entity, to the extent a pledge of such Equity Interests is prohibited by the organizational documents or agreements with the other equity holders of such entity.

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“Excluded JV Subsidiaries” means any Domestic Subsidiary that is a JV Subsidiary to the extent the organizational documents of such Subsidiary prohibit such Subsidiary from acting as a Subsidiary Guarantor.

“Excluded Taxes” means, with respect to any payments made to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which the Borrower is located, (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.19(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s failure to comply with Section 2.17(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.17(a), (d) any Taxes attributable to such Person’s failure to comply with Section 2.17(f), (e) any Taxes imposed as a result of such Person’s gross negligence or willful misconduct (as determined by a court of competent jurisdiction by a final and nonappealable judgment) and (f) any withholding tax that is imposed pursuant to FATCA.

“Exclusive License” means any license with a term greater than five (5) years and made on an exclusive basis. “Exclusively License” shall have the correlative meaning.

“Existing Credit Agreement” means that certain Credit Agreement, dated as of October 16, 2009, by and among the Borrower, the lenders from time to time parties thereto and JPMorgan Chase Bank, N.A. as administrative agent thereunder, as amended, restated, supplemented or otherwise modified prior to the Effective Date.

“Existing Letters of Credit” has the meaning assigned to such term in Section 2.06(a).

“FATCA” means Sections 1471 through 1474 of the Code and any current or future regulations promulgated or official interpretations thereunder.

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded upwards, if necessary, to the next  ¹/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next  ¹/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

“Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of the Borrower.

“Financials” means the annual or quarterly financial statements, and accompanying certificates and other documents, of the Borrower and its Subsidiaries required to be delivered pursuant to Section 5.01(a) or 5.01(b).

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“First Tier Foreign Subsidiary” means each Foreign Subsidiary with respect to which any one or more of the Borrower and its Domestic Subsidiaries directly owns or Controls more than 50% of such Foreign Subsidiary’s issued and outstanding Equity Interests.

“Foreign Currencies” means Agreed Currencies other than Dollars.

“Foreign Currency LC Exposure” means, at any time, the sum of (a) the Dollar Amount of the aggregate undrawn and unexpired amount of all outstanding Foreign Currency Letters of Credit at such time plus (b) the aggregate principal Dollar Amount of all LC Disbursements in respect of Foreign Currency Letters of Credit that have not yet been reimbursed at such time.

“Foreign Currency Letter of Credit” means a Multicurrency Tranche Letter of Credit denominated in a Foreign Currency.

“Foreign Holdco” means any Domestic Subsidiary that (i) has assets substantially all of which consist of stock of a controlled foreign corporation (as defined in Section 957 of the Code), (ii) does not conduct any business or operations (other than (a) ownership and acquisition of such corporations, (b) performance of obligations under, and in connection with, the Loan Documents, (c) actions required to maintain its existence and (d) activities incidental to its maintenance and continuance of the foregoing activities) and (iii) does not have any assets and liabilities (other than ownership of such corporations and bank accounts and immaterial liabilities incidental to such ownership and its existence).

“Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

“Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.

“GAAP” means generally accepted accounting principles in the United States of America.

“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Guarantee shall be deemed to be an amount equal to the lesser of (a) the stated or determinable amount of the primary payment obligation in respect of which such Guarantee is made and (b) the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the

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instrument embodying such Guarantee, unless such primary payment obligation and the maximum amount for which such guaranteeing Person may be liable are not stated or determinable, in which case the amount of the Guarantee shall be such guaranteeing Person’s maximum reasonably possible liability in respect thereof as reasonably determined by the Borrower in good faith.

“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of similar nature regulated pursuant to any Environmental Law.

“Increasing Lender” has the meaning assigned to such term in Section 2.20.

“Incremental Term Loan” has the meaning assigned to such term in Section 2.20.

“Incremental Term Loan Amendment” has the meaning assigned to such term in Section 2.20.

“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person (excluding trade accounts payable incurred in the ordinary course of business), (d) all obligations of such Person in respect of the deferred purchase price of property or services (including payments or other arrangements representing acquisition consideration, in each case entered into in connection with an acquisition, but excluding (i) accounts payable not more than 60 days overdue incurred in the ordinary course of business, (ii) deferred compensation and (iii) any purchase price adjustment, royalty, earnout, contingent payment or deferred payment of a similar nature incurred in connection with an acquisition), (e) all Capital Lease Obligations and Synthetic Lease Obligations of such Person, (f) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, (g) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances, (h) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed; provided that, if such Person has not assumed or otherwise become liable in respect of such Indebtedness, such obligations shall be deemed to be in an amount equal to the lesser of (i) the amount of such Indebtedness and (ii) fair market value of such property at the time of determination (in the Borrower’s good faith estimate), (i) all Guarantees by such Person of Indebtedness of others and (j) all Disqualified Equity Interests. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.

“Indemnified Taxes” means Taxes other than Excluded Taxes, imposed on or with respect to any payments made by or on account of any obligation of the Borrower hereunder, and Other Taxes.

“Information Memorandum” means the Confidential Information Memorandum dated October 2010 relating to the Borrower and the Transactions.

“Interest Coverage Ratio” has the meaning assigned to such term in Section 6.12(b).

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“Interest Election Request” means a request by the Borrower to convert or continue a Revolving Borrowing in accordance with Section 2.08.

“Interest Payment Date” means (a) with respect to any ABR Loan (other than a Swingline Loan), the last day of each March, June, September and December and the Maturity Date, (b) with respect to any Eurocurrency Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period and the Maturity Date and (c) with respect to any Swingline Loan, the day that such Loan is required to be repaid and the Maturity Date.

“Interest Period” means with respect to any Eurocurrency Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter (or, if acceptable to all Lenders, nine or twelve months thereafter), as the Borrower may elect; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurocurrency Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period pertaining to a Eurocurrency Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and, in the case of a Revolving Borrowing, thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

“Issuing Bank” means JPMorgan Chase Bank, N.A., in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.06(i); provided that, solely with respect to the Existing Letters of Credit issued by Royal Bank of Canada, Royal Bank of Canada shall be deemed to be an Issuing Bank (and each reference in this Agreement to the “Issuing Bank” solely when made in respect of the Existing Letters of Credit issued by Royal Bank of Canada, shall be deemed to refer to Royal Bank of Canada). The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

“Japanese Yen” means the lawful currency of Japan.

“JV Subsidiary” means any Subsidiary that is not a wholly owned Subsidiary and that is a joint venture with a third party unaffiliated with the Borrower or any other Subsidiary. The treatment of any JV Subsidiary as a Subsidiary hereunder shall be subject to the terms set forth in the definition of Subsidiary.

“LC Collateral Account” has the meaning assigned to such term in Section 2.06(j).

“LC Disbursement” means a payment made by the Issuing Bank pursuant to a Letter of Credit.

“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn Dollar Amount of all outstanding Letters of Credit at such time plus (b) the aggregate Dollar Amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Multicurrency Tranche Lender at any time shall be its Multicurrency Tranche Percentage of the total Multicurrency Tranche LC Exposure at such time and the LC Exposure of any Dollar Tranche Lender at any time shall be its Dollar Tranche Percentage of the total Dollar Tranche LC Exposure at such time.

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“Ledgemont” means Ledgemont Royalty Sub LLC, a Delaware limited liability company.

“Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall have become a Lender hereunder pursuant to Section 2.20 or pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption. Unless the context otherwise requires, the term “Lenders” includes the Swingline Lender.

“Letter of Credit” means any Multicurrency Tranche Letter of Credit or Dollar Tranche Letter of Credit.

“Leverage Ratio” has the meaning assigned to such term in Section 6.12(a).

“LIBO Rate” means, with respect to any Eurocurrency Borrowing for any Interest Period, the rate appearing on, in the case of Dollars, Reuters Screen LIBOR01 Page and, in the case of any Foreign Currency, the appropriate page of such service which displays British Bankers Association Interest Settlement Rates for deposits in such Foreign Currency (or, in each case, on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to deposits in the relevant Agreed Currency in the London interbank market) at approximately 11:00 a.m., London time, two (2) Business Days prior to (or, in the case of Loans denominated in Pounds Sterling, on the date of) the commencement of such Interest Period, as the rate for deposits in the relevant Agreed Currency with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the “LIBO Rate” with respect to such Eurocurrency Borrowing for such Interest Period shall be the rate at which deposits in the relevant Agreed Currency in an Equivalent Amount of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two (2) Business Days prior to (or, in the case of Loans denominated in Pounds Sterling, on the date of) the commencement of such Interest Period.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

“Liquidity” means, at any time the same is to be determined, the sum of (a) unencumbered cash and Permitted Investments held by the Borrower and its Subsidiaries, plus (b) the Aggregate Available Revolving Commitment hereunder at such time.

“Loan Documents” means this Agreement, any promissory notes issued pursuant to Section 2.10(e) of this Agreement, any Letter of Credit applications, the Collateral Documents, the Subsidiary Guaranty, any intercreditor agreements and subordination agreements, and all other agreements, instruments, documents and certificates identified in Section 4.01 executed and delivered to, or in favor of, the Administrative Agent or any Lenders and including all other pledges, powers of attorney, consents, assignments, contracts, notices, letter of credit agreements and all other written matter

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whether heretofore, now or hereafter executed by or on behalf of any Loan Party, or any employee of any Loan Party, and delivered to the Administrative Agent or any Lender in connection with the Agreement or the transactions contemplated thereby. Any reference in the Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to the Agreement or such Loan Document as the same may be in effect at any and all times such reference becomes operative.

“Loan Parties” means, collectively, the Borrower and the Subsidiary Guarantors.

“Loans” means the loans made by the Lenders to the Borrower pursuant to this Agreement.

“Local Time” means (i) New York City time in the case of a Loan, Borrowing or LC Disbursement denominated in Dollars and (ii) local time in the case of a Loan, Borrowing or LC Disbursement denominated in a Foreign Currency (it being understood that such local time shall mean London, England time unless otherwise notified by the Administrative Agent).

“Majority in Interest”, when used in reference to Lenders of any Class, means, at any time (i) in the case of the Revolving Lenders, Lenders having Revolving Credit Exposures and unused Revolving Commitments representing more than 50% of the sum of the aggregate Revolving Credit Exposures and the unused aggregate Revolving Commitments at such time and (ii) in the case of the Term Lenders, Lenders holding outstanding Term Loans representing more than 50% of all Term Loans outstanding at such time.

“Mandatory Cost” is described in Schedule 2.02.

“Material Acquisition” means any Permitted Acquisition (other than a Drug Acquisition) that involves the payment of Acquisition Consideration by the Borrower and its Subsidiaries in excess of $75,000,000.

“Material Adverse Effect” means a material adverse effect on (a) the business, assets, property or condition (financial or otherwise) of the Borrower and the Subsidiaries taken as a whole or (b) the validity or enforceability of this Agreement or any and all other Loan Documents or the rights or remedies of the Administrative Agent and the Lenders thereunder.

“Material Disposition” means any sale, transfer or disposition of property or series of related sales, transfers, or dispositions of property that involves payment of Disposition Consideration to the Borrower or any of its Subsidiaries in excess of $75,000,000.

“Material Domestic Subsidiary” means each Domestic Subsidiary (other than Excluded JV Subsidiaries) (i) which, as of the most recent fiscal quarter of the Borrower, for the period of four consecutive fiscal quarters then ended, for which financial statements have been delivered pursuant to Section 5.01, contributed greater than five percent (5%) of the Borrower’s Consolidated EBITDA for such period or (ii) which contributed greater than five percent (5%) of the Borrower’s Consolidated Total Assets as of such date; provided that, if at any time the aggregate amount of Consolidated EBITDA or Consolidated Total Assets attributable to all Domestic Subsidiaries that are not Material Domestic Subsidiaries exceeds ten percent (10%) of Consolidated EBITDA for any such period or ten percent (10%) of Consolidated Total Assets as of the end of any such fiscal quarter, the Borrower (or, in the event the Borrower has failed to do so within twenty (20) days, the Administrative Agent) shall designate sufficient Domestic Subsidiaries (other than Excluded JV Subsidiaries) as “Material Domestic Subsidiaries” to eliminate such excess, and such designated Subsidiaries shall for all purposes of this Agreement constitute Material Domestic Subsidiaries.

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“Material Foreign Subsidiary” means each Foreign Subsidiary (i) which, as of the most recent fiscal quarter of the Borrower, for the period of four consecutive fiscal quarters then ended, for which financial statements have been delivered pursuant to Section 5.01, contributed greater than five percent (5%) of the Borrower’s Consolidated EBITDA for such period or (ii) which contributed greater than five percent (5%) of the Borrower’s Consolidated Total Assets as of such date; provided that, if at any time the aggregate amount of Consolidated EBITDA or Consolidated Total Assets attributable to all Foreign Subsidiaries that are not Material Foreign Subsidiaries exceeds ten percent (10%) of the Borrower’s Consolidated EBITDA for any such period or ten percent (10%) of the Borrower’s Consolidated Total Assets as of the end of any such fiscal quarter, the Borrower (or, in the event the Borrower has failed to do so within twenty (20) days, the Administrative Agent) shall designate sufficient Foreign Subsidiaries as “Material Foreign Subsidiaries” to eliminate such excess, and such designated Subsidiaries shall for all purposes of this Agreement constitute Material Foreign Subsidiaries.

“Material Indebtedness” means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Swap Agreements, of any one or more of the Borrower and its Subsidiaries in an aggregate principal amount exceeding $50,000,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Borrower or any Subsidiary in respect of any Swap Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Swap Agreement were terminated at such time.

“Material Subsidiary” means each Material Domestic Subsidiary and each Material Foreign Subsidiary.

“Maturity Date” means November 30, 2015.

“Milestone Payments” means payments made under contractual arrangements existing during the period of twelve months ending on the Effective Date or contractual arrangements arising thereafter, in each case in connection with any Permitted Acquisition to sellers (or licensors) of the assets or Equity Interests acquired (or licensed) therein based on the achievement of specified revenue, profit or other performance targets (financial or otherwise).

“Moody’s” means Moody’s Investors Service, Inc.

“Mortgage” means each mortgage, deed of trust or other agreement which conveys or evidences a Lien in favor of the Administrative Agent, for the benefit of the Administrative Agent and the Secured Parties, on real property of a Loan Party, including any amendment, restatement, modification or supplement thereto.

“Mortgage Instruments” means such title reports, title insurance, flood certifications and flood insurance, opinions of counsel, surveys, appraisals and environmental reports and other similar information and related certifications as are requested by, and in form and substance reasonably acceptable to, the Administrative Agent from time to time.

“Multicurrency Tranche Commitment” means, with respect to each Multicurrency Tranche Lender, the commitment, if any, of such Multicurrency Tranche Lender to make Multicurrency Tranche Revolving Loans and to acquire participations in Multicurrency Tranche Letters of Credit hereunder, as such commitment may be (a) reduced or terminated from time to time pursuant to Section

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2.09, (b) increased from time to time pursuant to Section 2.20 and (c) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Multicurrency Tranche Lender’s Multicurrency Tranche Commitment is set forth on Schedule 2.01, or in the Assignment and Assumption (or other documentation contemplated by this Agreement) pursuant to which such Multicurrency Tranche Lender shall have assumed its Multicurrency Tranche Commitment, as applicable. The aggregate principal amount of the Multicurrency Tranche Commitments on the Effective Date is $443,055,553.

“Multicurrency Tranche Credit Event” means a Multicurrency Tranche Revolving Borrowing, the issuance of a Multicurrency Letter of Credit, an LC Disbursement with respect to a Multicurrency Tranche Letter of Credit or any of the foregoing.

“Multicurrency Tranche LC Exposure” means, at any time, the sum of (a) the aggregate undrawn Dollar Amount of all outstanding Multicurrency Tranche Letters of Credit at such time plus (b) the aggregate Dollar Amount of all LC Disbursements in respect of Multicurrency Tranche Letters of Credit that have not yet been reimbursed by or on behalf of the Borrower at such time. The Multicurrency Tranche LC Exposure of any Multicurrency Tranche Lender at any time shall be its Multicurrency Tranche Percentage of the total Multicurrency Tranche LC Exposure at such time.

“Multicurrency Tranche Lender” means a Lender with a Multicurrency Tranche Commitment or holding Multicurrency Tranche Revolving Loans.

“Multicurrency Tranche Letter of Credit” means any letter of credit issued under the Multicurrency Tranche Commitments pursuant to this Agreement.

“Multicurrency Tranche Percentage” the percentage equal to a fraction the numerator of which is such Lender’s Multicurrency Tranche Commitment and the denominator of which is the aggregate Multicurrency Tranche Commitments of all Multicurrency Tranche Lenders (if the Multicurrency Tranche Commitments have terminated or expired, the Multicurrency Tranche Percentages shall be determined based upon the Multicurrency Tranche Commitments most recently in effect, giving effect to any assignments); provided that in the case of Section 2.22 when a Defaulting Lender shall exist, any such Defaulting Lender’s Multicurrency Tranche Commitment shall be disregarded in the calculation.

“Multicurrency Tranche Revolving Borrowing” means a Borrowing comprised of Multicurrency Tranche Revolving Loans.

“Multicurrency Tranche Revolving Credit Exposure” means, with respect to any Multicurrency Tranche Lender at any time, and without duplication, the sum of the outstanding principal amount of such Multicurrency Tranche Lender’s Multicurrency Tranche Revolving Loans and its Multicurrency Tranche LC Exposure at such time.

“Multicurrency Tranche Revolving Loan” means a Loan made by a Multicurrency Tranche Lender pursuant to Section 2.01(b). Each Multicurrency Tranche Revolving Loan shall be a Eurocurrency Loan denominated in an Agreed Currency or an ABR Loan denominated in Dollars.

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“Net Proceeds” means, with respect to any event, (a) the cash proceeds received in respect of such event including (i) any cash received in respect of any non-cash proceeds (including any cash payments received by way of deferred payment of principal pursuant to a note or installment

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receivable or purchase price adjustment receivable or otherwise, but excluding any interest payments), but only as and when received, (ii) in the case of a casualty, insurance proceeds and (iii) in the case of a condemnation or similar event, condemnation awards and similar payments, net of (b) the sum of (i) all reasonable fees and out-of-pocket expenses paid to third parties (other than Affiliates) in connection with such event, (ii) in the case of a sale, transfer or other disposition of an asset (including pursuant to a Sale and Leaseback transaction or a casualty or a condemnation or similar proceeding), the amount of all payments required to be made as a result of such event to repay Indebtedness (other than Loans) secured by such asset or otherwise subject to mandatory prepayment as a result of such event and (iii) the amount of all taxes paid (or reasonably estimated to be payable) and the amount of any reserves established to fund contingent liabilities reasonably estimated to be payable, in each case that are directly attributable to such event (as determined reasonably and in good faith by a Financial Officer), provided that on the date on which such reserve is no longer required to be maintained, the remaining amount of such reserve shall then be deemed to be Net Proceeds.

“Obligations” means all unpaid principal of and accrued and unpaid interest on the Loans, all LC Exposure, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations and indebtedness (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), obligations and liabilities of any of the Borrower and its Subsidiaries to any of the Lenders, the Administrative Agent, the Issuing Bank or any indemnified party, individually or collectively, existing on the Effective Date or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, arising or incurred under this Credit Agreement or any of the other Loan Documents or in respect of any of the Loans made or reimbursement or other obligations incurred or any of the Letters of Credit or other instruments at any time evidencing any thereof.

“Other Taxes” means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

“Overnight Foreign Currency Rate” means, for any amount payable in a Foreign Currency, the rate of interest per annum as determined by the Administrative Agent at which overnight or weekend deposits in the relevant currency (or if such amount due remains unpaid for more than three (3) Business Days, then for such other period of time as the Administrative Agent may elect) for delivery in immediately available and freely transferable funds would be offered by the Administrative Agent to major banks in the interbank market upon request of such major banks for the relevant currency as determined above and in an amount comparable to the unpaid principal amount of the related Credit Event, plus any taxes, levies, imposts, duties, deductions, charges or withholdings imposed upon, or charged to, the Administrative Agent by any relevant correspondent bank in respect of such amount in such relevant currency.

“Parent” means, with respect to any Lender, any Person as to which such Lender is directly or indirectly, a subsidiary.

“Participant” has the meaning set forth in Section 9.04.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

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“Permitted Acquisition” means the purchase or other acquisition by the Borrower or any Subsidiary of Equity Interests in, or all or substantially all the assets of (or all or substantially all the assets constituting a business unit, division, product line (including rights in respect of any drug or other pharmaceutical product) or line of business of), any Person, or any Exclusive License of rights to a drug or other product line, in a single transaction or a series of related transactions if (a) (i) in the case of any purchase or other acquisition of Equity Interests in a Person, such Person (including each subsidiary of such Person to the extent such subsidiary was wholly-owned by such Person immediately prior to the purchase or acquisition), upon the consummation of such purchase or acquisition, will be a wholly-owned Subsidiary (including as a result of a merger or consolidation between the Borrower or any Subsidiary and such Person, with, in the case of a merger or consolidation involving the Borrower, the Borrower being the surviving entity) or (ii) in the case of any purchase, license or other acquisition of other assets, such assets will be owned and/or licensed by the Borrower or a wholly-owned Subsidiary; (b) the business of such Person, or the business conducted with such assets, as the case may be, constitutes a business permitted by Section 6.03(b); (c) at the time of and immediately after giving effect (including pro forma effect) to any such purchase, license or other acquisition, (i) no Default shall have occurred and be continuing, (ii) the Borrower shall be in compliance with the covenants set forth in Section 6.12 on a pro forma basis in accordance with Section 1.04(b) (without any pro forma adjustment to Consolidated EBITDA for any Drug Acquisition), (iii) if the Acquisition Consideration with respect thereto exceeds $50,000,000, the Borrower shall have delivered to the Administrative Agent a certificate of a Financial Officer, in form and substance reasonably satisfactory to the Administrative Agent, certifying that all the requirements set forth in this definition have been satisfied with respect to such purchase or other acquisition, together, except in the case of a Drug Acquisition, with reasonably detailed calculations demonstrating satisfaction of the requirements set forth in clause (c)(ii) above and (d) below, as applicable; and (d) after giving effect (on a pro forma basis in accordance with Section 1.04(b), but without any pro forma adjustment to Consolidated EBITDA for any Drug Acquisition) to any such purchase, license or other acquisition, the Leverage Ratio shall not exceed 2.75 to 1.0.

“Permitted Acquisition Milestone Payment” means a Milestone Payment arising pursuant to a Permitted Acquisition so long as after giving effect (on a pro forma basis, but without any pro forma adjustment to Consolidated EBITDA for such Milestone Payment) to any such Milestone Payment, the Leverage Ratio shall not exceed 2.75 to 1.0.

“Permitted Encumbrances” means:

(a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.04 and Liens for unpaid utility charges;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than forty-five (45) days or are being contested in compliance with Section 5.04;

(c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations or employment laws or to secure other public, statutory or regulatory obligations;

(d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;

(e) judgment Liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article VII or securing appeal or surety bonds related to such judgments;

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(f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary;

(g) banker’s liens, rights of setoff or similar rights and remedies as to deposit accounts or other funds maintained with depository institutions; provided that such deposit accounts or funds are not established or deposited for the purpose of providing collateral for any Indebtedness; and

(h) Liens arising by virtue of Uniform Commercial Code financing statement filings (or similar filings under applicable law) regarding operating leases entered into by the Borrower and the Subsidiaries in the ordinary course of business.

“Permitted Foreign Entities” means any First Tier Foreign Subsidiary which is a Material Foreign Subsidiary.

“Permitted Foreign Loan” means a loan made by the Borrower or a Loan Party to any Permitted Foreign Entity after the date hereof that satisfies the following requirements: (a) the proceeds of such loan are used to finance an acquisition permitted under clause (b) or (p) of Section 6.04; (b) such loan is evidenced by a promissory note of such Permitted Foreign Entity; and (c) such promissory note is delivered and pledged to the Administrative Agent pursuant to the Security Agreement, and is accompanied by a certificate of a responsible officer of the issuer representing that such promissory note constitutes a valid and binding obligation of such issuer.

“Permitted Indebtedness” means Indebtedness (including Subordinated Indebtedness) of the Borrower or its Subsidiaries and any Permitted Refinancing Indebtedness in respect of any such Indebtedness; provided that (i) both immediately prior to and after giving effect (including pro forma effect) thereto, no Default or Event of Default shall exist or result therefrom, (ii) such Indebtedness matures after, and does not require any scheduled amortization or other scheduled payments of principal prior to, the date that is 91 days after the Maturity Date (it being understood that any provision requiring an offer to purchase such Indebtedness as a result of a change of control or asset sale shall not violate the foregoing restriction), (iii) such Indebtedness is not guaranteed by any Subsidiary of the Borrower other than the Subsidiary Guarantors (which guarantees, if such Indebtedness is subordinated, shall be expressly subordinated to the Secured Obligations on terms not less favorable to the Lenders than the subordination terms of such Subordinated Indebtedness) and (iv) the aggregate principal amount of Indebtedness permitted to be issued or incurred under this definition during such time as the Leverage Ratio equals or exceeds 2.75 to 1.0 (whether prior to or after giving effect (including pro forma effect) thereto), shall be limited to the greater of (x) $500,000,000 and (y) 10% of Consolidated EBITDA for the period of four (4) consecutive fiscal quarters ending as of the last day of the most recent fiscal quarter for which Financials have been delivered at any time (it being understood and agreed that, for the avoidance of doubt, Indebtedness incurred during such time when the Leverage Ratio is less than 2.75 to 1.0 (whether prior to or after giving effect (including pro forma effect) thereto) shall be excluded from the limitation in this clause (iv)).

“Permitted Investments” means:

(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;

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(b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody’s;

(c) investments in certificates of deposit, banker’s acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000;

(d) fully collateralized repurchase agreements with a term of not more than thirty (30) days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above;

(e) money market funds that (i) comply with the criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least $5,000,000,000;

(f) in the case of any Foreign Subsidiary, other short-term investments that are analogous to the foregoing, are of comparable credit quality and are customarily used by companies in the jurisdiction of such Foreign Subsidiary for cash management purposes;

(g) investments in auction rate securities to the extent held by the Borrower or any Subsidiary on the Effective Date; and

(h) any other cash equivalent investments permitted by the Borrower’s investment policy as such policy is in effect and as disclosed to the Administrative Agent prior to the Effective Date and as such policy may be amended, restated, supplemented or otherwise modified from time to time with the consent of the Administrative Agent.

“Permitted Refinancing Indebtedness” means any Indebtedness issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (collectively, to “Refinance”), the Indebtedness under any Permitted Indebtedness being Refinanced (or previous refinancings thereof constituting Permitted Indebtedness); provided that (a) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so refinanced (plus unpaid accrued interest and premium thereon, any committed or undrawn amounts and underwriting discounts, fees, commissions and expenses, associated with such Permitted Refinancing Indebtedness), (b) the final maturity date of such Permitted Refinancing Indebtedness is no earlier than the date that is 91 days after the Maturity Date (it being understood that, in each case, any provision requiring an offer to purchase such Indebtedness as a result of a change of control or asset sale shall not violate the foregoing restriction), (c) if the Indebtedness (including any Guarantee thereof) being Refinanced is by its terms subordinated in right of payment to the Secured Obligations, such Permitted Refinancing Indebtedness (including any Guarantee thereof) shall be subordinated in right of payment to the Secured Obligations on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness being Refinanced, taken as a whole (as determined in good faith by the board of directors of the Borrower), (d) such Permitted Refinancing Indebtedness contains mandatory redemption (or similar provisions), covenants and events of default and is benefited by guarantees, if any, which are customary for Indebtedness of such type (reasonably determined in good faith by the board of directors of the Borrower), (e) no Permitted Refinancing Indebtedness shall have obligors or contingent obligors that were not obligors or contingent obligors (or that would not have been required to become obligors or

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contingent obligors) in respect of the Indebtedness being Refinanced and (f) if the Indebtedness being Refinanced is secured, such Permitted Refinancing Indebtedness may be secured on terms no less favorable, taken as a whole, to the Secured Parties than those contained in the documentation (including any intercreditor agreement) governing the Indebtedness being Refinanced (reasonably determined in good faith by the board of directors of the Borrower); provided, that any Lien on Collateral securing such Indebtedness shall be subordinated to the Liens granted under the Loan Documents pursuant to the terms of subordination and intercreditor agreements reasonably satisfactory to the Administrative Agent.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Pledge Subsidiary” means (i) each Domestic Subsidiary and (ii) each First Tier Foreign Subsidiary which is a Material Foreign Subsidiary.

“Pounds Sterling” means the lawful currency of the United Kingdom.

“Prepayment Event” means:

(a) any sale, transfer or other disposition (including pursuant to a sale and leaseback transaction) of any property or asset of the Borrower or any Subsidiary described in Section 6.03(a)(xvi) (other than Net Proceeds which, together with the aggregate amount of Net Proceeds received from all such sales, transfers or other dispositions occurring in the same fiscal year of the Borrower, do not exceed $25,000,000); or

(b) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of the Borrower or any Subsidiary with a fair market value immediately prior to such event greater than $25,000,000; or

(c) the incurrence by the Borrower or any Subsidiary of any Indebtedness (other than Loans), other than Indebtedness permitted under Section 6.01 or permitted by the Required Lenders pursuant to Section 9.02.

“Prime Rate” means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank, N.A. as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

“Qualified Milestone Payment” means a Milestone Payment made by the Borrower in compliance with Section 6.04(v) and which the Borrower has designated to be added back to Consolidated EBITDA pursuant to clause (xii) of the definition thereof as a Qualified Milestone Payment.

“Qualitest” means Generics International (US Parent), Inc. (doing business as Qualitest Pharmaceuticals), a Delaware corporation.

“Qualitest Acquisition” means the acquisition by the Borrower, directly or indirectly, of all of the issued and outstanding Equity Interests of Qualitest.

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“Qualitest Acquisition Agreement” means the Stock Purchase Agreement dated as of September 28, 2010 by and among Endo Pharmaceuticals Inc., the Borrower, Qualitest and Apax Quartz (Cayman) L.P., together with all exhibits, schedules and disclosure letters thereto.

“Register” has the meaning set forth in Section 9.04.

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

“Release” means any release, spill, emission, discharge, leaking, pumping, injection, deposit, disposal, dispersal, leaching or migration of Hazardous Materials into the environment (including, without limitation, ambient air, surface water, groundwater and surface or subsurface strata).

“Required Lenders” means, at any time, Lenders having Credit Exposures and unused Commitments representing more than 50% of the sum of the total Credit Exposures and unused Commitments at such time.

“Responsible Officer” means the chief executive officer, president, an executive vice president or senior vice president or a Financial Officer of the Borrower.

“Restricted Milestone Payment” means any Milestone Payment which the Borrower has designated to be added back to Consolidated EBITDA pursuant to clause (xii) of the definition thereof as a Qualified Milestone Payment.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests in the Borrower or any Subsidiary or any option, warrant or other right to acquire any such Equity Interests in the Borrower or any Subsidiary.

“Revolving Commitment” means a Dollar Tranche Commitment or a Multicurrency Tranche Commitment and “Revolving Commitments” means both the Dollar Tranche Commitments and the Multicurrency Tranche Commitments.

“Revolving Credit Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Multicurrency Tranche Revolving Loans and Dollar Tranche Revolving Loans and its LC Exposure and Swingline Exposure at such time.

“Revolving Lender” means, as of any date of determination, each Lender that has a Revolving Commitment or, if the Revolving Commitments have terminated or expired, a Lender with Revolving Credit Exposure.

“Revolving Loan” means any Multicurrency Tranche Revolving Loan or Dollar Tranche Revolving Loan.

“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business.

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“Sale and Leaseback Transaction” means any sale or other transfer of any property or asset by any Person with the intent to lease such property or asset as lessee.

“SEC” means the United States Securities and Exchange Commission.

“Secured Obligations” means all Obligations, together with all Swap Obligations and Banking Services Obligations owing to one or more Lenders or their respective Affiliates.

“Secured Parties” means the holders of the Secured Obligations from time to time and shall include (i) each Lender and the Issuing Bank in respect of its Loans and LC Exposure respectively, (ii) the Administrative Agent, the Issuing Bank and the Lenders in respect of all other present and future obligations and liabilities of the Borrower and each Subsidiary of every type and description arising under or in connection with this Agreement or any other Loan Document, (iii) each Lender and affiliate of such Lender in respect of Swap Agreements and Banking Services Agreements entered into with such Person by the Borrower or any Subsidiary, (iv) each indemnified party under Section 9.03 in respect of the obligations and liabilities of the Borrower to such Person hereunder and under the other Loan Documents, and (v) their respective successors and (in the case of a Lender, permitted) transferees and assigns.

“Securities Act” means the United States Securities Act of 1933, as amended from time to time and any successor statute.

“Security Agreement” means that certain Pledge and Security Agreement (including any and all supplements thereto), dated as of the date hereof, between the Loan Parties and the Administrative Agent, for the benefit of the Administrative Agent and the other Secured Parties, and any other pledge or security agreement entered into, after the date of this Agreement by any other Loan Party (as required by this Agreement or any other Loan Document), or any other Person.

“Specified Obligations” means Obligations consisting of the principal of and interest on outstanding Loans, reimbursement obligations in respect of LC Disbursements and any interest with respect thereto, and fees.

“Specified Representations” means the representations and warranties set forth in Sections 3.01 (but limited to the first sentence thereof), 3.02, 3.08, 3.12, 3.16 and 3.17.

“Statutory Reserve Rate” means, with respect to any currency, a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve, liquid asset, fees or similar requirements (including any marginal, special, emergency or supplemental reserves or other requirements) established by any central bank, monetary authority, the Board, the Financial Services Authority, the European Central Bank or other Governmental Authority for any category of deposits or liabilities customarily used to fund loans in such currency, expressed in the case of each such requirement as a decimal. Such reserve, liquid asset, fees or similar requirements shall, in the case of Dollar denominated Loans, include those imposed pursuant to Regulation D of the Board. Eurocurrency Loans shall be deemed to be subject to such reserve, liquid asset, fee or similar requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under any applicable law, rule or regulation, including Regulation D of the Board. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve, liquid asset or similar requirement.

“Subordinated Indebtedness” means any Indebtedness of the Borrower or any Subsidiary the payment of which is subordinated to payment of the obligations under the Loan Documents, and includes the 2008 Subordinated Convertible Notes.

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“Subordinated Indebtedness Documents” means any document, agreement or instrument evidencing any Subordinated Indebtedness or entered into in connection with any Subordinated Indebtedness, and includes the 2008 Subordinated Convertible Notes Indenture.

“subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, Controlled or held.

“Subsidiary” means any subsidiary of the Borrower; provided that for purposes of Articles V, VI and VII (and application of definitions therein), references to a “Subsidiary” or to “Subsidiaries” shall be deemed to exclude any JV Subsidiaries; provided further that, no later than thirty (30) days after the end of each fiscal quarter of the Borrower, the Borrower may designate any JV Subsidiary as a Subsidiary hereunder for all purposes (it being understood and agreed that any JV Subsidiary so designated as a Subsidiary may not be subsequently redesignated as a JV Subsidiary).

“Subsidiary Guarantor” means each Material Domestic Subsidiary that is party to the Subsidiary Guaranty. The Subsidiary Guarantors on the Effective Date are identified as such in Schedule 3.01 hereto.

“Subsidiary Guaranty” means that certain Guaranty dated as of the Effective Date (including any and all supplements thereto) and executed by each Subsidiary Guarantor.

“Swap Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or the Subsidiaries shall be a Swap Agreement.

“Swap Obligations” means any and all obligations of the Borrower or any Subsidiary, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (a) any and all Swap Agreements permitted hereunder with a Lender or an Affiliate of a Lender, and (b) any and all cancellations, buy backs, reversals, terminations or assignments of any such Swap Agreement transaction.

“Swingline Exposure” means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall be its Dollar Tranche Percentage of the total Swingline Exposure at such time.

“Swingline Lender” means JPMorgan Chase Bank, N.A., in its capacity as lender of Swingline Loans hereunder.

“Swingline Loan” means a Loan made pursuant to Section 2.05.

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“Syndication Agent” means Royal Bank of Canada in its capacity as syndication agent for the credit facility evidenced by this Agreement.

“Synthetic Lease” means, as to any Person, any lease (including leases that may be terminated by the lessee at any time) of real or personal property, or a combination thereof, (a) that is accounted for as an operating lease under GAAP and (b) in respect of which the lessee is deemed to own the property so leased for U.S. federal income tax purposes, other than any such lease under which such Person is the lessor.

“Synthetic Lease Obligations” means, as to any Person, an amount equal to the capitalized amount of the remaining lease payments under any Synthetic Lease (determined, in the case of a Synthetic Lease providing for an option to purchase the leased property, as if such purchase were required at the end of the term thereof) that would appear on a balance sheet of such Person prepared in accordance with GAAP if such payment obligations were accounted for as Capital Lease Obligations. For purposes of Section 6.02, a Synthetic Lease Obligation shall be deemed to be secured by a Lien on the property being leased and such property shall be deemed to be owned by the lessee.

“TARGET” means the Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) payment system (or, if such payment system ceases to be operative, such other payment system (if any) reasonably determined by the Administrative Agent to be a suitable replacement) for the settlement of payments in euro.

“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

“Term Lender” means, as of any date of determination, each Lender having a Term Loan Commitment or that holds Term Loans.

“Term Loan Commitment” means (a) as to any Term Lender, the aggregate commitment of such Term Lender to make Term Loans as set forth on Schedule 2.01 or in the most recent Assignment Agreement or other documentation contemplated hereby executed by such Term Lender and (b) as to all Term Lenders, the aggregate commitment of all Term Lenders to make Term Loans, which aggregate commitment shall be $400,000,000 on the date of this Agreement. After funding the Term Loans, each reference to a Term Lender’s Term Loan Commitment shall refer to that Term Lender’s Applicable Percentage of the Term Loans.

“Term Loans” means the term loans made by the Term Lenders to the Borrower pursuant to Section 2.01(c).

“Termination Date” means (i) the date that is six (6) months from September 27, 2010 (as such date may be extended pursuant to this definition, the “Final Date”); or (ii) that date that is nine (9) months from October 18, 2010, if on the Final Date the conditions to the closing of the Qualitest Acquisition (the “Closing”) set forth in Section 8.1(a) of the Qualitest Acquisition Agreement shall not have been satisfied but all other conditions to Closing set forth in Article VIII of the Qualitest Acquisition Agreement shall be satisfied or waived or by their terms cannot be satisfied until or immediately preceding the Closing (but which conditions would be satisfied if the date and time of the Closing were the Final Date).

“Tranche” means a category of Commitments and extensions of credit thereunder. For purposes hereof, each of the following comprises a separate Tranche: (a) Multicurrency Tranche Commitments, Multicurrency Tranche Revolving Loans and Multicurrency Tranche Letters of Credit, (b) Dollar Tranche Commitments, Dollar Tranche Revolving Loans, Dollar Tranche Letters of Credit and Swingline Loans and (c) Term Loan Commitments and Term Loans.

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“Transactions” means the execution, delivery and performance by the Loan Parties of this Agreement and the other Loan Documents, the borrowing of Loans and other credit extensions, the use of the proceeds thereof, the issuance of Letters of Credit hereunder and the consummation of the Qualitest Acquisition.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

“UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York or any other state the laws of which are required to be applied in connection with the issue of perfection of security interests.

“Unliquidated Obligations” means, at any time, any Secured Obligations (or portion thereof) that are contingent in nature or unliquidated at such time, including any Secured Obligation that is: (i) an obligation to reimburse a bank for drawings not yet made under a letter of credit issued by it; (ii) any other obligation (including any guarantee) that is contingent in nature at such time; or (iii) an obligation to provide collateral to secure any of the foregoing types of obligations.

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

“2008 Subordinated Convertible Notes” means the 1.75% convertible senior subordinated notes due April 15, 2015, issued by the Borrower under the 2008 Subordinated Convertible Notes Indenture.

“2008 Subordinated Convertible Notes Indenture” means the Indenture dated as of April 15, 2008, between the Borrower and The Bank of New York, as trustee, under which the 2008 Subordinated Convertible Notes are outstanding.

SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a “Dollar Tranche Revolving Loan”) or by Type (e.g., a “Eurocurrency Loan”) or by Class and Type (e.g., a “Eurocurrency Dollar Tranche Revolving Loan”). Borrowings also may be classified and referred to by Class (e.g., a “Dollar Tranche Revolving Borrowing”) or by Type (e.g., a “Eurocurrency Borrowing”) or by Class and Type (e.g., a “Dollar Tranche Eurocurrency Revolving Borrowing”).

SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. The word “law” shall be construed as referring to all statutes, rules, regulations, codes and other laws (including official rulings and interpretations thereunder having the force of law or with which affected Persons customarily comply), and all judgments, orders and decrees, of all Governmental Authorities. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended,

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restated, supplemented or otherwise modified (subject to any restrictions on such amendments, restatements, supplements or modifications set forth herein), (b) any definition of or reference to any statute, rule or regulation shall be construed as referring thereto as from time to time amended, supplemented or otherwise modified (including by succession of comparable successor laws), (c) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to any restrictions on assignment set forth herein) and, in the case of any Governmental Authority, any other Governmental Authority that shall have succeeded to any or all functions thereof, (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

SECTION 1.04. Accounting Terms; GAAP; Pro Forma Calculations. (a) Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, (i) without giving effect to any election under Statement of Financial Accounting Standards 159 (or any other Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of the Borrower or any Subsidiary at “fair value”, as defined therein, (ii) without giving effect to any treatment of Indebtedness in respect of convertible debt instruments under Financial Accounting Standards Board Staff Position APB 14-1 to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof and (iii) for the avoidance of doubt, except as provided in the definition of “Consolidated Net Income”, without giving effect to the financial condition, results and performance of the JV Subsidiaries.

(b) All pro forma computations required to be made hereunder giving effect to any Material Acquisition, Material Disposition, Permitted Acquisition or issuance, incurrence or assumption of Indebtedness shall be calculated after giving pro forma effect thereto immediately after giving effect to such acquisition, disposition or issuance, incurrence or assumption of Indebtedness (and to any other such transaction consummated since the first day of the period for which such pro forma computation is being made and on or prior to the date of such computation) as if such transaction had occurred on the first day of the period of four consecutive fiscal quarters ending with the most recent fiscal quarter for which financial statements shall have been delivered pursuant to Section 5.01(a) or 5.01(b) (or, prior to the delivery of any such financial statements, ending on September 30, 2010), and, to the extent applicable, the historical earnings and cash flows associated with the assets acquired or disposed of, any related incurrence or reduction of Indebtedness and any related cost savings, operating expense reductions and synergies, all in accordance with (and, in the case of cost savings, operating expense reductions and synergies, to the extent permitted by) Article 11 of Regulation S-X under the Securities Act unless otherwise agreed to by the Administrative Agent. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Swap Agreement applicable to such Indebtedness).

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SECTION 1.05. Status of Obligations. The Secured Obligations are hereby designated as “Designated Senior Debt” for purposes of the 2008 Subordinated Convertible Notes and the 2008 Subordinated Convertible Notes Indenture. In the event that the Borrower or any other Loan Party shall at any time issue or have outstanding any other Subordinated Indebtedness, the Borrower shall take or cause such other Loan Party to take all such actions as shall be necessary to cause the Secured Obligations to constitute senior indebtedness (however denominated) in respect of such Subordinated Indebtedness and to enable the Administrative Agent and the Lenders to have and exercise any payment blockage or other remedies available or potentially available to holders of senior indebtedness under the terms of such Subordinated Indebtedness. Without limiting the foregoing, the Secured Obligations are hereby designated as “senior indebtedness” and as “designated senior indebtedness” and words of similar import under and in respect of any indenture or other agreement or instrument under which such other Subordinated Indebtedness is outstanding and are further given all such other designations as shall be required under the terms of any such Subordinated Indebtedness in order that the Lenders may have and exercise any payment blockage or other remedies available or potentially available to holders of senior indebtedness under the terms of such Subordinated Indebtedness.

ARTICLE II

The Credits

SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, (a) each Dollar Tranche Lender agrees to make Dollar Tranche Revolving Loans to the Borrower in Dollars from time to time during the Availability Period in an aggregate principal amount that will not result in (i) such Lender’s Dollar Tranche Revolving Credit Exposure exceeding such Lender’s Dollar Tranche Commitment or (ii) the sum of the total Dollar Tranche Revolving Credit Exposures exceeding the aggregate Dollar Tranche Commitments, (b) each Multicurrency Tranche Lender agrees to make Multicurrency Tranche Revolving Loans to the Borrower in Agreed Currencies from time to time during the Availability Period in an aggregate principal amount that will not result in (i) subject to Sections 2.04 and 2.11(b), the Dollar Amount of such Lender’s Multicurrency Tranche Revolving Credit Exposure exceeding such Lender’s Multicurrency Tranche Commitment or (ii) subject to Sections 2.04 and 2.11(b), the sum of the Dollar Amount of the total Multicurrency Tranche Revolving Credit Exposures exceeding the aggregate Multicurrency Tranche Commitments and (c) each Term Lender with a Term Loan Commitment agrees to make a Term Loan to the Borrower in Dollars on the Effective Date, in an amount equal to such Lender’s Term Loan Commitment by making immediately available funds available to the Administrative Agent’s designated account, not later than the time specified by the Administrative Agent. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Dollar Tranche Revolving Loans and Multicurrency Tranche Revolving Loans. Amounts repaid or prepaid in respect of Term Loans may not be reborrowed.

SECTION 2.02. Loans and Borrowings. (a) Each Loan (other than a Swingline Loan) shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the relevant Lenders ratably in accordance with their respective Commitments of the applicable Class. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required. Any Swingline Loan shall be made in accordance with the procedures set forth in Section 2.05. The Term Loans shall amortize as set forth in Section 2.10.

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(b) Subject to Section 2.14, each Dollar Tranche Revolving Borrowing, each Multicurrency Tranche Revolving Borrowing and each Term Loan Borrowing shall be comprised entirely of ABR Loans or Eurocurrency Loans as the Borrower may request in accordance herewith; provided that each ABR Loan shall only be made in Dollars. Each Swingline Loan shall be an ABR Loan. Each Lender at its option may make any Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan (and in the case of an Affiliate, the provisions of Sections 2.14, 2.15, 2.16 and 2.17 shall apply to such Affiliate to the same extent as to such Lender); provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.

(c) At the commencement of each Interest Period for any Eurocurrency Revolving Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 (or, if such Borrowing is denominated in a Foreign Currency, 500,000 units of such currency other than Japanese Yen and ¥50,000,000 in the case of Japanese Yen) and not less than $2,000,000 (or, if such Borrowing is denominated in a Foreign Currency, 2,000,000 units of such currency other than Japanese Yen and ¥200,000,000 in the case of Japanese Yen). At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 and not less than $1,000,000; provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the aggregate Dollar Tranche Commitments or the aggregate Multicurrency Tranche Commitments, as the case may be, or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.06(e). Each Swingline Loan shall be in an amount that is an integral multiple of $500,000 and not less than $1,000,000. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of eight (8) Eurocurrency Revolving Borrowings outstanding.

(d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.

SECTION 2.03. Requests for Borrowings. To request a Borrowing, the Borrower shall notify the Administrative Agent of such request (a) by irrevocable written notice (via a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower, promptly followed by telephonic confirmation of such request) in the case of a Eurocurrency Borrowing, not later than 11:00 a.m., Local Time, three (3) Business Days (in the case of a Eurocurrency Borrowing denominated in Dollars) or by irrevocable written notice (via a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower) not later than three (3) Business Days (in the case of a Eurocurrency Borrowing denominated in a Foreign Currency), in each case before the date of the proposed Borrowing or (b) by telephone in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, one (1) Business Day before the date of the proposed Borrowing; provided that any such notice of an ABR Revolving Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.06(e) may be given not later than 10:00 a.m., New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:

(i) the aggregate amount of the requested Borrowing;

(ii) the date of such Borrowing, which shall be a Business Day;

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(iii) whether such Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing and, if such Borrowing is a Revolving Borrowing, whether such Borrowing is to be a Dollar Tranche Revolving Borrowing or Multicurrency Tranche Revolving Borrowing;

(iv) in the case of a Eurocurrency Borrowing, the Agreed Currency and initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and

(v) the location and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.07.

If no election as to the Type of Revolving Borrowing is specified, then, in the case of a Borrowing denominated in Dollars, the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurocurrency Revolving Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

SECTION 2.04. Determination of Dollar Amounts. The Administrative Agent will determine the Dollar Amount of:

(a) each Multicurrency Tranche Eurocurrency Borrowing as of the date two (2) Business Days prior to the date of such Borrowing or, if applicable, the date of conversion/continuation of any Borrowing as a Multicurrency Tranche Eurocurrency Borrowing,

(b) the LC Exposure as of the date of each request for the issuance, amendment, renewal or extension of any Letter of Credit, and

(c) all outstanding Credit Events on and as of the last Business Day of each calendar quarter and, during the continuation of an Event of Default, on any other Business Day elected by the Administrative Agent in its discretion or upon instruction by the Required Lenders.

Each day upon or as of which the Administrative Agent determines Dollar Amounts as described in the preceding clauses (a), (b) and (c) is herein described as a “Computation Date” with respect to each Credit Event for which a Dollar Amount is determined on or as of such day.

SECTION 2.05. Swingline Loans. (a) Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans in Dollars to the Borrower from time to time during the Availability Period, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding $30,000,000 or (ii) the Dollar Amount of the total Dollar Tranche Revolving Credit Exposures exceeding the aggregate Dollar Tranche Commitments; provided that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Loans.

(b) To request a Swingline Loan, the Borrower shall notify the Administrative Agent of such request by telephone (confirmed by telecopy), not later than 2:00 p.m., New York City time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Loan. The Administrative

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Agent will promptly advise the Swingline Lender of any such notice received from the Borrower. The Swingline Lender shall make each Swingline Loan available to the Borrower by means of a credit to the general deposit account of the Borrower with the Swingline Lender (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.06(e), by remittance to the Issuing Bank) by 3:00 p.m., New York City time, on the requested date of such Swingline Loan.

(c) The Swingline Lender may by written notice given to the Administrative Agent not later than 10:00 a.m., New York City time, on any Business Day require the Dollar Tranche Lenders to acquire participations on such Business Day in all or a portion of the Swingline Loans outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which Dollar Tranche Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Dollar Tranche Lender, specifying in such notice such Lender’s Dollar Tranche Percentage of such Swingline Loan or Loans. Each Dollar Tranche Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such Dollar Tranche Lender’s Dollar Tranche Percentage of such Swingline Loan or Loans. Each Dollar Tranche Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Dollar Tranche Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Dollar Tranche Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.07 with respect to Loans made by such Lender (and Section 2.07 shall apply, mutatis mutandis, to the payment obligations of the Dollar Tranche Lenders), and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Dollar Tranche Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from the Borrower (or other party on behalf of the Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Dollar Tranche Lenders that shall have made their payments pursuant to this paragraph and to the Swingline Lender, as their interests may appear; provided that any such payment so remitted shall be repaid to the Swingline Lender or to the Administrative Agent, as applicable, if and to the extent such payment is required to be refunded to the Borrower for any reason. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof.

SECTION 2.06. Letters of Credit. (a) General. Subject to the terms and conditions set forth herein, the Borrower may request the issuance of Multicurrency Tranche Letters of Credit denominated in Agreed Currencies and Dollar Tranche Letters of Credit denominated in Dollars, in each case for its own account, in a form reasonably acceptable to the Administrative Agent and the Issuing Bank, at any time and from time to time during the Availability Period. The letters of credit identified on Schedule 2.06 (the “Existing Letters of Credit”) shall be deemed to be “Letters of Credit” issued on the Effective Date for all purposes of the Loan Documents. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control.

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if

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arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the Agreed Currency applicable thereto, whether such Letter of Credit is a Multicurrency Tranche Letter of Credit or a Dollar Tranche Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the Issuing Bank, the Borrower also shall submit a letter of credit application on the Issuing Bank’s standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) subject to Sections 2.04 and 2.11(b), the Dollar Amount of the LC Exposure shall not exceed $30,000,000, (ii) subject to Sections 2.04 and 2.11(b), the sum of the Dollar Amount of the total Multicurrency Tranche Revolving Credit Exposures shall not exceed the aggregate Multicurrency Tranche Commitments and (iii) the sum of the total Dollar Tranche Revolving Credit Exposures shall not exceed the aggregate Dollar Tranche Commitments.

(c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (ii) the date that is five (5) Business Days prior to the Maturity Date; provided that any Letter of Credit may contain customary automatic renewal provisions agreed upon by the Borrower and the Issuing Bank pursuant to which the expiration date of such Letter of Credit shall automatically be extended for consecutive periods of up to twelve (12) months (but not to a date later than the date set forth in clause (ii) above) (it being understood and agreed that the Existing Letters of Credit issued by Royal Bank of Canada will not be so renewed to the extent that Royal Bank of Canada has not already agreed to the renewal of such Letters of Credit prior to the Effective Date).

(d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or any Revolving Lender in respect of the Tranche under which such Letter of Credit is issued (each such Revolving Lender, an “Applicable Lender”), the Issuing Bank hereby grants to each Applicable Lender, and each Applicable Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Applicable Lender’s Applicable Percentage of the aggregate Dollar Amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Applicable Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Applicable Lender’s Applicable Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

(e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent in Dollars the Dollar Amount equal to such LC Disbursement, calculated as of the date the Issuing

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Bank made such LC Disbursement (or if the Issuing Bank shall so elect in its sole discretion by notice to the Borrower, in such other Agreed Currency which was paid by the Issuing Bank pursuant to such LC Disbursement in an amount equal to such LC Disbursement) not later than 12:00 noon, Local Time, on the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m., Local Time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 12:00 noon, Local Time, on the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided that, if such LC Disbursement is not less than the Dollar Amount of $1,000,000, the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 or 2.05 that such payment be financed with an ABR Revolving Borrowing or Swingline Loan in an equivalent Dollar Amount of such LC Disbursement and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR Revolving Borrowing or Swingline Loan. If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Applicable Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Lender’s Applicable Percentage thereof. Promptly following receipt of such notice, each Applicable Lender shall pay to the Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.07 with respect to Loans made by such Lender (and Section 2.07 shall apply, mutatis mutandis, to the payment obligations of the Applicable Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Applicable Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the Issuing Bank or, to the extent that Applicable Lenders have made payments pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing Bank as their interests may appear. Any payment made by an Applicable Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than the funding of ABR Revolving Loans or a Swingline Loan as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement. If the Borrower’s reimbursement of, or obligation to reimburse, any amounts in any Foreign Currency would subject the Administrative Agent, the Issuing Bank or any Multicurrency Tranche Lender to any stamp duty, ad valorem charge or similar tax that would not be payable if such reimbursement were made or required to be made in Dollars, the Borrower shall, at its option, either (x) pay the amount of any such tax requested by the Administrative Agent, the Issuing Bank or the relevant Multicurrency Tranche Lender or (y) reimburse each LC Disbursement made in such Foreign Currency in Dollars, in an amount equal to the Equivalent Amount, calculated using the applicable exchange rates, on the date such LC Disbursement is made, of such LC Disbursement.

(f) Obligations Absolute. The Borrower’s obligation to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. Neither the Administrative Agent, the Revolving Lenders nor the Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other

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communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

(g) Disbursement Procedures. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Applicable Lenders with respect to any such LC Disbursement.

(h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Revolving Loans (or in the case such LC Disbursement is denominated in a Foreign Currency, at the Overnight Foreign Currency Rate for such Agreed Currency plus the then effective Applicable Rate with respect to Eurocurrency Revolving Loans); provided that, if the Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this Section, then Section 2.13(c) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Applicable Lender pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be for the account of such Applicable Lender to the extent of such payment.

(i) Replacement of Issuing Bank. The Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Revolving Lenders of any such replacement of the Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.12(b). From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit then outstanding and issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.

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(j) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, a Majority in Interest of the Revolving Lenders) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Revolving Lenders (the “LC Collateral Account”), an amount in cash equal to 105% of the Dollar Amount of the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that (i) the portions of such amount attributable to undrawn Foreign Currency Letters of Credit or LC Disbursements in a Foreign Currency that the Borrower is not late in reimbursing shall be deposited in the applicable Foreign Currencies in the actual amounts of such undrawn Letters of Credit and LC Disbursements and (ii) the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (h) or (i) of Article VII. For the purposes of this paragraph, the Foreign Currency LC Exposure shall be calculated using the applicable Exchange Rate on the date notice demanding cash collateralization is delivered to the Borrower. The Borrower also shall deposit cash collateral pursuant to this paragraph as and to the extent required by Section 2.11(b). Such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the Secured Obligations. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account and the Borrower hereby grants the Administrative Agent a security interest in the LC Collateral Account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower’s risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of a Majority in Interest of the Revolving Lenders), be applied to satisfy other Secured Obligations. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three (3) Business Days after all Events of Default have been cured or waived. If the Borrower is required to provide an amount of cash collateral hereunder pursuant to Section 2.11(b), such amount (to the extent not applied as aforesaid) shall be returned to the Borrower as and to the extent that, after giving effect to such return, the aggregate Revolving Credit Exposures would not exceed the aggregate Revolving Commitments and no Default shall have occurred and be continuing.

SECTION 2.07. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds (i) in the case of Loans denominated in Dollars, by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders and (ii) in the case of each Loan denominated in a Foreign Currency, by 12:00 noon, Local Time, in the city of the Administrative Agent’s Eurocurrency Payment Office for such currency and at such Eurocurrency Payment Office for such currency; provided that Swingline Loans shall be made as provided in Section 2.05. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to (x) an account of the Borrower maintained with the Administrative Agent in New York City or Chicago and designated by the Borrower in the applicable Borrowing Request, in the case of Loans denominated in Dollars and (y) an account of the Borrower in the relevant jurisdiction and designated by the Borrower in the applicable Borrowing Request, in the case of Loans denominated in a Foreign Currency; provided that ABR Revolving Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.06(e) shall be remitted by the Administrative Agent to the Issuing Bank.

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(b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation (including without limitation the Overnight Foreign Currency Rate in the case of Loans denominated in a Foreign Currency) or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing.

SECTION 2.08. Interest Elections. (a) Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurocurrency Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurocurrency Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings, which may not be converted or continued.

(b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election (by telephone or irrevocable written notice in the case of a Borrowing denominated in Dollars or by irrevocable written notice (via an Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower) in the case of a Borrowing denominated in a Foreign Currency) by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower. Notwithstanding any contrary provision herein, this Section shall not be construed to permit the Borrower to (i) change the currency of any Borrowing, (ii) elect an Interest Period for Eurocurrency Loans that does not comply with Section 2.02(d) or (iii) convert any Borrowing to a Borrowing of a Type not available under the Class of Commitments pursuant to which such Borrowing was made.

(c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:

(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

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(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing and, if such Borrowing is a Revolving Borrowing, whether the resulting Borrowing is to be a Dollar Tranche Borrowing or a Multicurrency Tranche Borrowing; and

(iv) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period and Agreed Currency to be applicable thereto after giving effect to such election, which Interest Period shall be a period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurocurrency Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.

(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

(e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurocurrency Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period (i) in the case of a Borrowing denominated in Dollars, such Borrowing shall be converted to an ABR Borrowing and (ii) in the case of a Borrowing denominated in a Foreign Currency in respect of which the Borrower shall have failed to deliver an Interest Election Request prior to the third (3^rd) Business Day preceding the end of such Interest Period, such Borrowing shall automatically continue as a Eurocurrency Borrowing in the same Agreed Currency with an Interest Period of one month unless such Eurocurrency Borrowing is or was repaid in accordance with Section 2.11. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurocurrency Borrowing and (ii) unless repaid, each Eurocurrency Borrowing shall be converted to an ABR Borrowing (and any such Eurocurrency Borrowing denominated in a Foreign Currency shall be redenominated in Dollars at the time of such conversion) at the end of the Interest Period applicable thereto.

SECTION 2.09. Termination and Reduction of Commitments. (a) Unless previously terminated, (i) the Term Loan Commitments shall terminate at 3:00 p.m. (New York City time) on the Effective Date and (ii) all other Commitments shall terminate on the Maturity Date.

(b) The Borrower may at any time terminate, or from time to time reduce, the Commitments of any Class; provided that (i) each reduction of the Commitments of any Class shall be in an amount that is an integral multiple of $5,000,000 and not less than $10,000,000, (ii) the Borrower shall not terminate or reduce the Dollar Tranche Commitments if, after giving effect to any concurrent prepayment of the Dollar Tranche Revolving Loans in accordance with Section 2.11, the Dollar Amount of the sum of the total Dollar Tranche Revolving Credit Exposures would exceed the aggregate Dollar Tranche Commitments and (iii) the Borrower shall not terminate or reduce the Multicurrency Tranche Commitments if, after giving effect to any concurrent prepayment of the Multicurrency Tranche Revolving Loans in accordance with Section 2.11, the Dollar Amount of the sum of the total Multicurrency Tranche Revolving Credit Exposures would exceed the aggregate Multicurrency Tranche Commitments.

(c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments of any Class under paragraph (b) of this Section at least three (3) Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable;

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provided that a notice of termination of the Commitments of any Class delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities or one or more other events specified therein, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments of any Class shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the applicable Lenders in accordance with their respective Commitments of such Class.

SECTION 2.10. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Revolving Lender the then unpaid principal amount of each Revolving Loan on the Maturity Date in the currency of such Loan and (ii) to the Swingline Lender the then unpaid principal amount of each Swingline Loan on the earlier of the Maturity Date and the first date after such Swingline Loan is made that is the 15^th or last day of a calendar month and is at least two (2) Business Days after such Swingline Loan is made; provided that on each date that a Dollar Tranche Revolving Borrowing is made, the Borrower shall repay all Swingline Loans then outstanding. The Borrower shall repay Term Loans on each date set forth below in the aggregate principal amount set forth opposite such date (as adjusted from time to time pursuant to Sections 2.11(a) and 2.11(d)):

Date	Amount
March 31, 2011	$	5,000,000
June 30, 2011	$	5,000,000
September 30, 2011	$	5,000,000
December 31, 2011	$	7,500,000
March 31, 2012	$	7,500,000
June 30, 2012	$	7,500,000
September 30, 2012	$	7,500,000
December 31, 2012	$	10,000,000
March 31, 2013	$	10,000,000
June 30, 2013	$	10,000,000
September 30, 2013	$	10,000,000
December 31, 2013	$	10,000,000
March 31, 2014	$	10,000,000
June 30, 2014	$	10,000,000
September 30, 2014	$	10,000,000
December 31, 2014	$	15,000,000
March 31, 2015	$	15,000,000
June 30, 2015	$	15,000,000
September 30, 2015	$	15,000,000

To the extent not previously repaid, all unpaid Term Loans shall be paid in full in Dollars by the Borrower on the Maturity Date.

(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

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(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class, Agreed Currency and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.

(e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).

SECTION 2.11. Prepayment of Loans.

(a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, without premium or penalty but subject to break funding payments required by Section 2.16), subject to prior notice in accordance with the provisions of this Section 2.11(a). The Borrower shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurocurrency Revolving Borrowing, not later than 11:00 a.m., Local Time, three (3) Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m., New York City time, one (1) Business Day before the date of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later than 12:00 noon, New York City time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.09, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.09. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Revolving Borrowing shall be applied ratably to the Revolving Loans included in the prepaid Revolving Borrowing, each voluntary prepayment of a Term Loan Borrowing shall be applied as directed by the Borrower and each mandatory prepayment of a Term Loan Borrowing shall be applied in accordance with Section 2.11(d). Prepayments shall be accompanied by (i) accrued interest to the extent required by Section 2.13 and (ii) break funding payments pursuant to Section 2.16.

(b) If at any time, (i) other than as a result of fluctuations in currency exchange rates, the sum of the aggregate principal Dollar Amount of all of the Revolving Credit Exposures of any Class (calculated, with respect to those Credit Events denominated in Foreign Currencies, as of the most recent Computation Date with respect to each such Credit Event) exceeds the aggregate Commitments of such Class or (ii) solely as a result of fluctuations in currency exchange rates, the sum of the aggregate principal Dollar Amount of all of the Multicurrency Tranche Revolving Credit Exposures (so calculated)

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exceeds 105% of the aggregate Multicurrency Tranche Commitments, the Borrower shall in each case immediately repay the applicable Borrowings or cash collateralize LC Exposure in an account with the Administrative Agent pursuant to Section 2.06(j), as applicable, in an aggregate principal amount sufficient to cause the aggregate Dollar Amount of all Revolving Credit Exposures (so calculated) of each Class to be less than or equal to the aggregate Commitments of such Class.

(c) In the event and on each occasion that any Net Proceeds are received by or on behalf of the Borrower or any of its Subsidiaries in respect of any Prepayment Event, the Borrower shall, within one Business Day after such Net Proceeds are received, prepay the Obligations as set forth in Section 2.11(d) below in an aggregate amount equal to 100% of such Net Proceeds; provided that, in the case of any event described in clause (a) or (b) of the definition of the term “Prepayment Event”, if the Borrower shall deliver to the Administrative Agent a certificate of a Financial Officer to the effect that the Borrower or its relevant Subsidiaries intend to apply the Net Proceeds from such event (or a portion thereof specified in such certificate), within 270 days after receipt of such Net Proceeds, to acquire (or replace or rebuild) real property, equipment or other tangible assets (excluding inventory) to be used in the business of the Borrower and/or its Subsidiaries, and certifying that no Event of Default has occurred and is continuing, then no prepayment shall be required pursuant to this paragraph in respect of the Net Proceeds specified in such certificate; provided further that to the extent of any such Net Proceeds therefrom that have not been so applied by the end of such 270 day period (or committed to be applied by the end of the 270 day period and applied within 90 days after the end of such 270 day period), at which time a prepayment shall be required in an amount equal to such Net Proceeds that have not been so applied.

(d) All such amounts pursuant to Section 2.11(c) shall be applied (i) first, to prepay the next eight scheduled principal payments in respect of the Term Loans in the order of maturity and (ii) second, to prepay the remaining scheduled principal payments in respect of the Term Loans on a pro rata basis.

SECTION 2.12. Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Lender a commitment fee, which shall accrue at the Applicable Rate on the daily amount of the Available Revolving Commitment of such Revolving Lender during the period from and including the Effective Date to but excluding the date on which the last of the Revolving Commitments terminates. Accrued commitment fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the last of the Revolving Commitments terminate, commencing on the first such date to occur after the date hereof; provided that any commitment fees accruing after the date on which such Revolving Commitments terminate shall be payable on demand. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(b) The Borrower agrees to pay (i) to the Administrative Agent for the account of each Revolving Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at the same Applicable Rate used to determine the interest rate applicable to Eurocurrency Revolving Loans on the average daily Dollar Amount of such Revolving Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which the last of such Revolving Lender’s Revolving Commitment terminates and the date on which such Revolving Lender ceases to have any LC Exposure and (ii) to the Issuing Bank for its own account a fronting fee, which shall accrue at the rate per annum separately agreed upon by the Borrower and the Issuing Bank on the average daily Dollar Amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) attributable to Letters of Credit issued by the Issuing Bank during the period from and including the Effective Date to but excluding the later of the date of termination of the last of the Revolving Commitments and the date on which there ceases to be any LC Exposure, as well as the

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Issuing Bank’s standard fees and commissions with respect to the issuance, amendment, cancellation, negotiation, transfer, presentment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Unless otherwise specified above, participation fees and fronting fees accrued through and including the last day of March, June, September and December of each year shall be payable on the third (3^rd) Business Day following such last day, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the date on which the last of the Revolving Commitments terminate and any such fees accruing after the date on which the such Revolving Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within ten (10) days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(c) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent.

(d) All fees payable hereunder shall be paid on the dates due, in Dollars and immediately available funds, to the Administrative Agent (or to the Issuing Bank, in the case of fees payable to it) for distribution, in the case of commitment fees and participation fees, to the applicable Revolving Lenders. Fees paid shall not be refundable under any circumstances.

SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the Alternate Base Rate plus the Applicable Rate.

(b) The Loans comprising each Eurocurrency Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.

(c) Notwithstanding the foregoing, during the occurrence and continuance of an Event of Default, the Administrative Agent or the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 9.02 requiring the consent of “each Lender directly affected thereby” for reductions in interest rates), declare that (i) all Loans shall bear interest at 2% plus the rate otherwise applicable to such Loans as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount outstanding hereunder, such amount shall accrue at 2% plus the rate applicable to such fee or other obligation as provided hereunder.

(d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upon termination of the applicable Revolving Commitments; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurocurrency Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

(e) All interest hereunder shall be computed on the basis of a year of 360 days, except that (i) interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and (ii) for Borrowings denominated in Pounds Sterling, interest shall be computed on the basis of a year of 365 days, and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

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SECTION 2.14. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurocurrency Borrowing:

(a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or

(b) the Administrative Agent is advised by a Majority in Interest of the Lenders of any Class that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the applicable Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the applicable Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurocurrency Borrowing shall be ineffective and any such Eurocurrency Borrowing shall be repaid on the last day of the then current Interest Period applicable thereto, and (ii) if any Borrowing Request requests a Eurocurrency Borrowing in Dollars, such Borrowing shall be made as an ABR Borrowing (and if any Borrowing Request requests a Eurocurrency Revolving Borrowing denominated in a Foreign Currency, such Borrowing Request shall be ineffective); provided that if the circumstances giving rise to such notice affect only one Type of Borrowings, then the other Type of Borrowings shall be permitted.

SECTION 2.15. Increased Costs. (a) If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank;

(ii) impose on any Lender or the Issuing Bank or the London interbank market any other condition, cost or expense affecting this Agreement or Eurocurrency Loans made by such Lender or any Letter of Credit or participation therein; or

(iii) subject the Administrative Agent, any Lender or the Issuing Bank to any Taxes (other than (A) Indemnified Taxes, (B) Other Taxes and (C) Excluded Taxes (including any change in the rate of Excluded Taxes)) with respect to this Agreement, or any Loan made by it or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to the Administrative Agent or such Lender of making or maintaining any Loan or of maintaining its obligation to make any such Loan (including, without limitation, pursuant to any conversion of any Borrowing denominated in an Agreed Currency into a Borrowing denominated in any other Agreed Currency) or to increase the cost to the Administrative Agent, such Lender or the Issuing Bank of participating in, issuing or maintaining any Letter of Credit (including, without limitation, pursuant to any conversion of any Borrowing denominated in an Agreed Currency into a Borrowing denominated in any other Agreed Currency) or to reduce the amount of any sum received or receivable by the Administrative Agent, such Lender or the Issuing Bank

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hereunder, whether of principal, interest or otherwise (including, without limitation, pursuant to any conversion of any Borrowing denominated in an Agreed Currency into a Borrowing denominated in any other Agreed Currency), then the Borrower will pay to the Administrative Agent, such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.

(b) If any Lender or the Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company for any such reduction suffered.

(c) A certificate of a Lender or the Issuing Bank setting forth, in reasonable detail, the basis and calculation of the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within ten (10) days after receipt thereof.

(d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender or the Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the Issuing Bank’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any principal of any Eurocurrency Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default or as a result of any prepayment pursuant to Section 2.11), (b) the conversion of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurocurrency Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.11(a) and is revoked in accordance therewith) or (d) the assignment of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.19 or the CAM Exchange, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. Such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan (but not the Applicable Rate applicable thereto), for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which

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would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for deposits in the relevant currency of a comparable amount and period from other banks in the eurocurrency market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section, and setting forth in reasonable detail the calculations used by such Lender to determine such amount or amounts, shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section for any amounts under this Section 2.16 incurred more than 180 days prior to the date that such Lender notifies the Borrower of such amount and of such Lender’s intention to claim compensation therefor.

SECTION 2.17. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent, Lender or Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

(b) In addition, the Borrower shall pay any Other Taxes imposed on or incurred by the Administrative Agent, a Lender or the Issuing Bank to the relevant Governmental Authority in accordance with applicable law.

(c) The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within ten (10) days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error.

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrower as will permit such payments to be made without withholding or at a reduced rate.

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(f) Each Lender and Administrative Agent that is a United States Person, as defined in section 7701(a)(30) of the Code (other than Persons that are corporations or otherwise exempt from United States backup withholding Tax), shall deliver at the time(s) and in the manner(s) prescribed by applicable law or reasonably requested by the Borrower, to the Borrowers and the Administrative Agent (as applicable), a properly completed and duly executed United States Internal Revenue Form W-9 or any successor form, certifying that such Person is exempt from United States backup withholding Tax on payments made hereunder.

(g) If a Lender or the Administrative Agent shall become aware that it is entitled to claim a refund from a Governmental Authority in respect of Indemnified Taxes or Other Taxes paid by the Borrower pursuant to this Section 2.17, such Lender or Administrative Agent, as applicable, shall promptly notify the Borrower of the availability of such refund claim and, if the Lender or the Administrative Agent, as applicable, determines in its sole discretion that making a claim for refund will not have an adverse effect on its Taxes or business operations, shall, within 60 days after receipt of a request by the Borrower, make a claim to such Governmental Authority for such refund. If the Administrative Agent or a Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 2.17, it shall pay over such refund to the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 2.17 with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that the Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This Section shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to the Borrower or any other Person.

(h) Each Lender shall severally indemnify the Administrative Agent for any Taxes (but, in the case of any Indemnified Taxes, only to the extent that the Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Borrower to do so) and the Borrower for any Excluded Taxes, in each case attributable to such Lender that are paid or payable by the Administrative Agent or the Borrower in connection with any Loan Document and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes or Excluded Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. The indemnity under this Section 2.17(h) shall be paid within ten (10) days after the Administrative Agent or the Borrower (as applicable) delivers to the applicable Lender a certificate stating the amount of Taxes or Excluded Taxes so paid or payable by the Administrative Agent or the Borrower (as applicable). Such certificate shall be conclusive of the amount so paid or payable absent manifest error.

SECTION 2.18. Payments Generally; Allocations of Proceeds; Pro Rata Treatment; Sharing of Set-offs.

(a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.15, 2.16 or 2.17, or otherwise) prior to (i) in the case of payments denominated in Dollars, 12:00 noon, New York City time and (ii) in the case of payments denominated in a Foreign Currency, 12:00 noon, Local Time, in the city of the Administrative Agent’s Eurocurrency Payment Office for such currency, in each case on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be

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deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made (i) in the same currency in which the applicable Credit Event was made (or where such currency has been converted to euro, in euro) and (ii) to the Administrative Agent at its offices at 10 South Dearborn Street, 7^th Floor, Chicago, Illinois 60603 or, in the case of a Credit Event denominated in a Foreign Currency, the Administrative Agent’s Eurocurrency Payment Office for such currency, except payments to be made directly to the Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments denominated in the same currency received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. Notwithstanding the foregoing provisions of this Section, if, after the making of any Credit Event in any Foreign Currency, currency control or exchange regulations are imposed in the country which issues such currency with the result that the type of currency in which the Credit Event was made (the “Original Currency”) no longer exists or the Borrower is not able to make payment to the Administrative Agent for the account of the applicable Lenders in such Original Currency, then all payments to be made by the Borrower hereunder in such currency shall instead be made when due in Dollars in an amount equal to the Dollar Amount (as of the date of repayment) of such payment due, it being the intention of the parties hereto that the Borrower takes all risks of the imposition of any such currency control or exchange regulations.

(b) Any proceeds of Collateral received by the Administrative Agent (i) not constituting (A) a specific payment of principal, interest, fees or other sum payable under the Loan Documents (which shall be applied on a pro rata basis among the relevant Lenders under the Class of Loans being prepaid as specified by the Borrower) or (B) a mandatory prepayment (which shall be applied in accordance with Section 2.11) or (ii) after an Event of Default has occurred and is continuing and the Administrative Agent so elects or the Required Lenders so direct, such funds shall be applied ratably first, to pay any fees, indemnities, or expense reimbursements including amounts then due to the Administrative Agent and the Issuing Bank from the Borrower, second, to pay any fees or expense reimbursements then due to the Lenders from the Borrower, third, to pay interest then due and payable on the Loans ratably, fourth, to prepay principal on the Loans and unreimbursed LC Disbursements and any other amounts owing with respect to Banking Services Obligations and Swap Obligations ratably, fifth, to pay an amount to the Administrative Agent equal to one hundred five percent (105%) of the aggregate undrawn face amount of all outstanding Letters of Credit and the aggregate amount of any unpaid LC Disbursements, to be held as cash collateral for such Obligations, and sixth, to the payment of any other Secured Obligation due to the Administrative Agent or any Lender by the Borrower. Notwithstanding anything to the contrary contained in this Agreement, unless so directed by the Borrower, or unless a Default is in existence, none of the Administrative Agent or any Lender shall apply any payment which it receives to any Eurocurrency Loan of a Class, except (a) on the expiration date of the Interest Period applicable to any such Eurocurrency Loan or (b) in the event, and only to the extent, that there are no outstanding ABR Loans of the same Class and, in any event, the Borrower shall pay the break funding payment required in accordance with Section 2.16. The Administrative Agent and the Lenders shall have the continuing and exclusive right to apply and reverse and reapply any and all such received proceeds and payments to any portion of the Secured Obligations.

(c) At the election of the Administrative Agent, all payments of principal, interest, LC Disbursements, fees, premiums, reimbursable expenses (including, without limitation, all reimbursement for fees and expenses pursuant to Section 9.03), and other sums due and payable under the Loan Documents, may be paid from the proceeds of Borrowings made hereunder pursuant to Section 2.03.

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(d) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and participations in LC Disbursements and Swingline Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements and Swingline Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

(e) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the relevant Lenders or the Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the relevant Lenders or the Issuing Bank, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the relevant Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation (including without limitation the Overnight Foreign Currency Rate in the case of Loans denominated in a Foreign Currency).

(f) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.05(c), 2.06(d) or (e), 2.07(b), 2.18(e) or 9.03(c), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), (i) apply any amounts thereafter received by the Administrative Agent for the account of such Lender and for the benefit of the Administrative Agent, the Swingline Lender or the Issuing Bank to satisfy such Lender’s obligations to it under such Section until all such unsatisfied obligations are fully paid and/or (ii) hold any such amounts in a segregated account as cash collateral for, and application to, any future funding obligations of such Lender under any such Section; in the case of each of clauses (i) and (ii) above, in any order as determined by the Administrative Agent in its discretion.

SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.15, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or

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affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

(b) If (i) any Lender requests compensation under Section 2.15, or (ii) the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, or (iii) any Lender becomes a Defaulting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under the Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent (and if a Revolving Commitment is being assigned, the Issuing Bank), which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

SECTION 2.20. Expansion Option. The Borrower may from time to time elect to increase the total Dollar Tranche Commitments or the total Multicurrency Tranche Commitments or enter into one or more tranches of term loans (each an “Incremental Term Loan”), in each case in minimum increments of $10,000,000 so long as, after giving effect thereto, the aggregate amount of such increases and all such Incremental Term Loans does not exceed $200,000,000. The Borrower may arrange for any such increase or tranche to be provided by one or more Lenders (each Lender so agreeing to an increase in its Revolving Commitment, or to participate in such Incremental Term Loans, an “Increasing Lender”), or by one or more new banks, financial institutions or other entities (each such new bank, financial institution or other entity, an “Augmenting Lender”), to increase their existing Revolving Commitments, or to participate in such Incremental Term Loans, or extend Revolving Commitments, as the case may be; provided that (i) each Augmenting Lender, shall be subject to the approval of the Borrower and the Administrative Agent (not to be unreasonably withheld or delayed) and (ii) (x) in the case of an Increasing Lender, the Borrower and such Increasing Lender execute an agreement substantially in the form of Exhibit B hereto, and (y) in the case of an Augmenting Lender, the Borrower and such Augmenting Lender execute an agreement substantially in the form of Exhibit C hereto. No consent of any Lender (other than the Lenders participating in the increase or extension of Revolving Commitments or any Incremental Term Loan) shall be required for any increase in or extension of Revolving Commitments or Incremental Term Loans pursuant to this Section 2.20. Increases, extensions and new Revolving Commitments and Incremental Term Loans created pursuant to this Section 2.20 shall become effective on the date agreed by the Borrower, the Administrative Agent and the relevant Increasing Lenders or Augmenting Lenders, and the Administrative Agent shall notify each Lender thereof. Notwithstanding the foregoing, no increase in or extension of the Revolving Commitments (or in the Revolving Commitment of any Lender) or tranche of Incremental Term Loans shall become effective under this paragraph unless, (i) on the proposed date of the effectiveness of such increase or Incremental Term Loans, (A) the conditions set forth in paragraphs (a) and (b) of Section 4.02 shall be satisfied or

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waived by the Required Lenders and the Administrative Agent shall have received a certificate to that effect dated such date and executed by a Financial Officer of the Borrower and (B) the Borrower shall be in compliance (on a pro forma basis) with the covenants contained in Section 6.12 and (ii) the Administrative Agent shall have received documents and legal opinions consistent with those delivered on the Effective Date as to such legal matters as are reasonably requested by the Administrative Agent. On the effective date of any increase in the Revolving Commitments of any Class, (i) each relevant Increasing Lender and Augmenting Lender shall make available to the Administrative Agent such amounts in immediately available funds as the Administrative Agent shall determine, for the benefit of the other Lenders of such Class, as being required in order to cause, after giving effect to such increase and the use of such amounts to make payments to such other Lenders, each Lender’s portion of the outstanding Revolving Loans of such Class of all the Lenders to equal its Dollar Tranche Percentage or Multicurrency Tranche Percentage, as applicable, of such outstanding Revolving Loans and (ii) the Borrower shall be deemed to have repaid and reborrowed all outstanding Revolving Loans of such Class as of the date of any increase in the Revolving Commitments of such Class (with such reborrowing to consist of the Types of Revolving Loans of such Class, with related Interest Periods if applicable, specified in a notice delivered by the Borrower, in accordance with the requirements of Section 2.03). The deemed payments made pursuant to clause (ii) of the immediately preceding sentence shall be accompanied by payment of all accrued interest on the amount prepaid and, in respect of each Eurocurrency Loan, shall be subject to indemnification by the Borrower pursuant to the provisions of Section 2.16 if the deemed payment occurs other than on the last day of the related Interest Periods. The Incremental Term Loans (a) shall rank pari passu in right of payment with the Revolving Loans and the Term Loans, (b) shall not mature earlier than the Maturity Date (but may have amortization prior to such date) and (c) shall be treated substantially the same as (and in any event no more favorably than) the Revolving Loans and the Term Loans; provided that (i) the terms and conditions applicable to any tranche of Incremental Term Loans maturing after the Maturity Date may provide for material additional or different financial or other covenants or prepayment requirements applicable only (other than with respect to prepayment requirements) during periods after the Maturity Date and (ii) the Incremental Term Loans may be priced, and may include fees, differently than the Revolving Loans and the Term Loans. Incremental Term Loans may be made hereunder pursuant to an amendment or restatement (an “Incremental Term Loan Amendment”) of this Agreement and, as appropriate, the other Loan Documents, executed by the Borrower, each Increasing Lender participating in such tranche, each Augmenting Lender participating in such tranche, if any, and the Administrative Agent. The Incremental Term Loan Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent, to effect the provisions of this Section 2.20. Nothing contained in this Section 2.20 shall constitute, or otherwise be deemed to be, a commitment on the part of any Lender to increase its Revolving Commitment hereunder, or provide Incremental Term Loans, at any time.

SECTION 2.21. Judgment Currency. If for the purposes of obtaining judgment in any court it is necessary to convert a sum due from the Borrower hereunder in the currency expressed to be payable herein (the “specified currency”) into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the specified currency with such other currency at the Administrative Agent’s main New York City office on the Business Day preceding that on which final, non-appealable judgment is given. The obligations of the Borrower in respect of any sum due to any Lender or the Administrative Agent hereunder shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Business Day following receipt by such Lender or the Administrative Agent (as the case may be) of any sum adjudged to be so due in such other currency such Lender or the Administrative Agent (as the case may be) may in accordance with normal, reasonable banking procedures purchase the specified currency with such other currency. If the amount of the specified currency so purchased is less than the sum

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originally due to such Lender or the Administrative Agent, as the case may be, in the specified currency, the Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender or the Administrative Agent, as the case may be, against such loss, and if the amount of the specified currency so purchased exceeds (a) the sum originally due to any Lender or the Administrative Agent, as the case may be, in the specified currency and (b) any amounts shared with other Lenders as a result of allocations of such excess as a disproportionate payment to such Lender under Section 2.18, such Lender or the Administrative Agent, as the case may be, agrees to remit such excess to the Borrower.

SECTION 2.22. Defaulting Lenders. Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:

(a) fees shall cease to accrue on the unfunded portion of the Commitment of such Defaulting Lender pursuant to Section 2.12(a);

(b) the Commitment and Revolving Credit Exposure of such Defaulting Lender shall not be included in determining whether the Required Lenders have taken or may take any action hereunder (including any consent to any amendment, waiver or other modification pursuant to Section 9.02); provided that this clause (b) shall not apply to the vote of a Defaulting Lender in the case of an amendment, waiver or other modification requiring the consent of such Lender or each Lender affected thereby;

(c) if any Swingline Exposure or LC Exposure exists at the time such Lender becomes a Defaulting Lender then:

(i) so long as no Default has occurred and is continuing: all or any part of the Swingline Exposure of such Defaulting Lender shall be reallocated among the non-Defaulting Dollar Tranche Lenders in accordance with their respective Dollar Tranche Percentages but only to the extent (A) the sum of all non-Defaulting Lenders’ Dollar Tranche Revolving Credit Exposures plus such Defaulting Lender’s Swingline Exposure does not exceed the total of all non-Defaulting Dollar Tranche Lenders’ Dollar Tranche Commitments and (B) each non-Defaulting Lender’s Dollar Tranche Revolving Credit Exposure does not exceed such non-Defaulting Lender’s Dollar Tranche Commitment; and all or any part of the Dollar Tranche LC Exposure of such Defaulting Lender shall be reallocated among the non-Defaulting Dollar Tranche Lenders in accordance with their respective Dollar Tranche Percentages but only to the extent (C) the sum of all non-Defaulting Lenders’ Dollar Tranche Revolving Credit Exposures plus such Defaulting Lender’s Dollar Tranche LC Tranche Exposure does not exceed the total of all non-Defaulting Dollar Tranche Lenders’ Dollar Tranche Commitments and (D) each non-Defaulting Lender’s Dollar Tranche Revolving Credit Exposure does not exceed such non-Defaulting Lender’s Dollar Tranche Commitment; and all or any part of the Multicurrency Tranche LC Exposure of such Defaulting Lender shall be reallocated among the non-Defaulting Multicurrency Tranche Lenders in accordance with their respective Multicurrency Tranche Percentages but only to the extent (E) the sum of all non-Defaulting Lenders’ Multicurrency Tranche Revolving Credit Exposures plus such Defaulting Lender’s Multicurrency Tranche LC Tranche Exposure does not exceed the total of all non-Defaulting Multicurrency Tranche Lenders’ Multicurrency Tranche Commitments and (F) each non-Defaulting Lender’s Multicurrency Tranche Revolving Credit Exposure does not exceed such non-Defaulting Lender’s Multicurrency Tranche Commitment;

(ii) if the reallocations described in clause (i) above cannot, or can only partially, be effected, the Borrower shall within one (1) Business Day following notice by the Administrative

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Agent (x) first, prepay such Swingline Exposure and (y) second, cash collateralize for the benefit of the Issuing Bank only the Borrower’s obligations corresponding to such Defaulting Lender’s LC Exposure (after giving effect to any partial reallocation pursuant to clause (i) above) in accordance with the procedures set forth in Section 2.06(j) for so long as such LC Exposure is outstanding;

(iii) if the Borrower cash collateralizes any portion of such Defaulting Lender’s LC Exposure pursuant to clause (ii) above, the Borrower shall not be required to pay any fees to such Defaulting Lender pursuant to Section 2.12(b) with respect to such Defaulting Lender’s LC Exposure during the period such Defaulting Lender’s LC Exposure is cash collateralized;

(iv) if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to clause (ii) above, then the fees payable to the Lenders pursuant to Section 2.12(a) and Section 2.12(b) shall be adjusted in accordance with such non-Defaulting Lenders’ Applicable Percentages; and

(v) if all or any portion of such Defaulting Lender’s LC Exposure is neither reallocated nor cash collateralized pursuant to clause (i) or (ii) above, then, without prejudice to any rights or remedies of the Issuing Bank or any other Lender hereunder, all letter of credit fees payable under Section 2.12(b) with respect to such Defaulting Lender’s LC Exposure shall be payable to the Issuing Bank until and to the extent that such LC Exposure is reallocated and/or cash collateralized; and

(d) so long as such Lender is a Defaulting Lender, the Swingline Lender shall not be required to fund any Swingline Loan and the Issuing Bank shall not be required to issue, amend or increase any Letter of Credit, unless it is satisfied that the related exposure and the Defaulting Lender’s then outstanding LC Exposure will be 100% covered by the Revolving Commitments of the non-Defaulting Lenders and/or cash collateral will be provided by the Borrower in accordance with Section 2.22(c), and participating interests in any such newly made Swingline Loan or any newly issued or increased Letter of Credit shall be allocated among non-Defaulting Lenders in a manner consistent with Section 2.22(c)(i) (and such Defaulting Lender shall not participate therein).

If (i) a Bankruptcy Event with respect to a Parent of any Lender shall occur following the date hereof and for so long as such event shall continue or (ii) the Swingline Lender or the Issuing Bank has a good faith belief that any Lender has defaulted in fulfilling its obligations under one or more other agreements in which such Lender commits to extend credit, the Swingline Lender shall not be required to fund any Swingline Loan and the Issuing Bank shall not be required to issue, amend or increase any Letter of Credit, unless the Swingline Lender or the Issuing Bank, as the case may be, shall have entered into arrangements with the Borrower or such Lender, reasonably satisfactory to the Swingline Lender or the Issuing Bank, as the case may be, to defease any risk to it in respect of such Lender hereunder.

In the event that the Administrative Agent, the Borrower, the Issuing Bank and the Swingline Lender each agrees that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then the Swingline Exposure and LC Exposure of the Lenders shall be readjusted to reflect the inclusion of such Lender’s Commitment and on such date such Lender shall purchase at par such of the Dollar Tranche Revolving Loans (other than Swingline Loans) and/or Multicurrency Tranche Revolving Loans of the other Lenders as the Administrative Agent shall determine may be necessary in order for such Lender to hold such Loans in accordance with its Applicable Percentage.

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ARTICLE III

Representations and Warranties

The Borrower represents and warrants to the Lenders that:

SECTION 3.01. Organization; Powers; Subsidiaries. Each of the Borrower and its Material Subsidiaries is duly organized, validly existing and (to the extent the concept is applicable in such jurisdiction) in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and (to the extent the concept is applicable in such jurisdiction) is in good standing in, every jurisdiction where such qualification is required. Schedule 3.01 hereto identifies each Subsidiary (other than Subsidiaries in respect of which the Borrower and its Subsidiaries own less than 50% of the Equity Interests thereof) as of the Effective Date, noting whether such Subsidiary is a Material Subsidiary, the jurisdiction of its incorporation or organization, as the case may be, the percentage of issued and outstanding shares of each class of its capital stock or other equity interests owned by the Borrower and the other Subsidiaries and, if such percentage is not 100% (excluding directors’ qualifying shares as required by law), a description of each class issued and outstanding. All of the outstanding shares of capital stock and other equity interests of each Material Subsidiary are validly issued and outstanding and fully paid and nonassessable and all such shares and other equity interests indicated on Schedule 3.01 as owned by the Borrower or another Subsidiary are owned, beneficially and of record, by the Borrower or any Subsidiary free and clear of all Liens, other than Liens created under the Loan Documents. There are no outstanding commitments or other obligations of any Material Subsidiary to issue, and no options, warrants or other rights of any Person to acquire, any shares of any class of capital stock or other equity interests of any Material Subsidiary.

SECTION 3.02. Authorization; Enforceability. The Transactions are within each Loan Party’s corporate or other organizational powers and have been duly authorized by all necessary corporate or other organizational actions and, if required, actions by equity holders. The Loan Documents to which each Loan Party is a party have been duly executed and delivered by such Loan Party and constitute a legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect and except for filings necessary to perfect Liens created pursuant to the Loan Documents, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of its Material Subsidiaries or any order of any Governmental Authority, (c) will not violate in any material respect or result in a default under any indenture, material agreement or other material instrument binding upon the Borrower or any of its Material Subsidiaries or its assets, or give rise to a right thereunder to require any payment to be made by the Borrower or any of its Material Subsidiaries and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Material Subsidiaries, other than Liens created under the Loan Documents.

SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Borrower has heretofore furnished to the Lenders its consolidated balance sheet and statements of income, stockholders equity and cash flows (i) as of and for the fiscal year ended December 31, 2009 reported on

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by Deloitte & Touche LLP, independent public accountants, and (ii) as of and for the fiscal quarter and the portion of the fiscal year ended September 30, 2010, certified by its chief financial officer. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above.

(b) Since December 31, 2009, there has been no material adverse change in the business, assets, operations or condition, financial or otherwise, of the Borrower and its Subsidiaries, taken as a whole.

SECTION 3.05. Properties. (a) Each of the Borrower and its Material Subsidiaries has good title to, or (to the knowledge of the Borrower) valid leasehold interests in, all its real and personal property (excluding intellectual property, which is considered in Section 3.05(b)) material to its business, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes.

(b) Each of the Borrower and its Material Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and its Material Subsidiaries does not (to the knowledge of the Borrower) infringe upon the rights of any other Person, except for any such infringements (or ownership or license issues) that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.06. Litigation, Environmental and Labor Matters. (a) Except as set forth in Schedule 3.06 hereto and the Borrower’s Annual Report on Form 10-K for the year ended December 31, 2009 and the Borrower’s Quarterly Report on Form 10-Q for the period ending September 30, 2010, there are no actions, suits, proceedings or investigations by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries (i) that could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve this Agreement or the Transactions.

(b) Except with respect to matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any of its Material Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) is subject to any Environmental Liability or (iii) has received notice of any claim with respect to any Environmental Liability.

(c) There are no strikes, lockouts or slowdowns against the Borrower or any of its Material Subsidiaries pending or, to their knowledge, threatened that have resulted in, or could reasonably be expected to result in, a Material Adverse Effect. The hours worked by and payments made to employees of the Borrower and its Material Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Federal, state, local or foreign law relating to such matters that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect. All material payments due from the Borrower or any of its Material Subsidiaries, or for which any claim may be made against the Borrower or any of its Material Subsidiaries, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as liabilities on the books of the Borrower or such Subsidiary except to the extent that the failure to do so has not resulted in, and could not reasonably be expected to result in, a Material Adverse Effect. The consummation of the Transactions will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement under which the Borrower or any of its Material Subsidiaries is bound.

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SECTION 3.07. Compliance with Laws and Agreements. Except as set forth in Schedule 3.07 hereto, each of the Borrower and its Material Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.08. Investment Company Status. Neither the Borrower nor any of its Subsidiaries is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940.

SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries has timely filed or caused to be filed all federal Tax returns and all other material Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, in each case, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect.

SECTION 3.11. Disclosure. As of the Effective Date, and except as otherwise disclosed in the Borrower’s public filings with the SEC prior to the Effective Date, the Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which the Borrower or any Subsidiary is subject, and all other matters known to the Borrower, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. All written or formally presented information, including the Information Memorandum, other than any projections and information of a general economic or general industry nature, furnished by or on behalf of, the Borrower or any Subsidiary to the Administrative Agent, any of its Affiliates or any Lender pursuant to or in connection with this Agreement or any other Loan Document, taken as a whole together with all other written information so delivered on or prior to any date of determination and all information contained in regular or periodic reports filed by or on behalf of the Borrower with the SEC on or prior to such date is (or will when furnished be) complete and correct in all material respects and does not (or will not when furnished) contain any untrue statement of material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made; provided that, with respect to forecasts or projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed by it to be reasonable at the time so furnished and, if furnished prior to the Effective Date, as of the Effective Date (it being understood by the Administrative Agent and the Lenders that any such projections are subject to significant uncertainties and contingencies, many of which are beyond the control of the Borrower or its Subsidiaries, that no assurances can be given that such projections will be realized and that actual results may differ materially from such projections).

SECTION 3.12. Federal Reserve Regulations. No part of the proceeds of any Loan have been used or will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X.

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SECTION 3.13. Liens. There are no Liens on any of the real or personal properties of the Borrower or any Subsidiary except for Liens permitted by Section 6.02.

SECTION 3.14. No Default. No Default or Event of Default has occurred and is continuing.

SECTION 3.15. No Burdensome Restrictions. The Borrower is not subject to any Burdensome Restrictions except Burdensome Restrictions permitted under Section 6.08.

SECTION 3.16. Security Interest in Collateral. The Collateral Documents, upon execution and delivery thereof by the parties thereto, will create in favor of the Administrative Agent, for the benefit of the Secured Parties, a valid and enforceable security interest in the Collateral covered thereby and (i) when the Collateral constituting certificated securities (as defined in the UCC) is delivered to the Administrative Agent, together with instruments of transfer duly endorsed in blank, the Liens under the Collateral Documents will constitute a fully perfected security interest in all right, title and interest of the pledgors thereunder in such Collateral, prior and superior in right to any other Person, and (ii) when financing statements in appropriate form are filed in the applicable filing offices, the security interest created under the Collateral Documents will constitute a fully perfected security interest in all right, title and interest of the Loan Parties in the remaining Collateral to the extent perfection can be obtained by filing UCC financing statements, prior and superior to the rights of any other Person, except for Liens permitted by Section 6.02.

SECTION 3.17. Solvency. Immediately after the consummation of the Transactions and immediately following the making of each Loan or the issuance of each Letter of Credit made or issued and after giving effect to the application of the proceeds of such Loans, (a) the fair value of the assets of the Borrower and its Subsidiaries on a consolidated basis will exceed their consolidated debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of the Borrower and its Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay the probable liability on their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) the Borrower and its Subsidiaries on a consolidated basis will not have incurred any debts and liabilities, subordinated, contingent or otherwise, that they do not believe that they will be able to pay as such debts and liabilities become absolute and matured; and (d) the Borrower and its Subsidiaries on a consolidated basis will not have unreasonably small capital with which to conduct the business in which they are engaged as such business is now conducted and is proposed to be conducted following the Effective Date.

ARTICLE IV

Conditions

SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02):

(a) The Administrative Agent (or its counsel) shall have received from (i) each party hereto either (A) a counterpart of this Agreement signed on behalf of such party or (B) written evidence satisfactory to the Administrative Agent (which may include telecopy or electronic transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement and (ii) duly executed copies of the Loan Documents and such other legal opinions, certificates, documents, instruments and agreements as the Administrative

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Agent shall reasonably request in connection with the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel and as further described in the list of closing documents attached as Exhibit D.

(b) The Administrative Agent shall have received favorable written opinions (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of (i) Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Loan Parties, (ii) Miller & Martin PLLC, local counsel in Georgia and (iii) Perkins Coie LLP, local counsel in Washington, covering such matters relating to the Loan Parties, the Loan Documents or the Transactions as the Administrative Agent shall reasonably request. The Borrower hereby requests such counsels to deliver such opinions.

(c) The Lenders shall have received (i) audited consolidated financial statements of the Borrower and Qualitest for the two most recent fiscal years ended prior to the Effective Date as to which such financial statements are available, (ii) unaudited interim consolidated financial statements of the Borrower and Qualitest for each quarterly period ended subsequent to the date of the latest financial statements delivered pursuant to clause (i) of this paragraph as to which such financial statements are publicly available and (iii) annual financial statement projections (giving effect to the Qualitest Acquisition) through and including the Borrower’s 2015 fiscal year.

(d) The Administrative Agent shall have received (i) such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the initial Loan Parties, the authorization of the Transactions and any other legal matters relating to such Loan Parties, the Loan Documents or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel and as further described in the list of closing documents attached as Exhibit D and (ii) to the extent requested by any of the Lenders, all documentation and other information required by bank regulatory authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act.

(e) The Administrative Agent shall have received evidence satisfactory to it that the Existing Credit Agreement shall have been terminated and cancelled and all indebtedness thereunder shall have been fully repaid (except to the extent being so repaid with the initial Revolving Loans) and any and all liens thereunder shall have been terminated and released.

(f) The Administrative Agent shall have received evidence reasonably satisfactory to it that all governmental and third party approvals necessary in connection with the Transactions and the continuing operations of the Borrower and its Subsidiaries have been obtained and are in full force and effect.

(g) The Qualitest Acquisition shall have been consummated pursuant to the Qualitest Acquisition Agreement, substantially concurrently with the initial funding of Loans hereunder, and no provision thereof shall have been amended or waived in a manner materially adverse to the Lenders without the prior written consent of J.P. Morgan Securities LLC and RBC Capital Markets (it being understood and agreed that changes to purchase price and transaction structure shall be deemed to be materially adverse to the Lenders).

(h) The Lenders shall have received a pro forma consolidated balance sheet of the Borrower as of September 30, 2010 and a pro forma statement of operations for the 12-month period ending on such date, in each case adjusted to give effect to the consummation of the Qualitest Acquisition and the financings contemplated hereby as if such transactions had occurred on such date or on the first day of such period, as applicable.

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(i) The Borrower shall have demonstrated to the reasonable satisfaction of the Administrative Agent that at the time of and immediately after giving effect to the Transactions: (i) pro forma compliance with all financial covenants set forth in Section 6.12 and (ii) pro forma Leverage Ratio of not more than 2.50 to 1.00.

(j) On the Effective Date, after giving effect to the Qualitest Acquisition, neither Qualitest nor any of its subsidiaries shall have any material Indebtedness for borrowed money other than the Loans hereunder and other Indebtedness expressly contemplated by the Qualitest Acquisition Agreement.

(k) The Administrative Agent and the Lenders shall have received a written certification from an officer of the Borrower that, after giving effect to the Qualitest Acquisition and any incurrence of indebtedness in connection therewith, the Borrower and its Subsidiaries, on a consolidated basis, are solvent as described in Section 3.17.

(l) Since December 31, 2009, there has not occurred any material adverse change in or affecting the business, operations, property, condition (financial or otherwise) of the Borrower and its Subsidiaries (both before and after giving effect to the Qualitest Acquisition).

(m) (i) The Specified Representations shall be true and correct giving effect to the Transactions and (ii) such of the representations and warranties made by Qualitest in the Qualitest Acquisition Agreement as are material to the interests of the Lenders, but only to the extent that the Borrower has the right to terminate its obligations (or to refuse to consummate the Qualitest Acquisition) under the Qualitest Acquisition Agreement as a result of a breach of such representations in the Qualitest Acquisition Agreement, shall be true and correct (all of the representations and warranties described in this clause (m), collectively, the “Effective Date Representations”).

(n) The Administrative Agent shall have received: (i) UCC financing statements for each appropriate jurisdiction as is necessary, in the Administrative Agent’s sole discretion, to perfect the Administrative Agent’s security interest in the Collateral; (ii) all certificates evidencing any certificated Equity Interests pledged to the Administrative Agent pursuant to the Security Agreement, together with duly executed in blank, undated stock powers attached thereto; and (iii) duly executed confirmatory grants of security interest in the form required by the Security Agreement as are necessary, in the Administrative Agent’s sole discretion, to perfect the Administrative Agent’s security interest in the United States registered intellectual property of the Loan Parties; provided that notwithstanding the foregoing or anything else to the contrary contained in this Agreement or the other Loan Documents, to the extent that any Collateral (other than the grant and perfection of security interests in (x) the Equity Interests in Domestic Subsidiaries held by the Borrower and the Subsidiary Guarantors (including those acquired in the Qualitest Acquisition) unless arrangements reasonably satisfactory to the Administrative Agent for timely post-closing delivery thereof shall have been made, (y) any promissory notes and other evidence of Indebtedness held by the Borrower and the Subsidiary Guarantors (including those acquired in the Qualitest Acquisition) unless arrangements reasonably satisfactory to the Administrative Agent for timely post-closing delivery thereof shall have been made and (z) other assets in which a lien or security interest may be perfected by the filing of a financing statement under the UCC) is not delivered on the Effective Date after the Borrower’s use of commercially reasonable efforts to do so or without undue delay, burden or expense, then the delivery of such

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Collateral shall not constitute a condition precedent to the effectiveness of this Agreement but shall be accomplished after the Effective Date pursuant to arrangements and timing to be mutually agreed by the Borrower and the Administrative Agent.

(o) The Administrative Agent and the Lenders shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder.

For purpose of determining compliance with the conditions specified in this Section 4.01, each Lender that has signed this Agreement shall be deemed to have accepted, and to be satisfied with, each document or other matter required under this Section 4.01 to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received written notice from such Lender prior to the proposed Effective Date specifying its objection thereto. The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) at or prior to 3:00 p.m., New York City time, on the Termination Date (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time).

SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing, and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit (other than on the Effective Date), is subject to the satisfaction of the following conditions:

(a) The representations and warranties of the Borrower set forth in this Agreement shall be true and correct in all material respects on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable, except in the case of any such representation and warranty that expressly relates to an earlier date, in which case such representation and warranty shall be true and correct in all material respects on and as of such earlier date.

(b) At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing.

Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section.

ARTICLE V

Affirmative Covenants

Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit shall have expired, terminated or been Cash Collateralized and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that:

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SECTION 5.01. Financial Statements and Other Information. The Borrower will furnish to the Administrative Agent, on behalf of each Lender:

(a) within ninety (90) days after the end of each fiscal year of the Borrower (or, if earlier, by the date that the Annual Report on Form 10-K of the Borrower for such fiscal year would be required to be filed under the rules and regulations of the SEC, giving effect to any automatic extension available thereunder for the filing of such form), its audited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, with such audited balance sheet and related consolidated financial statements reported on by Deloitte & Touche LLP or other independent public accountants of recognized national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;

(b) within forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower (or, if earlier, by the date that the Quarterly Report on Form 10-Q of the Borrower for such fiscal quarter would be required to be filed under the rules and regulations of the SEC, giving effect to any automatic extension available thereunder for the filing of such form), its consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;

(c) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Section 6.12 (including compliance on a consolidated basis without giving effect to the JV Subsidiaries) and (iii) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 3.04 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;

(d) concurrently with the delivery of the certificate of a Financial Officer of the Borrower under clause (c) above, updated versions of the exhibits to the Security Agreement (provided that if there have been no changes to any such exhibits since the previous updating required thereby, the Borrower shall indicate that there has been “no change” to the applicable exhibit(s));

(e) concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines);

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(f) as soon as available, but in any event not more than ninety (90) days after the end of each fiscal year of the Borrower, a copy of the plan and forecast (including a projected consolidated balance sheet, income statement and funds flow statement) of the Borrower for each month of the fiscal year following such fiscal year in form reasonably satisfactory to the Administrative Agent;

(g) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the SEC, or any Governmental Authority succeeding to any or all of the functions of the SEC, or with any national securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be; and

(h) promptly after any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of any Loan Document, as may be reasonably requested by the Administrative Agent or by any Lender through the Administrative Agent.

Information required to be delivered pursuant to Sections 5.01(a), 5.01(b) and 5.01(g) shall be deemed to have been delivered if such information, or one or more annual, quarterly or other periodic reports containing such information, shall have been posted by the Administrative Agent on an IntraLinks or similar site to which the Lenders have been granted access or shall be available on the website of the SEC at http://www.sec.gov; provided that, for the avoidance of doubt, the Borrower shall be required to provide copies of the compliance certificates required by clause (c) of this Section 5.01 to the Administrative Agent. Information required to be delivered pursuant to this Section may also be delivered by electronic communications pursuant to procedures approved by the Administrative Agent. In the event any financial statements delivered under clause (a) or (b) above shall be restated, the Borrower shall deliver, promptly after such restated financial statements become available, revised compliance certificates required by clause (c) of this Section 5.01 with respect to the periods covered thereby that give effect to such restatement, signed by a Financial Officer of the Borrower.

SECTION 5.02. Notices of Material Events. The Borrower will, upon knowledge thereof by a Responsible Officer, furnish to the Administrative Agent prompt written notice of the following:

(a) the occurrence of any Default;

(b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof that could reasonably be expected to result in a Material Adverse Effect;

(c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; and

(d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.

Each notice delivered under this Section shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. Information required to be delivered pursuant to clause (b) of this Section shall be deemed to have been delivered if such information, or one or more

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annual or quarterly or other periodic reports containing such information, shall have been posted by the Administrative Agent on an IntraLinks or similar site to which the Lenders have been granted access or shall be available on the website of the SEC at http://www.sec.gov. Information required to be delivered pursuant to this Section may also be delivered by electronic communications pursuant to procedures approved by the Administrative Agent.

SECTION 5.03. Existence; Conduct of Business. The Borrower will, and will cause each of its Material Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, qualifications, licenses, permits, privileges, franchises, governmental authorizations and intellectual property rights material to the conduct of its business, and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted; provided that (i) the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03 and (ii) neither the Borrower nor any of its Subsidiaries shall be required to preserve any right, license, permit, privilege, franchise, patent, copyright, trademark or trade name if the Borrower or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of business of the Borrower or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to the Borrower, such Subsidiary or the Lenders.

SECTION 5.04. Payment of Obligations. The Borrower will, and will cause each of its Subsidiaries to, pay its obligations, including Tax liabilities, that, if not paid, could result in a Material Adverse Effect before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.05. Maintenance of Properties; Insurance. The Borrower will, and will cause each of its Material Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, and (b) maintain with financially sound and reputable carriers (i) insurance in such amounts (with no greater risk retention) and against such risks and such other hazards, as is customarily maintained by companies of established repute engaged in the same or similar businesses operating in the same or similar locations and (ii) all insurance required pursuant to the Collateral Documents. The Borrower will furnish to the Lenders, upon request of the Administrative Agent, information in reasonable detail as to the insurance so maintained. The Borrower shall deliver to the Administrative Agent endorsements (x) to all “All Risk” physical damage insurance policies on all of the Loan Parties’ tangible personal property and assets and business interruption insurance policies naming the Administrative Agent as lender loss payee, and (y) to all general liability and other liability policies naming the Administrative Agent an additional insured. In the event the Borrower or any of its Material Subsidiaries at any time or times hereafter shall fail to obtain or maintain any of the policies or insurance required herein or to pay any premium in whole or in part relating thereto, then the Administrative Agent, without waiving or releasing any obligations or resulting Default hereunder, may at any time or times thereafter (but shall be under no obligation to do so) obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto which the Administrative Agent deems advisable. All sums so disbursed by the Administrative Agent shall constitute part of the Obligations, payable as provided in this Agreement.

SECTION 5.06. Books and Records; Inspection Rights. The Borrower will, and will cause each of its Material Subsidiaries to, keep proper books of record and account in which full, true and correct entries in conformity with GAAP and applicable law are made of all material financial dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of its

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Material Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender (pursuant to a request made through the Administrative Agent), at reasonable times upon reasonable prior notice (but not more than once annually if no Event of Default shall exist), to visit and inspect its properties, to examine and make extracts from its books and records, including examination of its environmental assessment reports and Phase I or Phase II studies, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested. The Borrower acknowledges that the Administrative Agent, after exercising its rights of inspection, may prepare and distribute to the Lenders certain reports pertaining to the Borrower and its Material Subsidiaries’ assets for internal use by the Administrative Agent and the Lenders.

SECTION 5.07. Compliance with Laws and Material Contractual Obligations. The Borrower will, and will cause each of its Material Subsidiaries to, (i) comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property (including without limitation Environmental Laws) and (ii) perform in all material respects its obligations under material agreements to which it is a party, in each case except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.08. Use of Proceeds. The proceeds of the Loans will be used for general corporate purposes (including financing a portion of the Qualitest Acquisition and Permitted Acquisitions) of the Borrower and its Subsidiaries. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X.

SECTION 5.09. Subsidiary Guarantors; Pledges; Additional Collateral; Further Assurances.

(a) As promptly as possible but in any event within thirty (30) days (or such later date as may be agreed upon by the Administrative Agent) after any Person becomes a Material Domestic Subsidiary or any Subsidiary qualifies independently as, or is designated by the Borrower as a Material Domestic Subsidiary, the Borrower shall provide the Administrative Agent with written notice thereof setting forth information in reasonable detail describing the material assets of such Person and shall cause each such Material Domestic Subsidiary to deliver to the Administrative Agent a joinder to the Subsidiary Guaranty and the Security Agreement (in each case in the form contemplated thereby) pursuant to which such Subsidiary agrees to be bound by the terms and provisions thereof, the Subsidiary Guaranty and the Security Agreement to be accompanied by appropriate corporate resolutions, other corporate documentation and legal opinions as may be reasonably requested by, and in form and substance reasonably satisfactory to, the Administrative Agent and its counsel.

(b) The Borrower will cause, and will cause each other Loan Party to cause, all of its owned property (whether real, personal, tangible, intangible, or mixed but excluding Excluded Assets) to be subject at all times to perfected Liens in favor of the Administrative Agent for the benefit of the Secured Parties to secure the Secured Obligations in accordance with the terms and conditions of the Collateral Documents on a first priority basis, subject to no other Liens other than Liens permitted by Section 6.02 (and provided further that such perfection with respect to intellectual property shall be limited to the United States). Without limiting the generality of the foregoing, the Borrower (i) will cause the Applicable Pledge Percentage of the issued and outstanding Equity Interests of each Pledge Subsidiary directly owned by the Borrower or any other Loan Party (other than Excluded Assets) to be subject at all times to a first priority, perfected Lien in favor of the Administrative Agent to secure the Secured Obligations in accordance with the terms and conditions of the Collateral Documents or such other pledge and security documents as the Administrative Agent shall reasonably request and (ii) will, and will cause each Subsidiary Guarantor to, deliver Mortgages and Mortgage Instruments with respect to

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real property (excluding Excluded Assets) owned by the Borrower or such Guarantor to the extent, and within such time period as is, reasonably required by the Administrative Agent. Notwithstanding the foregoing, (i) no such Mortgages and Mortgage Instruments are required to be delivered hereunder until 90 days after the Effective Date or such later date as the Administrative Agent may agree in the exercise of its reasonable discretion with respect thereto and (ii) no such pledge agreement in respect of the Equity Interests of a Foreign Subsidiary shall be required hereunder (A) until 90 days after the Effective Date or such later date as the Administrative Agent may agree in the exercise of its reasonable discretion with respect thereto, and (B) to the extent the Administrative Agent or its counsel determines that such pledge would not provide material credit support for the benefit of the Secured Parties pursuant to legally valid, binding and enforceable pledge agreements.

(c) Without limiting the foregoing, the Borrower will, and will cause each other Loan Party to, execute and deliver, or cause to be executed and delivered, to the Administrative Agent such documents, agreements and instruments, and will take or cause to be taken such further actions (including the filing and recording of financing statements, fixture filings, Mortgages, deeds of trust and other documents and such other actions or deliveries of the type required by Section 4.01, as applicable), which may be required by law or which the Administrative Agent may, from time to time, reasonably request to carry out the terms and conditions of this Agreement and the other Loan Documents and to ensure perfection and priority of the Liens created or intended to be created by the Collateral Documents, all at the expense of the Borrower (except that such perfection with respect to intellectual property shall be limited to the United States).

(d) If any assets (including any real property or improvements thereto or any interest therein) are acquired by a Loan Party after the Effective Date (other than Excluded Assets and assets constituting Collateral under the Security Agreement that become subject to the Lien in favor of the Security Agreement upon acquisition thereof), the Borrower will notify the Administrative Agent thereof, and, if requested by the Administrative Agent, the Borrower will cause such assets to be subjected to a Lien securing the Secured Obligations and will take, and cause the other Loan Parties to take, such actions as shall be necessary or reasonably requested by the Administrative Agent to grant and perfect such Liens, including actions described in paragraph (c) of this Section, all at the expense of the Borrower.

ARTICLE VI

Negative Covenants

Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired, terminated or been Cash Collateralized and all LC Disbursements shall have been reimbursed, the Borrower covenants and agrees with the Lenders that:

SECTION 6.01. Indebtedness. The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Indebtedness, except:

(a) the Secured Obligations;

(b) Indebtedness existing on the date hereof and set forth in Schedule 6.01 and any refinancing, extensions, renewals or replacements of any such Indebtedness that does not increase the outstanding principal amount thereof (other than with respect to unpaid accrued interest and premium thereon, any committed or undrawn amounts and underwriting discounts, fees, commissions and expenses, associated with such Indebtedness);

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(c) Indebtedness under the 2008 Subordinated Convertible Notes and any Permitted Refinancing Indebtedness in respect thereof;

(d) Indebtedness of the Borrower to any Subsidiary and of any Subsidiary to the Borrower or any other Subsidiary; provided that Indebtedness of any Subsidiary that is not a Loan Party to any Loan Party shall be subject to the limitations set forth in Section 6.04(d);

(e) Guarantees by the Borrower or any Subsidiary of Indebtedness or other obligations of the Borrower or any Subsidiary; provided that the aggregate amount of Indebtedness and other payment obligations (other than in respect of any overdrafts and related liabilities arising in the ordinary course of business from treasury, depository and cash management services or in connection with any automated clearing-house transfer of funds) of Subsidiaries that are not Loan Parties that is Guaranteed by any Loan Party shall be subject to the limitations set forth in Section 6.04(d);

(f) Indebtedness of the Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations, Synthetic Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and any refinancing, extensions, renewals or replacements of any such Indebtedness; provided that (i) such Indebtedness is incurred prior to or within 180 days after such acquisition or the completion of such construction or improvement and (ii) the aggregate principal amount of Indebtedness incurred under this clause (f) shall not exceed immediately after giving effect to the issuance or incurrence of such Indebtedness the greater of (x) $40,000,000 and (y) 10% of Consolidated EBITDA for the period of four (4) consecutive fiscal quarters ending as of the last day of the most recent fiscal quarter for which Financials have been delivered;

(g) Indebtedness of the Borrower or any Subsidiary as an account party in respect of trade letters of credit;

(h) Indebtedness owed in respect of any netting services, overdrafts and related liabilities arising from treasury, depository and cash management services or in connection with any automated clearing-house transfers of funds;

(i) Indebtedness under bid bonds, performance bonds, surety bonds and similar obligations, in each case, incurred by the Borrower or any of its Subsidiaries in the ordinary course of business, including guarantees or obligations with respect to letters of credit supporting such bid bonds, performance bonds, surety bonds and similar obligations;

(j) Swap Agreements permitted under Section 6.05;

(k) Indebtedness of Foreign Subsidiaries, and guarantees thereof by Foreign Subsidiaries, in respect of local lines of credit, letters of credit, bank guarantees and similar extensions of credit, in an aggregate principal amount not to exceed immediately after giving effect to the issuance or incurrence of such Indebtedness the greater of (x) $20,000,000 and (y) 5% of Consolidated EBITDA for the period of four (4) consecutive fiscal quarters ending as of the last day of the most recent fiscal quarter for which Financials have been delivered;

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(l) Guarantees of Indebtedness of directors, officers, employees, agents and advisors of the Borrower or any of its Subsidiaries in respect of expenses of such Persons in connection with relocations and other ordinary course of business purposes, if the aggregate amount of Indebtedness so guaranteed, when added to the aggregate amount of unreimbursed payments theretofore made in respect of such guarantees and the amount of loans and advances then outstanding under Section 6.04(t), shall not at any time exceed $5,000,000;

(m) Indebtedness arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guaranties, surety bonds or performance bonds securing the performance of the Borrower or any of its Subsidiaries pursuant to such agreements, in connection with Permitted Acquisitions or permitted dispositions;

(n) Indebtedness representing installment insurance premiums owing in the ordinary course of business;

(o) Indebtedness representing deferred compensation, severance, pension, and health and welfare retirement benefits or the equivalent to current and former employees of the Borrower and its Subsidiaries incurred in the ordinary course of business or existing on the Effective Date;

(p) unsecured Indebtedness arising out of judgments not constituting an Event of Default;

(q) Indebtedness of any Person that becomes a Subsidiary (or of any Person not previously a Subsidiary that is merged or consolidated with or into a Subsidiary in a transaction permitted hereunder) after the date hereof, or Indebtedness of any Person that is assumed by any Subsidiary in connection with an acquisition of assets by such Subsidiary in a Permitted Acquisition, and any refinancing, renewal, extension or replacement in respect thereof; provided that (A) such Indebtedness exists at the time such Person becomes a Subsidiary (or is so merged or consolidated) or such assets are acquired and is not created in contemplation of or in connection with such Person becoming a Subsidiary (or such merger or consolidation) or such assets being acquired and (B) neither the Borrower nor any Subsidiary (other than such Person or the Subsidiary with which such Person is merged or consolidated or that so assumes such Person’s Indebtedness) shall Guarantee or otherwise become liable for the payment of such Indebtedness; and

(r) Permitted Indebtedness.

SECTION 6.02. Liens. The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except:

(a) Liens created pursuant to any Loan Document;

(b) Permitted Encumbrances;

(c) any Lien on any property or asset of the Borrower or any Subsidiary existing on the date hereof and set forth in Schedule 6.02 and any modifications, renewals and extensions thereof and any Lien granted as a replacement or substitute therefor; provided that (i) such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary other than improvements thereon or proceeds from the disposition of such asset and (ii) such Lien shall secure only those obligations which it secures on the date hereof and any refinancing, extensions, renewals or replacements thereof that do not increase the outstanding principal amount thereof (other than as permitted by Section 6.01);

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(d) any Lien existing on any property or asset prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary and any modifications, replacements, renewals or extensions thereof; provided that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets of the Borrower or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be, and any refinancing, extensions, renewals or replacements thereof that do not increase the outstanding principal amount thereof (other than as permitted by Section 6.01);

(e) Liens on fixed or capital assets acquired, constructed or improved by the Borrower or any Subsidiary; provided that (i) such Liens secure Indebtedness permitted by clause (f) of Section 6.01, (ii) such Liens and the Indebtedness secured thereby are incurred prior to or within 180 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed the cost of acquiring, constructing or improving such fixed or capital assets and (iv) such Liens shall not apply to any other property or assets of the Borrower or any Subsidiary other than improvements thereon or proceeds from the disposition of such property or assets;

(f) in connection with the sale or transfer of any assets in a transaction permitted under Section 6.03, customary rights and restrictions contained in agreements relating to such sale or transfer pending the completion thereof;

(g) in the case of any JV Subsidiary, any put and call arrangements related to its Equity Interests set forth in its organizational documents or any related joint venture or similar agreement;

(h) any interest or title of a lessor under any lease or sublease entered into by the Borrower or any Subsidiary in the ordinary course of its business and other statutory and common law landlords’ liens under leases;

(i) any interest or title of a licensor under any license or sublicense entered into by the Borrower or any Subsidiary as a licensee or sublicensee in the ordinary course of its business;

(j) licenses, sublicenses, leases or subleases granted to other Persons permitted under Section 6.03;

(k) Liens on earnest money deposits of cash or cash equivalents made in connection with any Permitted Acquisition;

(l) Liens in the nature of the right of setoff in favor of counterparties to contractual agreements with the Loan Parties in the ordinary course of business;

(m) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Borrower or any Subsidiary in the ordinary course of business in accordance with the past practices of the Borrower or such Subsidiary;

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(n) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;

(o) Liens on assets of Foreign Subsidiaries customarily granted in connection with financing transactions in the respective jurisdictions of such Subsidiaries; provided that such Liens shall secure only Indebtedness or other obligations of such Foreign Subsidiaries permitted hereunder;

(p) Liens on insurance policies and the proceeds thereof securing Indebtedness permitted by Section 6.01(n);

(q) dispositions and other sales of assets permitted under Section 6.03;

(r) Liens on deposits or other amounts held in escrow (i) in connection with the Nebido Contingent Cash Consideration Agreement, dated as of February 23, 2009, by and between the Borrower and American Stock & Transfer Trust Company, as paying agent, and (ii) to secure contractual payments (contingent or otherwise) payable by the Borrower or its Subsidiaries to a seller after the consummation of a Permitted Acquisition;

(s) Liens securing Permitted Indebtedness so long as any such Liens on the Collateral shall be subordinated to the Liens granted under the Loan Documents pursuant to the terms of subordination and intercreditor agreements reasonably satisfactory to the Administrative Agent; and

(t) Liens on assets of the Borrower and its Subsidiaries not otherwise permitted above so long as the aggregate amount of obligations subject to such Liens does not immediately after giving effect to the incurrence of such obligations exceed the greater of (x) $20,000,000 and (y) 10% of Consolidated Net Tangible Assets at the end of the most recent fiscal quarter of the Borrower for which Financials have been delivered (or, prior to the first delivery of any such financial statements, as of the end of the fiscal quarter of the Borrower ended September 30, 2010).

SECTION 6.03. Fundamental Changes and Asset Sales. (a) The Borrower will not, and will not permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease, Exclusively License or otherwise dispose of (in one transaction or in a series of transactions) any of its assets (including pursuant to a Sale and Leaseback Transaction), or any of the Equity Interests of any of its Subsidiaries (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except that:

(i) any Person may merge into or consolidate with the Borrower in a transaction in which the Borrower is the surviving corporation;

(ii) any Person (other than the Borrower) may merge into or consolidate with any Subsidiary in a transaction in which the surviving entity is such Subsidiary (provided that any such merger, consolidation or liquidation involving a Subsidiary Guarantor must result in such Subsidiary Guarantor as the surviving entity);

(iii) any Subsidiary may merge into or consolidate with any Person in a transaction permitted under clauses (xiv) to (xvi) hereunder in which the surviving entity is not a Subsidiary;

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(iv) any Subsidiary may dispose of any or all of its assets (upon voluntary liquidation, dissolution or otherwise) to the Borrower or any other Loan Party;

(v) any Subsidiary that is not a Loan Party may dispose of any or all of its assets (upon voluntary liquidation, dissolution or otherwise) to another Subsidiary that is not a Loan Party;

(vi) any Subsidiary may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders;

(vii) sales, transfers and other dispositions of inventory, used, worn out, obsolete or surplus property, cash and Permitted Investments in the ordinary course of business and the assignment, cancellation, abandonment or other disposition of intellectual property that is, in the reasonable judgment of the Borrower, no longer economically practicable to maintain or useful in the conduct of the business of the Borrower and the Subsidiaries, taken as a whole;

(viii) sales, transfers, leases, Exclusive Licenses and other dispositions to the Borrower or any Subsidiary; provided that (i) any such sales, transfers, leases or other dispositions involving a Subsidiary that is not a Loan Party shall be made in compliance with Section 6.04 and (ii) Equity Interests in a Domestic Subsidiary may not be transferred to a Foreign Subsidiary;

(ix) the discount or sale, in each case without recourse and in the ordinary course of business, of past due receivables arising in the ordinary course of business, but only in connection with the compromise or collection thereof consistent with customary industry practice (and not as part of any bulk sale or financing of receivables);

(x) leases, subleases, non-Exclusive Licenses or sublicenses of property to other Persons in the ordinary course of business not materially interfering with the business of the Borrower and the Subsidiaries taken as a whole;

(xi) Liens incurred in compliance with Section 6.02;

(xii) Investments permitted by Section 6.04;

(xiii) dispositions of property as a result of a casualty event involving such property or any disposition of real property to a Governmental Authority as a result of a condemnation of such real property;

(xiv) dispositions of investments in joint ventures, to the extent required by, or made pursuant to buy/sell arrangements between the joint venture parties set forth in joint venture arrangements and similar binding arrangements; provided that the consideration received shall be in an amount at least equal to the fair market value thereof (determined in good faith by the board of directors of the Borrower);

(xv) sales or other dispositions of non-core assets acquired in a Permitted Acquisition; provided that such sales shall be consummated within 360 days of such Permitted Acquisition; and provided further that (i) the consideration received for such assets shall be in an amount at least equal to the fair market value thereof (determined in good faith by the board of directors of Borrower) and (ii) no less than 75% thereof shall be paid in cash; and

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(xvi) sales, transfers, leases and other dispositions, and Exclusive Licenses, of assets that are not permitted by any other clause of this Section; provided that the Disposition Consideration of all assets sold, transferred, leased or otherwise disposed of, and of all assets Exclusively Licensed in reliance on this clause (xvi) shall not at the time of and immediately after giving effect to any such transaction exceed in any fiscal year 10% of Consolidated Total Assets at the end of the immediately preceding fiscal year of the Borrower.

(b) The Borrower will not, and will not permit any of its Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Borrower and its Subsidiaries on the date of execution of this Agreement and businesses reasonably related thereto or similar or complementary thereto or reasonable extensions thereof (including, but not limited to the business of diagnostics, medical devices, delivery technologies and biotechnology).

(c) The Borrower will not, nor will it permit any of its Subsidiaries to, change its fiscal year from the basis in effect on the Effective Date.

SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions. The Borrower will not, and will not permit any of its Subsidiaries to, (i) purchase, hold or acquire (including pursuant to any merger or consolidation with any Person that was not a wholly owned Subsidiary prior to such merger) any capital stock, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or (ii) purchase or otherwise acquire (in one transaction or a series of transactions) substantially all the assets of any Person or any assets of any other Person constituting a business unit, division, product line (including rights in respect of any drug or other pharmaceutical product) or line of business of such Person, or (iii) acquire an exclusive long-term license of rights to a drug or other product line of any Person, or (iv) make a Restricted Milestone Payment (each, an “Investment”) except:

(a) cash and Permitted Investments;

(b) Permitted Acquisitions and the Qualitest Acquisition;

(c) Investments by the Borrower and its Subsidiaries existing on the date hereof and set forth on Schedule 6.04 and any modification, replacement, renewal or extension thereof to the extent not involving any additional Investment;

(d) Investments made by the Borrower in or to any Subsidiary and made by any Subsidiary in or to the Borrower or any other Subsidiary and Guarantees by the Borrower or any Subsidiary of obligations of any other Subsidiary; provided that the amount of any Investment by a Loan Party to a Subsidiary which is not a Loan Party made after the Effective Date or constituting a Guarantee of obligations of any Subsidiary that is not a Loan Party made after the Effective Date shall not exceed, together with the aggregate amount of all other Investments made pursuant to this proviso, and Section 6.04(v) below, $750,000,000 at any time outstanding;

(e) Guarantees constituting Indebtedness permitted by Section 6.01;

(f) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;

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(g) Investments made as a result of the receipt of non-cash consideration from a sale, transfer, lease or other disposition, or an Exclusive License, of any asset in compliance with Section 6.03;

(h) Investments in the form of Swap Agreements permitted by Section 6.05;

(i) payroll, travel and similar advances to directors, officers and employees of the Borrower or any Subsidiary that are made in the ordinary course of business;

(j) extensions of trade credit in the ordinary course of business;

(k) Investments to the extent the consideration paid therefor consists of Equity Interests (other than Disqualified Equity Interests) of the Borrower;

(l) Investments of any Person in existence at the time such Person becomes a Subsidiary; provided such Investment was not made in connection with or anticipation of such Person becoming a Subsidiary and any modification, replacement, renewal or extension thereof;

(m) transfers of rights with respect to one or more products or technologies under development to joint ventures with third parties or to other entities where the Borrower or a Subsidiary retains rights to acquire such joint ventures or other entities or otherwise repurchase such products or technologies;

(n) any customary upfront milestone, marketing or other funding payment in the ordinary course of business to another Person in connection with obtaining a right to receive royalty or other payments in the future;

(o) transfers of intellectual property to Foreign Subsidiaries, the Equity Interests of which are directly owned by or on behalf of any Loan Party and are pledged to the Administrative Agent pursuant to the Collateral Documents (including any local law governed pledge agreement requested by the Administrative Agent);

(p) Exclusive Licenses from a Foreign Subsidiary to the Borrower or a Domestic Subsidiary of rights to a drug or other pharmaceutical products, diagnostics, delivery technologies, medical devices or biotechnology businesses acquired by such Foreign Subsidiary in an acquisition permitted by Section 6.03;

(q) Investments in joint ventures (including JV Subsidiaries) and acquisitions of Equity Interests that would constitute Permitted Acquisitions but for the fact that Persons in which such Equity Interests are acquired do not become wholly owned Subsidiaries of the Borrower; provided that the sum of the aggregate amount of such Investments, plus the aggregate consideration paid in all such acquisitions, made under this clause (q) after the Effective Date shall not exceed $65,000,000 at any time outstanding;

(r) Permitted Foreign Loans;

(s) Investment in Light Sciences Oncology LLC in an amount not to exceed $6,000,000 at any time outstanding;

(t) loans or advances to directors and employees of the Borrower or any Subsidiary made in the ordinary course of business; provided that the aggregate amount of such loans and advances outstanding, when aggregated with the Guarantees then outstanding under Section 6.01(l), at any time shall not exceed $5,000,000;

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(u) any Investment in an aggregate amount, when aggregated with the aggregate amount of Restricted Payments made pursuant to Section 6.07(g), not to exceed at anytime the aggregate amount of net cash proceeds received from sales or issuances of Equity Interests of the Borrower (other than Disqualified Equity Interests) after the Effective Date; and

(v) any other Investment so long as the aggregate amount of all such Investments made after the Effective Date, when aggregated with the aggregate amount of Investments made after the Effective Date pursuant to Section 6.04(d) above, does not exceed $750,000,000 at any time outstanding. For purposes of clause (q) and this clause (v), the aggregate consideration payable for any Investment (other than a Milestone Payment) shall be the cash amount paid on or prior to the consummation of such Investment and shall not include any purchase price adjustment, royalty, earnout, contingent payment or any other deferred payment of a similar nature that may be payable in connection therewith.

For purposes of covenant compliance with this Section 6.04, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment, less any amount paid, repaid, returned, distributed or otherwise received in cash in respect of such Investment.

SECTION 6.05. Swap Agreements. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any Swap Agreement, except (a) Swap Agreements entered into to hedge or mitigate risks to which the Borrower or any Subsidiary has actual exposure (other than those in respect of Equity Interests of the Borrower or any of its Subsidiaries but without giving effect to the 2008 Subordinated Convertible Notes and any other Indebtedness convertible into Equity Interests in the Borrower), and (b) Swap Agreements entered into in order to effectively cap, collar or exchange interest rates (from fixed to floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of the Borrower or any Subsidiary.

SECTION 6.06. Transactions with Affiliates. The Borrower will not, and will not permit any of its Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates (other than the Borrower or any Subsidiary that is not a JV Subsidiary), except (a) transactions that are on terms and conditions not materially less favorable to the Borrower or such Subsidiary than it would obtain on an arm’s-length basis from a Person that is not an Affiliate, (b) any Restricted Payment permitted by Section 6.07, (c) customary fees and indemnifications paid to directors of the Borrower and its Subsidiaries, (d) transactions undertaken in good faith for the purpose of improving the consolidated tax efficiency of the Borrower and the Subsidiaries, (e) compensation and indemnification of, and other employment agreements and arrangements, employee benefit plans, and stock incentive plans with directors, officers and employees of the Borrower or any Subsidiary entered in the ordinary course of business and (f) loans and advances and other transactions to the extent permitted by Sections 6.01 and 6.04.

SECTION 6.07. Restricted Payments. The Borrower will not, and will not permit any of its Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except (a) the Borrower may declare and pay dividends or make other Restricted Payments with respect to its Equity Interests payable solely in additional Equity Interests of the Borrower (other than Disqualified Equity Interests), (b) the Borrower may repurchase Equity Interests upon the exercise of stock options if such Equity Interests represent a portion of the exercise price of such options, (c) the Borrower may make cash payments in lieu of the issuance of fractional shares in connection with the

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exercise of warrants, options or other securities convertible into or exchangeable for Equity Interests in the Borrower, (d) Subsidiaries may declare and pay dividends ratably with respect to their Equity Interests, (e) the Borrower may make Restricted Payments pursuant to and in accordance with stock incentive plans or other employee benefit plans for directors, officers or employees of the Borrower and its Subsidiaries, (f) so long as no Default or Event of Default has occurred and is continuing or would arise after giving effect (including pro forma effect) thereto, the Borrower may purchase Equity Interests from present or former officers, directors or employees of the Borrower or any Subsidiary upon the death, disability, retirement or termination of employment or service of such officer, director or employee, in an aggregate amount not exceeding $10,000,000 in any fiscal year of the Borrower, (g) so long as no Default or Event of Default shall have occurred and be continuing or would occur as a result thereof, Borrower may make Restricted Payments in an aggregate amount not to exceed, when aggregated with the aggregate amount of Investments made pursuant to Section 6.04(u), the aggregate amount of net cash proceeds received from sales or issuances of Equity Interests of the Borrower (other than Disqualified Equity Interests) after the Effective Date, (h) the Borrower and its Subsidiaries may make Restricted Payments with respect to the 2008 Subordinated Convertible Notes and any other Permitted Indebtedness that may be converted to Equity Interests of the Borrower by its terms and any derivative transactions entered into in connection therewith, and (i) the Borrower and its Subsidiaries may make any other Restricted Payment so long as no Event of Default has occurred and is continuing prior to making such Restricted Payment or would arise after giving effect (including pro forma effect) thereto and immediately after giving effect to such Restricted Payment the aggregate amount of all such Restricted Payments made under this clause will not exceed (i) the Applicable Amount at any time, if the Leverage Ratio after giving effect (including pro forma effect) to such Restricted Payment is less than or equal to 2.0 to 1.0 or (ii) $150,000,000 during any fiscal year (up to a maximum of the Applicable Amount in the aggregate during the term of this Agreement), if the Leverage Ratio after giving effect (including pro forma effect) to such Restricted Payment is greater than 2.0 to 1.0. As used in this Section 6.07, “Applicable Amount” means the greater of (i) $350,000,000 and (ii) 5% of Consolidated Total Assets as of the end of the most recent fiscal quarter of the Borrower for which Financials have been delivered (or, prior to the first delivery of any such financial statements, as of the end of the fiscal quarter of the Borrower ended June 30, 2010).

SECTION 6.08. Restrictive Agreements. The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to holders of its Equity Interests or to make or repay loans or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary; provided that (i) the foregoing shall not apply to (A) restrictions and conditions imposed by law or by any Loan Document, (B) restrictions and conditions existing on the date hereof identified on Schedule 6.08 and any amendments or modifications thereof that do not materially expanding the scope of any such restriction or condition taken as a whole, (C) restrictions and conditions imposed by agreements relating to Indebtedness of any Subsidiary in existence at the time such Subsidiary became a Subsidiary and any amendments or modifications thereof that do not materially expand the scope of any such restriction or condition taken as a whole, provided that such restrictions and conditions apply only to such Subsidiary, (D) customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (E) restrictions imposed by any amendment or refinancings that are otherwise permitted by the Loan Documents or the contracts, instruments or obligations referred to in clauses (A), (B), (C), (J) or (K) of this Section 6.08, provided that such amendments or refinancings do not materially expand the scope of any such restriction or condition, (F) in the case of any JV Subsidiary, customary restrictions and conditions imposed by its organizational documents or any related joint venture or similar agreement,

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provided that such restrictions and conditions apply only to such Subsidiary and to any Equity Interests in such Subsidiary, (G) any restriction arising under or in connection with any agreement or instrument governing Equity Interests of any JV Subsidiary that is formed or acquired after the Effective Date, (H) customary restrictions and conditions contained in any agreement relating to the disposition of any property permitted by Section 6.03 pending the consummation of such disposition, (I) restrictions in the transfers of assets encumbered by a Lien permitted by Section 6.02, (J) restrictions or conditions set forth in the 2008 Subordinated Convertible Notes, (K) restrictions or conditions set forth in any agreement governing Indebtedness permitted by Section 6.01; provided that such restrictions and conditions are customary for such Indebtedness and are no more restrictive, taken as a whole, than the comparable restrictions and conditions set forth in this Agreement as determined in the good faith judgment of the board of directors of the Borrower, (L) customary provisions restricting assignment of any agreement entered into in the ordinary course of business and (M) restrictions on cash or other deposits (including escrowed funds) or net worth imposed under contracts entered into in the ordinary course of business; and (ii) clause (a) of the foregoing shall not apply to (1) restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness and (2) customary provisions in leases, subleases, licenses, sublicenses and other agreements entered into in the ordinary course of business.

SECTION 6.09. Amendments to Subordinated Indebtedness Documents. None of the Borrower or any Subsidiary will amend, modify or waive any of its rights under any agreement or instrument governing or evidencing any Subordinated Indebtedness to the extent such amendment, modification or waiver could reasonably be expected to be adverse in any material respect to the Lenders.

SECTION 6.10. Sale and Leaseback Transactions. None of the Borrower or any Subsidiary will enter into any Sale and Leaseback Transaction unless (a) the sale or transfer of the property thereunder is permitted by Section 6.03, (b) any Capital Lease Obligations and Synthetic Lease Obligations arising in connection therewith are permitted by Section 6.01 and (c) any Liens arising in connection therewith (including Liens deemed to arise in connection with any such Capital Lease Obligations and Synthetic Lease Obligations) are permitted by Section 6.02.

SECTION 6.11. Capital Expenditures. The Borrower will not, nor will it permit any Subsidiary to expend, or be committed to expend (in the aggregate for the Borrower and its Subsidiaries) for Capital Expenditures during any fiscal year of the Borrower, an amount in excess of the greater of (x) $40,000,000 and (y) 10% of Consolidated EBITDA for the period of four (4) consecutive fiscal quarters ending as of the last day of the immediately preceding fiscal year of the Borrower so long as Financials for such period have been delivered; provided, however, that (i) if the aggregate amount of Capital Expenditures made in any fiscal year shall be less than the maximum amount of Capital Expenditures permitted under this Section 6.11 for such fiscal year (without giving effect to any carryover), then an amount of such shortfall may be added and carried over to the amount of Capital Expenditures permitted under this Section 6.11 for the immediately succeeding fiscal year only and (ii) to the extent that the maximum amount of Capital Expenditures permitted under this Section 6.11 has been utilized for any fiscal year (including, without limitation, any carryover), not more than $10,000,000 of Capital Expenditures availability in the immediately succeeding fiscal year may be utilized solely in the last fiscal quarter of the then current fiscal year and not thereafter.

SECTION 6.12. Financial Covenants.

(a) Maximum Leverage Ratio. The Borrower will not permit the ratio (the “Leverage Ratio”), determined as of the end of each of its fiscal quarters ending on and after the last day of the first fiscal quarter ending after the Effective Date of (i) Consolidated Total Indebtedness minus the aggregate amount (not to exceed $150,000,000) of unrestricted and unencumbered cash and Permitted Investments

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to (ii) Consolidated EBITDA for the period of four (4) consecutive fiscal quarters ending with the end of such fiscal quarter, all calculated for the Borrower and its Subsidiaries on a consolidated basis, to be greater than 3.0 to 1.0.

(b) Minimum Interest Coverage Ratio. The Borrower will not permit the ratio (the “Interest Coverage Ratio”), determined as of the end of each of its fiscal quarters ending on and after the last day of the first fiscal quarter ending after the Effective Date, of (i) Consolidated EBITDA to (ii) Consolidated Interest Expense, in each case for the period of four (4) consecutive fiscal quarters ending with the end of such fiscal quarter, all calculated for the Borrower and its Subsidiaries on a consolidated basis, to be less than 3.5 to 1.0.

ARTICLE VII

Events of Default

If any of the following events (“Events of Default”) shall occur:

(a) the Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

(b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three (3) Business Days;

(c) any representation or warranty made or deemed made by or on behalf of the Borrower or any other Loan Party in or in connection with this Agreement or any other Loan Document or any amendment or modification hereof or thereof or waiver hereunder or thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement or any other Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrect in any material respect when made or deemed made;

(d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.03 (with respect to the Borrower’s existence), 5.08 or 5.09 or in Article VI;

(e) the Borrower or any Subsidiary Guarantor, as applicable, shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in clause (a), (b) or (d) of this Article) or any other Loan Document, and such failure shall continue unremedied for a period of thirty (30) days after notice thereof from the Administrative Agent to the Borrower (which notice will be given at the request of any Lender);

(f) the Borrower or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable;

(g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits, after the expiration of any applicable grace period provided in the applicable agreement or instrument under which such Indebtedness was created, the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause

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any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness;

(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Material Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for sixty (60) days or an order or decree approving or ordering any of the foregoing shall be entered;

(i) the Borrower or any Material Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Material Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;

(j) the Borrower or any Material Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;

(k) one or more judgments for the payment of money in an aggregate amount in excess of $50,000,000 shall be rendered against the Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of thirty (30) consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any Subsidiary to enforce any such judgment; provided, that any such amount shall be calculated after deducting from the sum so payable any amount of such judgment or order that is covered by a valid and binding policy of insurance in favor of the Borrower or such Subsidiary (but only if the applicable insurer shall have been advised of such judgment and of the intent of the Borrower or such Subsidiary to make a claim in respect of any amount payable by it in connection therewith and such insurer shall not have disputed coverage);

(l) an ERISA Event shall have occurred that, in the reasonable opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect;

(m) a Change in Control shall occur;

(n) the occurrence of any “default”, as defined in any Loan Document (other than this Agreement) or the breach of any of the terms or provisions of any Loan Document (other than this Agreement), which default or breach continues beyond any period of grace therein provided;

(o) any material provision of any Loan Document for any reason ceases to be valid, binding and enforceable in accordance with its terms (or the Borrower or any Subsidiary shall challenge the enforceability of any Loan Document or shall assert in writing, or engage in any action or inaction based on any such assertion, that any provision of any of the Loan Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms);

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(p) any Collateral Document shall for any reason fail to create a valid and perfected first priority security interest in any material portion of the Collateral purported to be covered thereby, except as permitted by the terms of any Loan Document or as a result of the gross negligence or willful misconduct of the Administrative Agent so long as not resulting from the breach or non-compliance with any Loan Document by any Loan Party; or

(q) At any time during the period commencing on January 15, 2015 and ending on April 15, 2015, Liquidity is less than the sum of (i) the then outstanding principal amount of the 2008 Subordinated Convertible Notes plus (ii) $100,000,000; provided that immediately on and after the Borrower’s irrevocable payment in full in cash all principal, interest and other amounts under, and all other sums payable in respect of the 2008 Subordinated Convertible Notes, this clause shall be of no further force or effect;

then, and in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and (x) with respect to clause (i) below, at the request of a Majority in Interest of Revolving Lenders, shall, and (y) with respect to clause (ii) below, at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Revolving Commitments, and thereupon the Revolving Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other Secured Obligations accrued hereunder and under the other Loan Documents, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower described in clause (h) or (i) of this Article, the Revolving Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other Secured Obligations accrued hereunder and under the other Loan Documents, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent may, and at the request of the Required Lenders shall, exercise any rights and remedies provided to the Administrative Agent under the Loan Documents or at law or equity, including all remedies provided under the UCC.

ARTICLE VIII

The Administrative Agent

Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative Agent as its administrative agent and collateral agent and authorizes the Administrative Agent to take such actions on its behalf, including execution of the other Loan Documents, and to exercise such powers as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto.

The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.

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The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing as directed by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02), and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or in connection with any Loan Document, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, (v) the creation, perfection or priority of Liens on the Collateral or the existence of the Collateral or (vi) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring

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Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent’s resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.

Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

None of the Lenders, if any, identified in this Agreement as a Syndication Agent or Documentation Agent shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of such Lenders shall have or be deemed to have a fiduciary relationship with any Lender. Each Lender hereby makes the same acknowledgments with respect to the relevant Lenders in their respective capacities as Syndication Agent or Documentation Agent, as applicable, as it makes with respect to the Administrative Agent in the preceding paragraph.

The Lenders are not partners or co-venturers, and no Lender shall be liable for the acts or omissions of, or (except as otherwise set forth herein in case of the Administrative Agent) authorized to act for, any other Lender. The Administrative Agent shall have the exclusive right on behalf of the Lenders to enforce the payment of the principal of and interest on any Loan after the date such principal or interest has become due and payable pursuant to the terms of this Agreement.

In its capacity, the Administrative Agent is a “representative” of the Secured Parties within the meaning of the term “secured party” as defined in the New York Uniform Commercial Code. Each Lender authorizes the Administrative Agent to enter into each of the Collateral Documents to which it is a party and to take all action contemplated by such documents. Each Lender agrees that no Secured Party (other than the Administrative Agent) shall have the right individually to seek to realize upon the security granted by any Collateral Document, it being understood and agreed that such rights and remedies may be exercised solely by the Administrative Agent for the benefit of the Secured Parties upon the terms of the Collateral Documents. In the event that any Collateral is hereafter pledged by any Person as collateral security for the Secured Obligations, the Administrative Agent is hereby authorized, and hereby granted a power of attorney, to execute and deliver on behalf of the Secured Parties any Loan Documents necessary or appropriate to grant and perfect a Lien on such Collateral in favor of the Administrative Agent on behalf of the Secured Parties. The Lenders hereby authorize the Administrative Agent to release any Lien granted to or held by the Administrative Agent upon any Collateral (i) as described in Section 9.02(d); (ii) as permitted by, but only in accordance with, the terms of the applicable Loan Document; or (iii) if approved, authorized or ratified in writing by the Required Lenders, unless such release is required to be approved by all of the Lenders hereunder. Upon request by the Administrative Agent at any time, the Lenders will confirm in writing the Administrative Agent’s authority to release particular types or items of Collateral pursuant hereto.

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The Borrower, on its behalf and on behalf of its Subsidiaries, and each Lender, on its behalf and on the behalf of its affiliated Secured Parties, hereby irrevocably constitute the Administrative Agent as the holder of an irrevocable power of attorney (fondé de pouvoir within the meaning of Article 2692 of the Civil Code of Québec) in order to hold hypothecs and security granted by the Borrower or any Subsidiary on property pursuant to the laws of the Province of Quebec to secure obligations of the Borrower or any Subsidiary under any bond, debenture or similar title of indebtedness issued by the Borrower or any Subsidiary in connection with this Agreement, and agree that the Administrative Agent may act as the bondholder and mandatary with respect to any bond, debenture or similar title of indebtedness that may be issued by the Borrower or any Subsidiary and pledged in favor of the Secured Parties in connection with this Agreement. Notwithstanding the provisions of Section 32 of the An Act respecting the special powers of legal persons (Quebec), JPMorgan Chase Bank, N.A. as Administrative Agent may acquire and be the holder of any bond issued by the Borrower or any Subsidiary in connection with this Agreement (i.e., the fondé de pouvoir may acquire and hold the first bond issued under any deed of hypothec by the Borrower or any Subsidiary).

The Administrative Agent is hereby authorized to execute and deliver any documents necessary or appropriate to create and perfect the rights of pledge for the benefit of the Secured Parties including a right of pledge with respect to the entitlements to profits, the balance left after winding up and the voting rights of the Borrower as ultimate parent of any subsidiary of the Borrower which is organized under the laws of the Netherlands and the Equity Interests of which are pledged in connection herewith (a “Dutch Pledge”). Without prejudice to the provisions of this Agreement and the other Loan Documents, the parties hereto acknowledge and agree with the creation of parallel debt obligations of the Borrower or any relevant Subsidiary as will be described in any Dutch Pledge (the “Parallel Debt”), including that any payment received by the Administrative Agent in respect of the Parallel Debt will - conditionally upon such payment not subsequently being avoided or reduced by virtue of any provisions or enactments relating to bankruptcy, insolvency, preference, liquidation or similar laws of general application - be deemed a satisfaction of a pro rata portion of the corresponding amounts of the Obligations, and any payment to the Secured Parties in satisfaction of the Obligations shall - conditionally upon such payment not subsequently being avoided or reduced by virtue of any provisions or enactments relating to bankruptcy, insolvency, preference, liquidation or similar laws of general application - be deemed as satisfaction of the corresponding amount of the Parallel Debt. The parties hereto acknowledge and agree that, for purposes of a Dutch Pledge, any resignation by the Administrative Agent is not effective until its rights under the Parallel Debt are assigned to the successor Administrative Agent.

The parties hereto acknowledge and agree for the purposes of taking and ensuring the continuing validity of German law governed pledges (Pfandrechte) with the creation of parallel debt obligations of the Borrower as will be further described in a separate German law governed parallel debt undertaking. The Administrative Agent shall (i) hold such parallel debt undertaking as fiduciary agent (Treuhaender) and (ii) administer and hold as fiduciary agent (Treuhaender) any pledge created under a German law governed Collateral Document which is created in favor of any Secured Party or transferred to any Secured Party due to its accessory nature (Akzessorietaet), in each case in its own name and for the account of the Secured Parties. Each Lender, on its own behalf and on behalf of its affiliated Secured Parties, hereby authorizes the Administrative Agent to enter as its agent in its name and on its behalf into any German law governed Collateral Document, to accept as its agent in its name and on its behalf any pledge under such Collateral Document and to agree to and execute as agent in its name and on its behalf any amendments, supplements and other alterations to any such Collateral Document and to release any such Collateral Document and any pledge created under any such Collateral Document in accordance with the provisions herein and/or the provisions in any such Collateral Document.

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ARTICLE IX

Miscellaneous

SECTION 9.01. Notices. (a) Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

(i) if to the Borrower, to it at 100 Endo Boulevard, Chadds Ford, Pennsylvania 19317, Attention of Treasurer (Telecopy No. 610-558-9684; Telephone No. 610-558-9800);

(ii) if to the Administrative Agent, (A) in the case of Borrowings denominated in Dollars, to JPMorgan Chase Bank, N.A., 10 South Dearborn, Floor 7, Chicago, Illinois 60603-2003, Attention of Latanya Driver (Telecopy No. (312) 385-7096) and (B) in the case of Borrowings denominated in Foreign Currencies, to J.P. Morgan Europe Limited, 125 London Wall, Floor 9, London EC2Y 5AJ, Attention of Suchi P.L. (Telecopy No. 44 207 777 2288), and in each case with a copy to JPMorgan Chase Bank, N.A., 277 Park Avenue, New York, New York 10172, Attention of Deborah R. Winkler (Telecopy No. (646) 534-3081);

(iii) if to the Issuing Bank, to it at JPMorgan Chase Bank, N.A., 10 South Dearborn, Floor 7, Chicago, Illinois 60603-2003, Attention of Latanya Driver (Telecopy No. (312) 385-7096);

(iv) if to the Swingline Lender, to it at JPMorgan Chase Bank, N.A., 10 South Dearborn, Floor 7, Chicago, Illinois 60603-2003, Attention of Latanya Driver (Telecopy No. (312) 385-7096); and

(v) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.

(b) Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

(c) Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Administrative Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise

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have. No waiver of any provision of any Loan Document or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default at the time.

(b) Except as provided in Section 2.20 with respect to an Incremental Term Loan Amendment, neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, provided that any amendment to the financial covenant definitions in this Agreement shall not constitute a reduction in the rate of interest for purposes of this clause (ii), or reduce any fees payable hereunder, without the written consent of each Lender directly affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan or LC Disbursement (other than any reduction of the amount of, or any extension of the payment date for, the mandatory prepayments required under Section 2.11, in each case which shall only require the approval of the Required Lenders), or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender directly affected thereby, (iv) change Section 2.18(b) or (d) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of this Section or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender (it being understood that, solely with the consent of the parties prescribed by Section 2.20 to be parties to an Incremental Term Loan Amendment, Incremental Term Loans may be included in the determination of Required Lenders on substantially the same basis as the Commitments and the Revolving Loans are included on the Effective Date), (vi) release all or substantially all of the Subsidiary Guarantors from their obligations under the Subsidiary Guaranty without the written consent of each Lender, (vii) except as provided in clause (c) of this Section or in any Collateral Document, release all or substantially all of the Collateral, without the written consent of each Lender, or (viii) change any provisions of any Loan Document in a manner that by its terms adversely affects the rights in respect of payments due to Lenders holding Loans of any Class differently than those holding Loans of any other Class without the written consent of Lenders representing a Majority in Interest of each affected Class; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, the Issuing Bank or the Swingline Lender hereunder without the prior written consent of the Administrative Agent, the Issuing Bank or the Swingline Lender, as the case may be.

(c) Notwithstanding the foregoing, this Agreement and any other Loan Document may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent and the Borrower (x) to add one or more credit facilities (in addition to the Incremental Term Loans pursuant to an Incremental Term Loan Amendment) to this Agreement and to permit extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the Revolving Loans, the Term Loans, Incremental Term Loans and the accrued interest and fees in respect thereof and (y) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders and Lenders.

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(d) The Lenders hereby irrevocably authorize the Administrative Agent to release any Liens granted to the Administrative Agent by the Loan Parties on any Collateral (i) upon the termination of all the Commitments, payment and satisfaction in full in cash of all Secured Obligations (other than Unliquidated Obligations), and the cash collateralization of all Unliquidated Obligations in a manner satisfactory to the Administrative Agent, (ii) constituting property being sold or disposed of if the Borrower certifies to the Administrative Agent that the sale or disposition is made in compliance with the terms of this Agreement (and the Administrative Agent may rely conclusively on any such certificate, without further inquiry), (iii) constituting property leased to the Borrower or any Subsidiary under a lease which has expired or been terminated in a transaction permitted under this Agreement, or (iv) as required to effect any sale or other disposition of such Collateral in connection with any exercise of remedies of the Administrative Agent and the Lenders pursuant to Article VII. Any such release shall not in any manner discharge, affect, or impair the Obligations or any Liens (other than those expressly being released) upon (or obligations of the Loan Parties in respect of) all interests retained by the Loan Parties, including the proceeds of any sale, all of which shall continue to constitute part of the Collateral.

(e) If, in connection with any proposed amendment, waiver or consent requiring the consent of “each Lender” or “each Lender directly affected thereby,” the consent of the Required Lenders is obtained, but the consent of other necessary Lenders is not obtained (any such Lender whose consent is necessary but not obtained being referred to herein as a “Non-Consenting Lender”), then the Borrower may elect to replace a Non-Consenting Lender as a Lender party to this Agreement, provided that, concurrently with such replacement, (i) another bank or other entity (which is reasonably satisfactory to the Borrower and the Administrative Agent) shall agree, as of such date, to purchase for cash the Loans and other Obligations due to the Non-Consenting Lender pursuant to an Assignment and Assumption and to become a Lender for all purposes under this Agreement and to assume all obligations of the Non-Consenting Lender to be terminated as of such date and to comply with the requirements of clause (b) of Section 9.04, and (ii) the Borrower shall pay to such Non-Consenting Lender in same day funds on the day of such replacement (1) all interest, fees and other amounts then accrued but unpaid to such Non-Consenting Lender by the Borrower hereunder to and including the date of termination, including without limitation payments due to such Non-Consenting Lender under Sections 2.15 and 2.17, and (2) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 2.16 had the Loans of such Non-Consenting Lender been prepaid on such date rather than sold to the replacement Lender.

(f) Notwithstanding anything to the contrary herein the Administrative Agent may, with the consent of the Borrower only, amend, modify or supplement this Agreement or any of the other Loan Documents to cure any ambiguity, omission, mistake, defect or inconsistency.

SECTION 9.03. Expenses; Indemnity; Damage Waiver. The Borrower shall pay (i) all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with the syndication and distribution (including, without limitation, via the internet or through a service such as Intralinks) of the credit facilities provided for herein, the preparation and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable and documented out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all documented out-of-pocket expenses incurred by the Administrative Agent, the Issuing Bank or any Lender, including the fees, charges and disbursements of any counsel (other than in-house counsel) for the Administrative Agent, the Issuing Bank or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement and any other Loan Document, including its rights under this Section, or in connection with the Loans

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made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit; provided, however, that in no event shall the Borrower be required to reimburse the Lenders for more than one counsel to the Administrative Agent (and up to one local counsel in each applicable jurisdiction and regulatory counsel) and one counsel for all of the other Lenders (and up to one local counsel in each applicable jurisdiction and regulatory counsel), unless a Lender or its counsel determines that it is impractical or inappropriate (or would create actual or potential conflicts of interest) to not have individual counsel, in which case each Lender may have its own counsel which shall be reimbursed in accordance with the foregoing.

(b) Except in respect of Indemnified Taxes or Other Taxes otherwise covered by Section 2.17(c), the Borrower shall indemnify the Administrative Agent, the Issuing Bank and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee (but excluding any Excluded Taxes), incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any agreement or instrument contemplated thereby, the performance by the parties hereto of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or any of its Related Parties.

(c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent, the Issuing Bank or the Swingline Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent, and each Revolving Lender severally agrees to pay to the Issuing Bank or the Swingline Lender, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount (it being understood that the Borrower’s failure to pay any such amount shall not relieve the Borrower of any default in the payment thereof); provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, the Issuing Bank or the Swingline Lender in its capacity as such.

(d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee (i) for any damages arising from the use by others of information or other materials obtained through telecommunications, electronic or other information transmission systems (including the Internet) other than damages that are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or any of its Related Persons, or (ii) on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

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(e) All amounts due under this Section shall be payable not later than fifteen (15) days after written demand therefor.

SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in paragraph (c) of this Section) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees (other than the Borrower and its Affiliates) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:

(A) the Borrower (provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within ten (10) Business Days after having received written notice thereof); provided, further, that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default has occurred and is continuing, any other assignee;

(B) the Administrative Agent; provided that no consent of the Administrative Agent shall be required for an assignment of all or any portion of a Term Loan to a Lender, an Affiliate of a Lender or an Approved Fund; and

(C) the Issuing Bank; provided that no consent of the Issuing Bank shall be required for an assignment of all or any portion of a Term Loan.

(ii) Assignments shall be subject to the following additional conditions:

(A) except in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans of any Class, the amount of the applicable Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 (in the case of Revolving Commitments and Revolving Loans) or $1,000,000 (in the case of a Term Loan) unless each of the Borrower and the Administrative Agent otherwise consent, provided that no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing;

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(B) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement, provided that this clause shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender’s rights and obligations in respect of one Class of Commitments or Loans;

(C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500, such fee to be paid by either the assigning Lender or the assignee Lender or shared between such Lenders;

(D) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire in which the assignee designates one or more credit contacts to whom all syndicate-level information (which may contain material non-public information about the Borrower and its affiliates and their Related Parties or their respective securities) will be made available and who may receive such information in accordance with the assignee’s compliance procedures and applicable laws, including Federal and state securities laws; and

(E) without the prior written consent of the Administrative Agent, no assignment shall be made to a prospective assignee that bears a relationship to the Borrower described in Section 108(e)(4) of the Code.

For the purposes of this Section 9.04(b), the term “Approved Fund” has the following meaning:

“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this Section, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.

(iv) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of and interest on the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive (absent manifest error), and the Borrower, the Administrative Agent, the Issuing Bank and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

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(v) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register; provided that if either the assigning Lender or the assignee shall have failed to make any payment required to be made by it pursuant to Section 2.05(c), 2.06(d) or (e), 2.07(b), 2.18(e) or 9.03(c), the Administrative Agent shall have no obligation to accept such Assignment and Assumption and record the information therein in the Register unless and until such payment shall have been made in full, together with all accrued interest thereon. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

(c)(i) Any Lender may, without the consent of the Borrower, the Administrative Agent, the Issuing Bank or the Swingline Lender, sell participations to one or more banks or other entities excluding the Borrower and its Affiliates (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (C) the Borrower, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and (D) without the prior written consent of the Administrative Agent, no participation shall be sold to a prospective participant that bears a relationship to the Borrower described in Section 108(e)(4) of the Code. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (c)(ii) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(d) as though it were a Lender.

(ii) A Participant shall not be entitled to receive any greater payment under Section 2.15 or 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.17(e) as though it were a Lender.

(d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

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SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid (except for Unliquidated Obligations) or any Letter of Credit is outstanding (unless such Letter of Credit has been Cash Collateralized) and so long as the Commitments have not expired or terminated. The provisions of Sections 2.15, 2.16, 2.17 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any other Loan Document or any provision hereof or thereof.

SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic imaging shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 9.07. Severability. Any provision of any Loan Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions thereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final and in whatever currency denominated) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower or any Subsidiary Guarantor against any of and all of the Secured Obligations held by such Lender, irrespective of whether or not such Lender shall have made any demand under the Loan Documents and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York.

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(b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Loan Party or its properties in the courts of any jurisdiction.

(c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

SECTION 9.12. Confidentiality. Each of the Administrative Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies under this Agreement or any

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other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the prior written consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis from a source other than the Borrower. For the purposes of this Section, “Information” means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by the Borrower. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

SECTION 9.13. Release of Liens and Guarantees. A Subsidiary Guarantor shall automatically be released from its obligations under the Loan Documents upon the consummation of any transaction permitted by this Agreement as a result of which such Subsidiary Guarantor ceases to be a Subsidiary; provided that, if so required by this Agreement, the Required Lenders shall have consented to such transaction and the terms of such consent shall not have provided otherwise. Upon any sale or other disposition (other than any lease or license) by any Loan Party (other than to the Borrower or any Subsidiary) of any Collateral in a transaction permitted under this Agreement, or upon the effectiveness of any written consent to the release of the security interest created under any Collateral Document in any Collateral pursuant to Section 9.02, the security interests in such Collateral created by the Collateral Documents shall be automatically released. In connection with any termination or release pursuant to this Section, the Administrative Agent shall execute and deliver to any Loan Party, at such Loan Party’s expense, all documents that such Loan Party shall reasonably request to evidence such termination or release in accordance with Section 9.02; provided, however, that (i) the Administrative Agent shall not be required to execute any such document on terms which, in the Administrative Agent’s reasonable opinion, would expose the Administrative Agent to liability or create any obligation or entail any consequence other than the release of such Liens without recourse or warranty, and (ii) such release shall not in any manner discharge, affect or impair the Secured Obligations or any Liens upon (or obligations of the Borrower or any Subsidiary in respect of) all interests retained by the Borrower or any Subsidiary, including (without limitation) the proceeds of the sale, all of which shall continue to constitute part of the Collateral. Any execution and delivery of documents pursuant to this Section shall be without recourse to or warranty by the Administrative Agent.

SECTION 9.14. USA PATRIOT Act. Each Lender that is subject to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”) hereby notifies each Loan Party that pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies such Loan Party, which information includes the name and address of such Loan Party and other information that will allow such Lender to identify such Loan Party in accordance with the Act.

SECTION 9.15. Appointment for Perfection. Each Lender hereby appoints each other Lender as its agent for the purpose of perfecting Liens, for the benefit of the Administrative Agent and the Secured Parties, in assets which, in accordance with Article 9 of the UCC or any other applicable law can be perfected only by possession. Should any Lender (other than the Administrative Agent) obtain possession of any such Collateral, such Lender shall notify the Administrative Agent thereof, and, promptly upon the Administrative Agent’s request therefor shall deliver such Collateral to the Administrative Agent or otherwise deal with such Collateral in accordance with the Administrative Agent’s instructions.

93

SECTION 9.16. No Fiduciary Relationship. The Borrower, on behalf of itself and its Subsidiaries, agrees that in connection with all aspects of the transactions contemplated hereby and any communications in connection therewith, the Borrower, its Subsidiaries and their Affiliates, on the one hand, and the Administrative Agent, the Lenders and their Affiliates, on the other hand, have had, and will continue to have, a business relationship that does not create, by implication or otherwise, any fiduciary duty on the part of the Administrative Agent, the Lenders or their Affiliates, and no such duty will be deemed to have arisen in connection with any such transactions or communications.

ARTICLE X

COLLECTION ALLOCATION MECHANISM EXCHANGE

(a) On the CAM Exchange Date, (i) the Commitments shall automatically and without further act be terminated as provided in Article VII, (ii) the principal amount of each Revolving Loan and LC Disbursement denominated in a Foreign Currency shall automatically and without any further action required, be converted into Dollars determined using the Exchange Rates calculated as of the CAM Exchange Date, equal to the Dollar Amount of such amount and on and after such date all amounts accruing and owed to any Revolving Lender in respect of such Obligations shall accrue and be payable in Dollars at the rates otherwise applicable hereunder and (iii) the Revolving Lenders shall automatically and without further act be deemed to have exchanged interests in the Specified Obligations such that, in lieu of the interests of each Revolving Lender in the particular Specified Obligations that it shall own as of such date and prior to the CAM Exchange, such Revolving Lender shall own an interest equal to such Revolving Lender’s CAM Percentage in all the Specified Obligations. Each Revolving Lender, each Person acquiring a participation from any Revolving Lender as contemplated by Section 9.04, and the Borrower hereby consents and agrees to the CAM Exchange. Each of the Borrower and the Revolving Lenders agrees from time to time to execute and deliver to the Administrative Agent all such promissory notes and other instruments and documents as the Administrative Agent shall reasonably request to evidence and confirm the respective interests and obligations of the Revolving Lenders after giving effect to the CAM Exchange, and each Revolving Lender agrees to surrender any promissory notes originally received by it hereunder to the Administrative Agent against delivery of any promissory notes so executed and delivered; provided that the failure of the Borrower to execute or deliver or of any Revolving Lender to accept any such promissory note, instrument or document shall not affect the validity or effectiveness of the CAM Exchange.

(b) As a result of the CAM Exchange, on and after the CAM Exchange Date, (i) each payment received by the Administrative Agent pursuant to any Loan Document in respect of the Specified Obligations shall be distributed to the Revolving Lenders pro rata in accordance with their respective CAM Percentages (to be redetermined as of each such date of payment or distribution to the extent required by paragraph (c) below) and (ii) Section 2.17(e) shall not apply with respect to any Taxes required to be withheld or deducted by the Borrower from or in respect of payments hereunder to any Revolving Lender or the Administrative Agent that exceed the Taxes the Borrower would have been required to withhold or deduct from or in respect of payments to such Revolving Lender or the Administrative Agent had such CAM Exchange not occurred.

(c) In the event that, on or after the CAM Exchange Date, the aggregate amount of the Specified Obligations shall change as a result of the making of an LC Disbursement by the Issuing Bank that is not reimbursed by the Borrower, then (i) each Revolving Lender (determined without giving effect

94

to the CAM Exchange) shall, in accordance with Section 2.06(d), promptly purchase from the Issuing Bank the Dollar equivalent of a participation in such LC Disbursement in the amount of such Revolving Lender’s Applicable Percentage of such LC Disbursement (without giving effect to the CAM Exchange), (ii) the Administrative Agent shall redetermine the CAM Percentages after giving effect to such LC Disbursement and the purchase of participations therein by the applicable Revolving Lenders, and (iii) in the event distributions shall have been made in accordance with clause (i) of paragraph (b) above, the Revolving Lenders shall make such payments to one another in Dollars as shall be necessary in order that the amounts received by them shall be equal to the amounts they would have received had each LC Disbursement been outstanding immediately prior to the CAM Exchange. Each such redetermination shall be binding on each of the Borrower and Revolving Lenders and their successors and assigns and shall be conclusive absent manifest error.

[Signature Pages Follow]

95

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

ENDO PHARMACEUTICALS HOLDINGS INC., as the Borrower
By	/s/ Alan G. Levin
	Name:	Alan G. Levin
	Title:	Executive Vice President and Chief Financial Officer

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

JPMORGAN CHASE BANK, N.A., individually as a Lender, as the Swingline Lender, as the Issuing Bank and as Administrative Agent
By	/s/ Deborah R. Winkler
	Name:	Deborah R. Winkler
	Title:	Vice President

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

ROYAL BANK OF CANADA, individually as a Lender and as Syndication Agent
By	/s/ Dan LePage
	Name: Dan LePage
	Title: Authorized Signatory

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: BARCLAYS BANK PLC
By	/s/ David Barton
	Name: David Barton
	Title: Director

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: Bank of America N.A.
By	/s/ Robert LaPorte
	Name: Robert LaPorte
	Title: Vice President

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: Citibank N.A.
By	/s/ Munira Musadek
	Name: Munira Musadek
	Title:   Vice – President

For any Lender requiring a second signature line:
By
	Name:
	Title:

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: Deutsche Bank AG New York Branch
By	/s/ Carin Keegan
	Name: Carin Keegan
	Title: Director

For any Lender requiring a second signature line:
By	/s/ Erin Morrissey
	Name: Erin Morrissey
	Title: Vice President

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: MORGAN STANLEY BANK, N.A.
By	/s/ Sherrese Clarke
	Name: Sherrese Clarke
	Title: Authorized Signatory

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: The Governor and Company of the Bank of Ireland
By	/s/ K. Rockett
	Name: K. Rockett
	Title: Senior Manager

For any Lender requiring a second signature line:
By	/s/ E. Fahy
	Name: E. Fahy
	Title: Authorised Signatory

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

DuB NOR Bank ASA, New York Branch
By	/s/ Kristin Riise
	Name: Kristin Riise
	Title: First Vice President

By	/s/ Cathleen Buckley
	Name: Cathleen Buckley
	Title: First Vice President

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: SunTrust Bank
By	/s/ Dana Dhaliwal
	Name: Dana Dhaliwal
	Title:   Director

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: Citizens Bank of Pennsylvania
By	/s/ Carol Castle
	Name: Carol Castle
	Title: Senior Vice President

For any Lender requiring a second signature line:
By
	Name:
	Title:

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: Fifth Third Bank
By	/s/ William D. Priester
	Name: William D. Priester
	Title:    Vice President

For any Lender requiring a second signature line:
By
	Name:
	Title:

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: PNC Bank, National Association
By	/s/ Meredith Jermann
	Name: Meredith Jermann
	Title:   Vice President

For any Lender requiring a second signature line:
By
	Name:
	Title:

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: The Bank of Nova Scotia
By	/s/ Karen Anillo
	Name: Karen Anillo
	Title:   Director

For any Lender requiring a second signature line:
By
	Name:
	Title:

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: Scotiabank Inc.
By	/s/ J.F. Todd
	Name: J.F. Todd
	Title:   Managing Director

For any Lender requiring a second signature line:
By	/s/ Hardeep S. Thind
	Name: Hardeep S. Thind
	Title:   Director–Operations

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

SUMITOMO MITSUI BANKING CORPORATION
By	/s/ Yasuhiko Imai
	Name: Yasuhiko Imai
	Title:    Group Head

For any Lender requiring a second signature line:
By
	Name:
	Title:

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: TD Bank, N.A.
By	/s/ Ted Hopkinson
	Name: Ted Hopkinson
	Title:    Managing Director

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: U.S. Bank National Association
By	/s/ Jennifer Hwang
	Name: Jennifer Hwang
	Title: Vice President

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: First Niagara Bank, N.A.
By	/s/ Ken Jamison
	Name: Ken Jamison
	Title:    Vice President

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Sovereign Bank
By	/s/ Francis D. Phillips
	Name: Francis D. Phillips
	Title: Senior Vice President

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: Union Bank, N.A.
By	/s/ Joshua G. Gross
	Name: Joshua G. Gross
	Title: Assistant Vice President

For any Lender requiring a second signature line:
By
	Name:
	Title:

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: Wells Fargo Bank, National Association
By	/s/ Kirk Tesch
	Name: Kirk Tesch
	Title:    Director

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: Bank Leumi USA
By	/s/ Joung Hee Hong
	Name: Joung Hee Hong
	Title: First Vice President

For any Lender requiring a second signature line:
By
	Name:
	Title:

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: CAPITAL ONE LEVERAGE FINANCE CORP.
By	/s/ Paul Dellova
	Name: Paul Dellova
	Title: Senior Vice President

For any Lender requiring a second signature line:
By
	Name:
	Title:

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: Branch Banking and Trust Company
By	/s/ Glenn A. Page
	Name: Glenn A. Page
	Title: Senior Vice President

For any Lender requiring a second signature line:
By
	Name:
	Title:

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH
By	/s/ Ari Bruger
	Name: ARI BRUGER
	Title: VICE PRESIDENT

For any Lender requiring a second signature line:
By	/s/ Kevin Buddhdew
	Name: KEVIN BUDDHDEW
	Title: ASSOCIATE

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: FIRSTMERIT BANK, N.A.
By	/s/ Robert G. Morlan
	Name: Robert G. Morlan
	Title: Senior Vice President

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: The Northern Trust Company
By	/s/ Michael Kingsley
	Name: Michael Kingsley
	Title: Senior Vice President

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: The Bank of East Asia Limited, New York Branch
By	/s/ Danny Leung
	Name: Danny Leung
	Title: SVP

For any Lender requiring a second signature line:
By	/s/ David Willner
	Name: David Willner
	Title: EVP

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: E.Sun Commercial Bank, Ltd., Los Angeles Branch
By	/s/ Edward Chen
	Name: Edward Chen
	Title: VP & General Manager

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: East West Bank
By	/s/ Nancy A. Moore
	Name: Nancy A. Moore
	Title: Senior Vice President

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Mega International Commercial Bank Co., Ltd. New York Branch
By	/s/ Priscilla Hsing
	Name: Priscilla Hsing
	Title: VP & DGM

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: TAIWAN BUSINESS BANK, L.A. BRANCH
By	/s/ Alex Wang
	Name: Alex Wang
	Title: S.V.P. & General Manager
For any Lender requiring a second signature line:
By
	Name:
	Title:

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: Taiwan Cooperative Bank Los Angeles Branch
By	/s/ Li-Hua Huang
	Name: Li-Hua Huang
	Title: General Manager

For any Lender requiring a second signature line:
By
	Name:
	Title:

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: TriState Capital Bank
By	/s/ Joseph M. Finley
	Name: Joseph M. Finley
	Title: Regional President

For any Lender requiring a second signature line:
By
	Name:
	Title:

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Chang Hwa Bank Commercial Bank Ltd., New York Branch
By	/s/ Eric Y.S. Tsai
	Name: Eric Y.S. Tsai
	Title: Vice President & General Manager

For any Lender requiring a second signature line:
By
	Name:
	Title:

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: First Commercial Bank, New York Branch
By	/s/ Jenn-Iwa Wang
	Name: Jenn-Iwa Wang
	Title: VP & General Manager

For any Lender requiring a second signature line:
By
	Name:
	Title:

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

ISRAEL DISCOUNT BANK OF NEW YORK
By	/s/ Richard Tripaldi
	Name: Richard Tripaldi
	Title: First Vice President
By	/s/ Michael Paul
	Name: Michael Paul
	Title: Senior Vice President

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

Name of Lender: National Penn Bank
By	/s/ William R. Hauber
	Name: William R. Hauber
	Title: Senior Vice President

For any Lender requiring a second signature line:
By
	Name:
	Title:

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

HUA NAN COMMERCIAL BANK, LTD. NEW YORK AGENCY
By	/s/ Henry Hsieh
	Name: Henry Hsieh
	Title: Assistant Vice President

For any Lender requiring a second signature line:
By
	Name:
	Title:

Signature Page to Credit Agreement

Endo Pharmaceuticals Holdings Inc.

SCHEDULE 2.01

COMMITMENTS

LENDER	DOLLAR TRANCHE COMMITMENT		MULTICURRENCY TRANCHE COMMITMENT		TERM LOAN COMMITMENT
JPMORGAN CHASE BANK, N.A.	$	0	$	36,111,112	$	28,888,888
ROYAL BANK OF CANADA	$	0	$	36,111,112	$	28,888,888
BARCLAYS BANK PLC	$	0	$	36,111,112	$	28,888,888
BANK OF AMERICA, N.A.	$	0	$	29,444,444	$	23,555,556
CITIBANK, N.A.	$	0	$	29,444,444	$	23,555,556
DEUTSCHE BANK AG NEW YORK BRANCH	$	0	$	29,444,444	$	23,555,556
MORGAN STANLEY BANK, N.A.	$	0	$	29,444,444	$	23,555,556
THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND	$	0	$	19,444,444	$	15,555,556
DNB NOR BANK ASA, NEW YORK BRANCH	$	0	$	19,444,444	$	15,555,556
SUNTRUST BANK	$	0	$	19,444,444	$	15,555,556
CITIZENS BANK OF PENNSYLVANIA	$	0	$	13,888,889	$	11,111,111
FIFTH THIRD BANK	$	0	$	13,888,889	$	11,111,111
PNC BANK, NATIONAL ASSOCIATION	$	0	$	13,888,889	$	11,111,111
THE BANK OF NOVA SCOTIA	$	0	$	13,888,889	$	0
SCOTIABANC INC.	$	0	$	0	$	11,111,111
SUMITOMO MITSUI BANKING CORPORATION	$	0	$	13,888,889	$	11,111,111
TD BANK, N.A.	$	0	$	13,888,889	$	11,111,111
U.S. BANK NATIONAL ASSOCIATION	$	0	$	13,888,889	$	11,111,111
FIRST NIAGARA BANK, N.A.	$	9,722,222	$	0	$	7,777,778
SOVEREIGN BANK	$	0	$	9,722,222	$	7,777,778
UNION BANK, N.A.	$	0	$	9,722,222	$	7,777,778
WELLS FARGO BANK, NATIONAL ASSOCIATION	$	0	$	9,722,222	$	7,777,778
BANK LEUMI USA	$	0	$	7,222,222	$	5,777,778
CAPITAL ONE LEVERAGE FINANCE CORP.	$	7,222,222	$	0	$	5,777,778
BRANCH BANKING AND TRUST COMPANY	$	0	$	5,555,555	$	4,444,445
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH	$	0	$	5,555,555	$	4,444,445
FIRSTMERIT BANK, N.A.	$	0	$	5,555,555	$	4,444,445
THE NORTHERN TRUST COMPANY	$	0	$	5,555,555	$	4,444,445
THE BANK OF EAST ASIA LIMITED, NEW YORK BRANCH	$	4,166,667	$	0	$	3,333,333
E. SUN COMMERCIAL BANK, LTD., LOS ANGELES BRANCH	$	4,166,667	$	0	$	3,333,333
EAST WEST BANK	$	4,166,667	$	0	$	3,333,333
MEGA INTERNATIONAL COMMERCIAL BANK CO., LTD., NEW YORK BRANCH	$	4,166,667	$	0	$	3,333,333
TAIWAN BUSINESS BANK, L.A. BRANCH	$	4,166,667	$	0	$	3,333,333
TAIWAN COOPERATIVE BANK LOS ANGELES BRANCH	$	4,166,667	$	0	$	3,333,333
TRISTATE CAPITAL BANK	$	4,166,667	$	0	$	3,333,333
CHANG HWA COMMERCIAL BANK, LTD., NEW YORK BRANCH	$	2,777,778	$	0	$	2,222,222
FIRST COMMERCIAL BANK, NEW YORK BRANCH	$	2,777,778	$	0	$	2,222,222
ISRAEL DISCOUNT BANK OF NEW YORK	$	0	$	2,777,778	$	2,222,222
NATIONAL PENN BANK	$	2,777,778	$	0	$	2,222,222
HUA NAN COMMERCIAL BANK, LTD. NEW YORK AGENCY	$	2,500,000	$	0	$	2,000,000
AGGREGATE COMMITMENTS	$	56,944,447	$	443,055,553	$	400,000,000

SCHEDULE 2.02

MANDATORY COST FORMULAE

1. The Mandatory Cost is an addition to the interest rate to compensate Lenders for the cost of compliance with (a) the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.

2. On the first day of each Interest Period (or as soon as possible thereafter) the Administrative Agent shall calculate, as a percentage rate, a rate (the “Associated Costs Rate”) for each Lender, in accordance with the paragraphs set out below. The Mandatory Cost will be calculated by the Administrative Agent as a weighted average of the Lenders’ Associated Costs Rates (weighted in proportion to the percentage participation of each Lender in the relevant Loan) and will be expressed as a percentage rate per annum.

3. The Associated Costs Rate for any Lender lending from a Facility Office in a Participating Member State will be the percentage notified by that Lender to the Administrative Agent. This percentage will be certified by that Lender in its notice to the Administrative Agent to be its reasonable determination of the cost (expressed as a percentage of that Lender’s participation in all Loans made from that Facility Office) of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that Facility Office.

4. The Associated Costs Rate for any Lender lending from a Facility Office in the United Kingdom will be calculated by the Administrative Agent as follows:

(a) in relation to a Loan in Pounds Sterling:

per cent. per annum

(b) in relation to a Loan in any currency other than Pounds Sterling:

per cent. per annum.

Where:

A is the percentage of Eligible Liabilities (assuming these to be in excess of any stated minimum) which that Lender is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements.

B is the percentage rate of interest (excluding the Applicable Rate and the Mandatory Cost and, if the Loan is an Unpaid Sum, the additional rate of interest specified in Section 2.13(c)) payable for the relevant Interest Period on the Loan.

C is the percentage (if any) of Eligible Liabilities which that Lender is required from time to time to maintain as interest bearing Special Deposits with the Bank of England.

D is the percentage rate per annum payable by the Bank of England to the Administrative Agent on interest bearing Special Deposits.

E is designed to compensate Lenders for amounts payable under the Fees Rules and is calculated by the Administrative Agent as being the average of the most recent rates of charge supplied by the Reference Banks to the Administrative Agent pursuant to paragraph 7 below and expressed in Pounds Sterling per £1,000,000.

5. For the purposes of this Schedule:

(a) “Eligible Liabilities” and “Special Deposits” have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;

(b) “Facility Office” means in respect of a Lender or the Issuing Bank, the office or offices notified by such Lender or the Issuing Bank to the Administrative Agent in writing on or before the date it becomes a Lender or the Issuing Bank (or, following that date, by not less than five Business Days’ written notice) as the office or offices through which it will perform its obligations under this Agreement.

(c) “Fees Rules” means the rules on periodic fees contained in the Financial Services Authority Fees Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;

(d) “Fee Tariffs” means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate);

(e) “Participating Member State” means any member state of the European Union that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Union relating to economic and monetary union.

(f) “Reference Banks” means, in relation to Mandatory Cost, the principal London offices of JPMorgan Chase Bank, N.A.

(g) “Tariff Base” has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.

(h) “Unpaid Sum” means any sum due and payable but unpaid by any Loan Party under the Loan Documents.

6. In application of the above formulae, A, B, C and D will be included in the formulae as percentages (i.e. 5 per cent. will be included in the formula as 5 and not as 0.05). A negative result obtained by subtracting D from B shall be taken as zero. The resulting figures shall be rounded to four decimal places.

2

7. If requested by the Administrative Agent, the Reference Bank shall, as soon as practicable after publication by the Financial Services Authority, supply to the Administrative Agent, the rate of charge payable by the Reference Bank to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Services Authority (calculated for this purpose by the Reference Bank as being the average of the Fee Tariffs applicable to the Reference Bank for that financial year) and expressed in Pounds Sterling per £1,000,000 of the Tariff Base of the Reference Bank.

8. Each Lender shall supply any information required by the Administrative Agent for the purpose of calculating its Associated Costs Rate. In particular, but without limitation, each Lender shall supply the following information on or prior to the date on which it becomes a Lender:

(a) the jurisdiction of its Facility Office; and

(b) any other information that the Administrative Agent may reasonably require for such purpose.

Each Lender shall promptly notify the Administrative Agent of any change to the information provided by it pursuant to this paragraph.

9. The percentages of each Lender for the purpose of A and C above and the rates of charge of the Reference Bank for the purpose of E above shall be determined by the Administrative Agent based upon the information supplied to it pursuant to paragraphs 7 and 8 above and on the assumption that, unless a Lender notifies the Administrative Agent to the contrary, each Lender’s obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a Facility Office in the same jurisdiction as its Facility Office.

10. The Administrative Agent shall have no liability to any person if such determination results in an Associated Costs Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender or Reference Bank pursuant to paragraphs 3, 7 and 8 above is true and correct in all respects.

11. The Administrative Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the Associated Costs Rate for each Lender based on the information provided by any Lender or the Reference Bank pursuant to paragraphs 3, 7 and 8 above.

12. Any determination by the Administrative Agent pursuant to this Schedule in relation to a formula, the Mandatory Cost, an Associated Costs Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all parties hereto.

3

13. The Administrative Agent may from time to time, after consultation with the Borrower and the relevant Lenders, determine and notify to all parties hereto any amendments which are required to be made to this Schedule 2.02 in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England, the Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all parties hereto.

4

Schedule 2.06

Existing Letters of Credit

1. Letter of Credit number 6644/S22450 in the face amount of $100,000.00 for the benefit of the Maryland Board of Pharmacy issued by the Royal Bank of Canada with an expiration date of December 14, 2010.

2. Letter of Credit number 6644/S24409 in the face amount of $623,600.00 for the benefit of Huntsville Utilities issued by the Royal Bank of Canada with an expiration date of August 11, 2011.

3. Letter of Credit number 6644/S24410 in the face amount of $18,500.00 for the benefit of Huntsville Utilities issued by the Royal Bank of Canada with an expiration date of August 11, 2011.

4. Letter of Credit number 6644/S24437 in the face amount of $100,000.00 for the benefit of the Arizona State Board of Pharmacy issued by the Royal Bank of Canada with an expiration date of October 28, 2011.

5. Letter of Credit number 6644/S24438 in the face amount of $100,000.00 for the benefit of the Oregon Board of Pharmacy issued by the Royal Bank of Canada with an expiration date of October 28, 2011.

6. Letter of Credit number 6644/S24439 in the face amount of $100,000.00 for the benefit of the Nevada State Board of Pharmacy issued by the Royal Bank of Canada with an expiration date of October 28, 2011.

7. Letter of Credit number 6644/S24440 in the face amount of $100,000.00 for the benefit of the Nebraska Board of Pharmacy issued by the Royal Bank of Canada with an expiration date of October 28, 2011.

8. Letter of Credit number 6644/S24441 in the face amount of $100,000.00 for the benefit of the State of Indiana Board of Pharmacy issued by the Royal Bank of Canada with an expiration date of October 28, 2011.

9. Letter of Credit number 6644/S24442 in the face amount of $100,000.00 for the benefit of the California State Board Pharmacy issued by the Royal Bank of Canada with an expiration date of October 28, 2011.

10. Letter of Credit number 6644/S24443 in the face amount of $5,000.00 for the benefit of the State of Wisconsin issued by the Royal Bank of Canada with an expiration date of October 29, 2011.

11. Letter of Credit number 6644/S24445 in the face amount of $25,000.00 for the benefit of the Western Surety Company issued by the Royal Bank of Canada with an expiration date of November 1, 2011.

12. Letter of Credit number 6644/S24449 in the face amount of $100,000.00 for the benefit of the Maryland Board of Pharmacy issued by the Royal Bank of Canada with an expiration date of December 14, 2010.

13. Letter of Credit number 6644/S24533 in the face amount of $100,000.00 for the benefit of the Wyoming State Board of Pharmacy issued by the Royal Bank of Canada with an expiration date of May 12, 2011.

14. An Irrevocable Standby Letter of Credit number CPCS-830485 in the face amount of $200,000.00 for the benefit of Trustees of Hayden Office Trust issued by JPMorgan Chase Bank, N.A. with an expiration date of January 31, 2011.

SCHEDULE 3.01

SUBSIDIARIES

Subsidiary	Owner	Material     Subsidiary:      Yes / No	Jurisdiction	Organizational   Form	Percentage Ownership
*Endo Pharmaceuticals Inc.	Endo Pharmaceuticals   Holdings Inc.	Yes	Delaware	Corporation	100%
Endo Pharma Canada Inc.	Endo Pharmaceuticals Inc.	No	New Brunswick	Corporation	100%
Endo Pharma Delaware Inc.	Endo Pharmaceuticals Inc.	No	Delaware	Corporation	100%
Endo Pharma Ireland Limited	Endo Pharmaceuticals Inc.	No	Dublin	Limited Company	100%
*Endo Pharmaceuticals Solutions Inc.	Endo Pharmaceuticals Inc.	Yes	Delaware	Corporation	100%
CPEC LLC	Endo Pharmaceuticals Solutions Inc.	No	Delaware	LLC	65%1
IPI Management Corp.	Endo Pharmaceuticals Solutions Inc.	No	Massachusetts	Corporation	100%
*Endo Pharmaceuticals Valera Inc.	Endo Pharmaceuticals Solutions Inc.	Yes	Delaware	Corporation	100%
Ledgemont Royalty Sub LLC	Endo Pharmaceuticals Solutions Inc.	No	Delaware	LLC	100%
*HealthTronics, Inc.	Endo Pharmaceuticals Holdings Inc.	Yes	Georgia	Corporation	100%
Generics International (US Parent), Inc.2	Endo Pharmaceuticals Inc.	No	Delaware	Corporation	100%

¹ Subsidiary 35% owned by Aeolus Pharmaceuticals, Inc.

² Inclusion of Generics International (US Parent), Inc. and its subsidiaries, including Generics International (US Midco), Inc., Generics International (US Holdco), Inc., Generics International (US), Inc., Generics Bidco I, LLC, Generics Bidco II, LLC, Vintage Pharmaceuticals, LLC, Moores Mill Properties LLC, Wood Park Properties LLC and Quartz Specialty Pharmaceuticals, LLC, pending closing of Qualitest Acquisition pursuant to the Stock Purchase Agreement by and among Endo Pharmaceuticals Inc., Endo Pharmaceuticals Holdings Inc., Generics International (US Parent), Inc. and Apax Quartz (Cayman) L.P., dated as of September 28, 2010.

*Penwest Pharmaceuticals Co.	Endo Pharmaceuticals Inc.	Yes	Washington	Corporation	100%
Generics International (US Midco), Inc.	Generics International (US Parent), Inc.	No	Delaware	Corporation	100%
Generics International (US Holdco), Inc.	Generics International (US Midco), Inc.	No	Delaware	Corporation	100%
*Generics International (US), Inc.	Generics International (US Holdco), Inc.	Yes	Delaware	Corporation	100%
Generics Bidco I, LLC	Generics International (US), Inc.	No	Delaware	LLC	100%
Vintage Pharmaceuticals, LLC	Generics International (US), Inc.	No	Delaware	LLC	100%
Generics Bidco II, LLC	Generics International (US), Inc.	No	Delaware	LLC	100%
Moores Mill Properties, L.L.C.	Generics International (US), Inc.	No	Delaware	LLC	100%
Wood Park Properties LLC	Generics International (US), Inc.	No	Delaware	LLC	100%
Quartz Specialty Pharmaceuticals, LLC	Generics Bidco I, LLC	No	Delaware	LLC	50%
	Vintage Pharmaceuticals, LLC				50%
ClariPath Laboratories, Inc. n/k/a HealthTronics Laboratory Solutions, Inc.	HealthTronics, Inc.	No	DE	Corporation	100%
Endocare, Inc.	HealthTronics, Inc.	No	DE	Corporation	100%
Florida Lithology No. 2, Inc.	HealthTronics, Inc.	No	FL	Corporation	100%

Healthtronics GmbH	HealthTronics, Inc.	No	Switzerland	LLC	100%
HealthTronics Group, LP f/k/a Prime Medical Management, LP	HealthTronics, Inc.	No	DE	LP	100%
HT Cryosurgery Management Company, LLC	Advanced Medical Partners, Inc.	No	DE	LLC	100%
HT Lithotripsy Management Company, L.L.C.	HealthTronics, Inc.	No	DE	LLC	100%
HT Prostate Services, L.L.C.	RMPT, LLC f/k/a Rocky Mountain Prostate Thermotherapy LLC	No	DE	LLC	100%
HT Prostate Therapy Management Company, L.L.C.	HealthTronics, Inc.	No	DE	LLC	100%
Litho Management, Inc.	HealthTronics, Inc.	No	TX	Corporation	100%
Lithotripters, Inc.	HealthTronics, Inc.	No	NC	Corporation	100%
Medstone International Inc.	HealthTronics, Inc.	No	DE	Corporation	100%
Prime Medical Operating, Inc. f/k/a Prime Medical Services, Inc. f/k/a C.P. Rehab Corp.	HealthTronics, Inc.	No	DE	Corporation	100%
Surgicenter Management, Inc.	HealthTronics, Inc.	No	DE	Corporation	100%
HealthTronics Medical, L.L.C.	HealthTronics Service Center	No	DE	LLC	100%
HMT High Medical Technologies AG	HMT Holding AG	No	Switzerland	Corporation	100%

HMT Holding AG	HealthTronics GmbH	No	Switzerland	Corporation	100%
INnMed, LLC	Advanced Medical Partners, Inc.	No	CO	LLC	100%
Advanced Litho Associates, LLC	Advanced Medical Partners, Inc.	No	TX	LLC	94%3
Advanced Medical Partners in Radiation, LLC	Lithotripters, Inc.	No	DE	LLC	100%
Florida Laser Partners, L.P.	HT Prostate Therapy Management Company, LLC	No	DE	LP	99.99% GP4
HealthTronics Service Center, L.L.C. f/k/a HealthTronics Service Center, Inc. f/k/a/ Prime Service Center, Inc. f/k/a Prime Cardiac Rehabilitation Services, Inc.	Lithotripters, Inc.	No	DE	LLC	100%
HealthTronics TotalRad LLC	Lithotripters, Inc.	No	DE	LLC	100%
HealthTronics Urology Services, L.L.C. (in NY d/b/a Healthtronics Urology Equipment LLC)	Lithotripters, Inc.	No	DE	LLC	100%
Keystone ABG, LLC	Lithotripters, Inc.	No	PA	LLC	100%
West Coast Cambridge Inc. dba Litho Management Associates	Litho Group, Inc.	No	CA	Corporation	100%

³ 6% owned by physician investors.

⁴ 0.01% Lithotripters, Inc. (sole limited partner)

Amcare Health Services, Inc.	Litho Group, Inc.	No	PA	Corporation	100%
Amcare, Inc.	Litho Group, Inc.	No	CA	Corporation	100%
Integrated Lithotripsy of Georgia, Inc.	Litho Group, Inc.	No	GA	Corporation	100%
Midwest Cambridge, Inc. f/k/a Integrated Health Services at Whispering Meadows, Inc.	Litho Group, Inc.	No	IL	Corporation	100%
T2 Lithotripter Investment, Inc.	Litho Group, Inc.	No	DE	Corporation	100%
Advanced Medical Partners, Inc. (d/b/a CryoSyndicators In Michigan, NH, OK, & RI and d/b/a CryoSyndicators Incorporated in Nebraska)	Litho Management, Inc.	No	DE	Corporation	100%
KCPR, LLC	Amcare Health Services, Inc.	No	TX	LLC	100%
Litho Group, Inc. d/b/a Lithotripsy Management Associates	HT Lithotripsy Management Company, LLC	No	DE	Corporation	100%
Midwest Urologic Laser Services, LLC	Amcare, Inc.	No	DE	LLC	100%
Midwest Urologic Laser, LLC	Midwest Urologic Stone Unit Limited Partnership	No	DE	LLC	100%
New Jersey Urological Services, L.L.C.	Allied Urological Services, LLC	No	DE	LLC	100%
NGST, Inc.	Prime Lithotripter Operations, Inc.	No	TN	Corporation	100%

P1 Mobile Solutions, LLC	HT Cryosurgery Management Company, LLC	No	CO	LLC	100%
Prime Kidney Stone Treatment, Inc. f/k/a Fazio Consulting, Inc.	Prime Lithotripsy Services, Inc.	No	NJ	Corporation	100%
Prime Lithotripter Operations, Inc.	Prime Medical Operating, Inc.	No	NY	Corporation	100%
Sun Medical Technologies, Inc.	Prime Medical Operating, Inc.	No	CA	Corporation	100%
Prime Lithotripsy Services, Inc.	Prime Medical Operating, Inc.	No	NY	Corporation	100%
Prostate Laser Technologies, L.L.C.	HT Prostate Therapy Management Company, LLC	No	LA	LLC	100%
RMPT, LLC f/k/a Rocky Mountain Prostate Thermotherapy LLC	HT Prostate Therapy Management Company, LLC	No	CO	LLC	100%
U.S. Surgical Services, LLC	HT Cryosurgery Management Company, LLC	No	TN	LLC	100%
Greater Nebraska Lithotripsy, L.L.C.	HT Lithotripsy Management Company, LLC	No	NE	LLC	55.90%5
High Plains Lithotripsy, L.L.C.	HT Lithotripsy Management Company, LLC	No	NE	LLC	51.07%6

⁵ 44.1% owned by physician investors

⁶ 48.93% owned by physician investors

Mid America Cryotherapy, LP	Advanced Medical Partners, Inc.	No	TX	LP	79.99%: AMPI LP7
Ocean Radiation Therapy, Inc.	HealthTronics, Inc.	No	DE	Corporation	100%
OKS Prostate Services, L.P.	Lithotripters, Inc.	No	DE	LP	99%8
OssaTron Services of Southern Kansas, L.P.	SurgiCenter Management, Inc.	No	DE	LP	97%9

⁷ 20%: AMPI GP and 0.010%: HT Cryosurgery Management Company, LLC

⁸ 1%: HT Prostate Therapy Management Company, Inc.

⁹ 3% owned by physician investors

OssaTronics of Houston, LLC	SurgiCenter Management, Inc.	No	DE	LLC	55%10
Uropath, LLC (n/k/a HealthTronics Laboratory Solutions, LLC)	HealthTronics Laboratory Solutions, Inc.	No	TX	LLC	100%
Keystone Mobile Services, LP	Keystone Mobile Partners, LP	No	PA	LP	75%11
SEFL Cryo Associates, LLC	Advanced Medical Partners, Inc.	No	TX	LLC	20.613% GP & 38.144% LP12
Southeast Cryotherapy	Lithotripters, Inc.	No	TX	LP	50%13
Rocky Mountain Cryotherapy, LP	Advanced Medical Partners, Inc.	No	TX	LP	20% GP & 30% LP14
Advanced Urology Services, LLC	HT Lithotripsy Management Company, LLC	No	NE	LLC	59.69%15

* denotes Subsidiary Guarantors

¹⁰ 45% owned by physician investors

¹¹ 25% owned by Keystone ABG, LLC

¹² 41.243% owned by physician investors

¹³ 20% Advanced Medical Partners, Inc. (“AMPI”) GP, 10% AMPI LP and 20% owned by physician investors

¹⁴ 50% owned by physician investors

¹⁵ 40.31% owned by physician investors

SCHEDULE 3.06

MATERIAL LITIGATION

Susan S. Quinn, on behalf of herself and all others similarly situated v. Endo Pharmaceuticals Inc., filed in the United States District Court for the District of Massachusetts, Civil Action No. 10-11230 NG, on October 4, 2010, alleging violation of Fair Labor Standards Act overtime wage requirements, as well as other statutory and common law violations. Company filed Motion to Transfer Venue to the Eastern District of Pennsylvania or, in the alternative, to Dismiss in Part Plaintiff’s Amended Complaint on October 18, 2010.

We have signed the Stock Purchase Agreement by and among Endo Pharmaceuticals Inc., Endo Pharmaceuticals Holdings Inc., Generics International (US Parent), Inc. and Apax Quartz (Cayman) L.P., dated as of September 28, 2010, and Qualitest is named as a defendant in a number of cases that have been filed in various state and federal courts that allege plaintiffs experienced injuries as a result of ingesting the prescription medicine metoclopramide, which is and has been manufactured and marketed by Qualitest. Following the completion of the Qualitest Acquisition, we may be subject to liabilities arising out of these and similar future cases.

SCHEDULE 3.07

COMPLIANCE WITH LAWS

A number of pharmaceutical companies are defendants in litigation brought by their own current and former pharmaceutical sales representatives, alleging that the companies violated wage and hour laws by misclassifying the sales representatives as “exempt” employees, and by failing to pay overtime compensation under the Fair Labor Standards Act and its state law equivalents. The two federal Circuit Courts of Appeals which have considered the issue have split, with the Third Circuit finding that Johnson & Johnson sales representatives are exempt and the Second Circuit finding that Novartis sales representatives are non-exempt (a decision which Novartis is currently petitioning the Supreme Court to review). Endo Pharmaceuticals, Inc. (“EPI”) is currently subject to one such case which is at an early stage of litigation (Susan S. Quinn, on behalf of herself and all others similarly situated v. Endo Pharmaceuticals Inc.). While EPI believes that its sales representatives are correctly classified as non-exempt employees, there is a risk that the courts could determine otherwise.

SCHEDULE 6.01

EXISTING INDEBTEDNESS

1. In April 2008, Indevus Pharmaceuticals Inc. (now a wholly owned Subsidiary of Borrower) entered into an agreement to terminate its manufacturing and supply agreement with Shire Pharmaceuticals Group plc (Shire) related to Vantas^®. Under this termination agreement, Shire relinquished its right to receive royalties on net sales of Vantas^® or a percentage of royalties and other consideration received by Indevus in connection with a sublicense of Vantas^® selling and marketing rights granted by Shire. The termination agreement provided for Indevus to pay Shire a total of $5.0 million. The remaining payments to be made to Shire consist of $1.4 million payable in January 2010 and $1.5 million payable in January 2011.

2. 7.00% Senior Notes, due in 2020 of Endo Pharmaceuticals Holdings, Inc.

SCHEDULE 6.02

EXISTING LIENS

NONE.

SCHEDULE 6.04

EXISTING INVESTMENTS

1. Endo Pharmaceuticals Inc.’s investment in Durect Corporation

2. Endo Pharmaceuticals Inc.’s investment in Light Sciences Oncology, Inc.

3. Endo Pharmaceuticals Inc.’s investment in Life Sciences Opportunities Fund (Institutional) II, L.P.

4. Endo Pharmaceuticals Solutions Inc.’s investment in Arca biopharma, Inc.

5. Endo Pharmaceuticals Solutions Inc.’s investment in CPEC LLC

SCHEDULE 6.08

EXISTING RESTRICTIONS

1. The partnership agreements, limited liability company agreements, and other governing documents of the non-wholly-owned Subsidiaries of HealthTronics, Inc. generally restrict the ability of owners of Equity Interests therein to create, incur or permit to exist any Liens on such Equity Interests.

2. Penwest Pharamaceuticals Co. has assets in a Rabbi Trust that are restricted for use to pay benefits to a former CEO of Penwest Pharmaceuticals Co. The Trustee under this arrangement is Wells Fargo and the asset value as of October 31, 2010 is $2,090,952.

3. 7.00% Senior Notes, due in 2020 of Endo Pharmaceuticals Holdings, Inc.

EXHIBIT A

ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including any letters of credit, guarantees, and swingline loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.

1.	Assignor:	________________________________
2.	Assignee:	________________________________
		[and is an Affiliate/Approved Fund of [identify Lender]1]
3.	Borrower(s):	Endo Pharmaceuticals Holdings Inc.
4.	Administrative Agent:	JPMorgan Chase Bank, N.A., as the administrative agent under the Credit Agreement
5.	Credit Agreement:	The Credit Agreement dated as of November 30, 2010 among Endo Pharmaceuticals Holdings Inc., the Lenders parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other agents parties thereto

¹ Select as applicable.

6. Assigned Interest:

Facility Assigned2	Aggregate Amount of Commitment/Loans for all Lenders	Amount of Commitment/ Loans Assigned	Percentage Assigned of Commitment/Loans3
	$	$	%
	$	$	%
	$	$	%

Effective Date: _____________ ___, 20___ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

ASSIGNOR
[NAME OF ASSIGNOR]
By:
	Title:

ASSIGNEE
[NAME OF ASSIGNEE]
By:
	Title:

Consented to and Accepted:
JPMORGAN CHASE BANK, N.A., as Administrative Agent and Issuing Bank
By:
	Title:

Consented to:

[ENDO PHARMACEUTICALS HOLDINGS INC.]⁴

By:

² Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment (e.g., “Revolving Commitment”, “Term Loan Commitment”, etc.).

³ Set forth, so at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.

⁴ To be added only if the consent of the Borrower is required by the terms of the Credit Agreement.

Title:

ANNEX I

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.

1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent or any other Lender, (v) if it is a Foreign Lender, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee, and (vi) it does not bear a relationship to the Borrower described in Section 108(e)(4) of the Code; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.

3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and

Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.

EXHIBIT B

FORM OF INCREASING LENDER SUPPLEMENT

INCREASING LENDER SUPPLEMENT, dated __________, 20___ (this “Supplement”), by and among each of the signatories hereto, to the Credit Agreement, dated as of November 30, 2010 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Endo Pharmaceuticals Holdings Inc. (the “Borrower”), the Lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (in such capacity, the “Administrative Agent”).

W I T N E S S E T H

WHEREAS, pursuant to Section 2.20 of the Credit Agreement, the Borrower has the right, subject to the terms and conditions thereof, to effectuate from time to time an increase in the aggregate Revolving Commitments and/or one or more tranches of Incremental Term Loans under the Credit Agreement by requesting one or more Lenders to increase the amount of its Revolving Commitment and/or to participate in such a tranche;

WHEREAS, the Borrower has given notice to the Administrative Agent of its intention to [increase the aggregate Revolving Commitments] [and] [enter into a tranche of Incremental Term Loans] pursuant to such Section 2.20; and

WHEREAS, pursuant to Section 2.20 of the Credit Agreement, the undersigned Increasing Lender now desires to [increase the amount of its Revolving Commitment] [and] [participate in a tranche of Incremental Term Loans] under the Credit Agreement by executing and delivering to the Borrower and the Administrative Agent this Supplement;

NOW, THEREFORE, each of the parties hereto hereby agrees as follows:

1. The undersigned Increasing Lender agrees, subject to the terms and conditions of the Credit Agreement, that on the date of this Supplement it shall [have its Revolving Commitment increased by $[______], thereby making the aggregate amount of its total Revolving Commitments equal to $[______]] [and] [participate in a tranche of Incremental Term Loans with a commitment amount equal to $[______] with respect thereto].

2. The Borrower hereby represents and warrants that no Default or Event of Default has occurred and is continuing on and as of the date hereof.

3. Terms defined in the Credit Agreement shall have their defined meanings when used herein.

4. This Supplement shall be governed by, and construed in accordance with, the laws of the State of New York.

5. This Supplement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same document.

IN WITNESS WHEREOF, each of the undersigned has caused this Supplement to be executed and delivered by a duly authorized officer on the date first above written.

[INSERT NAME OF INCREASING LENDER]

By:

Name:

Title:

Accepted and agreed to as of the date first written above:

ENDO PHARMACEUTICALS HOLDINGS INC.

By:

Name:

Title:

Acknowledged as of the date first written above:

JPMORGAN CHASE BANK, N.A.

as Administrative Agent

By:

Name:

Title:

EXHIBIT C

FORM OF AUGMENTING LENDER SUPPLEMENT

AUGMENTING LENDER SUPPLEMENT, dated __________, 20___ (this “Supplement”), to the Credit Agreement, dated as of November 30, 2010 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Endo Pharmaceuticals Holdings Inc. (the “Borrower”), the Lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (in such capacity, the “Administrative Agent”).

W I T N E S S E T H

WHEREAS, the Credit Agreement provides in Section 2.20 thereof that any bank, financial institution or other entity may [extend Revolving Commitments] [and] [participate in tranches of Incremental Term Loans] under the Credit Agreement subject to the approval of the Borrower and the Administrative Agent, by executing and delivering to the Borrower and the Administrative Agent a supplement to the Credit Agreement in substantially the form of this Supplement; and

WHEREAS, the undersigned Augmenting Lender was not an original party to the Credit Agreement but now desires to become a party thereto;

NOW, THEREFORE, each of the parties hereto hereby agrees as follows:

1. The undersigned Augmenting Lender agrees to be bound by the provisions of the Credit Agreement and agrees that it shall, on the date of this Supplement, become a Lender for all purposes of the Credit Agreement to the same extent as if originally a party thereto, with a [Revolving Commitment of $[_______]] [and] [a commitment with respect to Incremental Term Loans of $[_______]].

2. The undersigned Augmenting Lender (a) represents and warrants that it is legally authorized to enter into this Supplement; (b) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof, as applicable, and has reviewed such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Supplement; (c) agrees that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent by the terms thereof, together with such powers as are incidental thereto; and (e) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender.

3. The undersigned’s address for notices for the purposes of the Credit Agreement is as follows:

[________]

4. The Borrower hereby represents and warrants that no Default or Event of Default has occurred and is continuing on and as of the date hereof.

5. Terms defined in the Credit Agreement shall have their defined meanings when used herein.

6. This Supplement shall be governed by, and construed in accordance with, the laws of the State of New York.

7. This Supplement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same document.

[remainder of this page intentionally left blank]

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IN WITNESS WHEREOF, each of the undersigned has caused this Supplement to be executed and delivered by a duly authorized officer on the date first above written.

[INSERT NAME OF AUGMENTING LENDER]

By:

Name:

Title:

Accepted and agreed to as of the date first written above:

ENDO PHARMACEUTICALS HOLDINGS INC.

By:

Name:

Title:

Acknowledged as of the date first written above:

JPMORGAN CHASE BANK, N.A.

as Administrative Agent

By:

Name:

Title:

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EXHIBIT D

LIST OF CLOSING DOCUMENTS

ENDO PHARMACEUTICALS HOLDINGS INC.

CREDIT FACILITIES

November 30, 2010

LIST OF CLOSING DOCUMENTS⁵

A. LOAN DOCUMENTS

1. Credit Agreement (the “Credit Agreement”) by and among Endo Pharmaceuticals Holdings Inc., a Delaware corporation (the “Borrower”), the institutions from time to time parties thereto as Lenders (the “Lenders”) and JPMorgan Chase Bank, N.A., in its capacity as Administrative Agent for itself and the other Lenders (the “Administrative Agent”), evidencing a revolving credit facility to the Borrower from the Lenders in an initial aggregate principal amount of $500,000,000 and a term loan facility to the Borrower from the Lenders in an initial aggregate principal amount of $400,000,000.

SCHEDULES

Schedule 2.01	—	Commitments
Schedule 2.02	—	Mandatory Cost
Schedule 2.06	—	Existing Letters of Credit
Schedule 3.01	—	Subsidiaries
Schedule 3.06	—	Material Litigation
Schedule 3.07	—	Compliance with Laws
Schedule 6.01	—	Existing Indebtedness
Schedule 6.02	—	Existing Liens
Schedule 6.04	—	Existing Investments
Schedule 6.08	—	Existing Restrictions
EXHIBITS
Exhibit A	—	Form of Assignment and Assumption
Exhibit B	—	Form of Increasing Lender Supplement
Exhibit C	—	Form of Augmenting Lender Supplement
Exhibit D	—	List of Closing Documents

2. Notes executed by the Borrower in favor of each of the Lenders, if any, which has requested a note pursuant to Section 2.10(e) of the Credit Agreement.

⁵ Each capitalized term used herein and not defined herein shall have the meaning assigned to such term in the above-defined Credit Agreement. Items appearing in bold and italics shall be prepared and/or provided by the Borrower and/or Borrower’s counsel.

3. Guaranty executed by the initial Subsidiary Guarantors (collectively with the Borrower, the “Loan Parties”) in favor of the Administrative Agent.

4. Pledge and Security Agreement executed by the Loan Parties, together with, pledged instruments and allonges, stock certificates, stock powers executed in blank, pledge instructions and acknowledgments, as appropriate.

Exhibit A	—	Legal and Prior Names; Principal Place of Business and Chief Executive Office
Exhibit B	—	Patents, Copyrights and Trademarks Protected under Federal Law
Exhibit C	—	List of Instruments, Pledged Securities and other Investment Property
Exhibit D	—	UCC Financing Statement Filing Locations
Exhibit E	—	Commercial Tort Claims
Exhibit F	—	FEIN; State Organization Number; Jurisdiction of Incorporation
Exhibit G	—	Deposit Accounts; Securities Accounts
Exhibit H	—	Form of Non-Disturbance Agreement

5. Confirmatory Grant of Security Interest in United States Patents made by certain of the Loan Parties in favor of the Administrative Agent for the benefit of the Secured Parties.

Schedule A     —     Registered Patents; Patent Applications; Other Patents

6. Confirmatory Grant of Security Interest in United States Trademarks made by certain of the Loan Parties in favor of the Administrative Agent for the benefit of the Secured Parties.

Schedule A     —     Registered Trademarks; Trademark and Service Mark Applications; Other Trademarks

7. Certificates of Insurance listing the Administrative Agent as (x) lender loss payee for the property, casualty and business interruption insurance policies of the Initial Loan Parties, together with long-form lender loss payable endorsements, as appropriate, and (y) additional insured with respect to the liability insurance of the Loan Parties, together with additional insured endorsements.

B. UCC DOCUMENTS

8. UCC, tax lien and name variation search reports naming each Loan Party from the appropriate offices in relevant jurisdictions.

9. UCC financing statements naming each Loan Party as debtor and the Administrative Agent as secured party as filed with the appropriate offices in applicable jurisdictions.

C. CORPORATE DOCUMENTS

10. Certificate of the Secretary or an Assistant Secretary of each Loan Party certifying (i) that there have been no changes in the Certificate of Incorporation or other charter document of such Loan Party, as attached thereto and as certified as of a recent date by the Secretary of State of the jurisdiction of its organization, since the date of the certification thereof by such secretary of state, (ii) the By-Laws or other applicable organizational document, as attached

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thereto, of such Loan Party as in effect on the date of such certification, (iii) resolutions of the Board of Directors or other governing body of such Loan Party authorizing the execution, delivery and performance of each Loan Document to which it is a party, and (iv) the names and true signatures of the incumbent officers of each Loan Party authorized to sign the Loan Documents to which it is a party, and (in the case of the Borrower) authorized to request a Borrowing or the issuance of a Letter of Credit under the Credit Agreement.

11. Good Standing Certificate for each Loan Party from the Secretary of State of the jurisdiction of its organization.

D. OPINIONS

12. Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Loan Parties.

13. Opinion of Miller & Martin PLLC, Georgia counsel for the Loan Parties.

14. Opinion of Perkins Coie LLP, Washington counsel for the Loan Parties.

E. ACQUISITION DOCUMENTS

15. Executed copy of the Qualitest Acquisition Agreement.

16. Payoff documentation providing evidence satisfactory to the Administrative Agent that all material Indebtedness for borrowed money (other than Loans under the Credit Agreement and Indebtedness expressly contemplated by the Qualitest Acquisition Agreement) of Qualitest and its subsidiaries has been terminated and cancelled (along with all of the agreements, documents and instruments delivered in connection therewith) and all Indebtedness owing thereunder has been repaid and any and all liens thereunder have been terminated.

F. CLOSING CERTIFICATES AND MISCELLANEOUS

17. A Certificate signed by a Financial Officer of the Borrower certifying that, after giving effect to the Qualitest Acquisition and any incurrence of indebtedness in connection therewith, the Borrower and its Subsidiaries, on a consolidated basis, are solvent as described in Section 3.17 of the Credit Agreement.

18. A Certificate signed by a Financial Officer of the Borrower certifying:

(A) that no provision of the Qualitest Acquisition Agreement shall have been amended or waived in a manner materially adverse to the Lenders;

(B) that at the time of and immediately after giving effect to the Transactions: (i) pro forma compliance with all financial covenants set forth in Section 6.12 of the Credit Agreement and (ii) pro forma Leverage Ratio of not more than 2.50 to 1.00;

(C) that, since December 31, 2009, there has not occurred any material adverse change in or affecting the business, operations, property, condition (financial or otherwise) of the Borrower and its Subsidiaries (both before and after giving effect to the Qualitest Acquisition);

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(D) that neither Qualitest nor any of its subsidiaries has any material Indebtedness for borrowed money other than the Loans under the Credit Agreement and other Indebtedness expressly contemplated by the Qualitest Acquisition Agreement;

(E) that the Specified Representations are true and correct after giving effect to the Transactions;

(F) that such of the representations and warranties made by Qualitest in the Qualitest Acquisition Agreement as are material to the interests of the Lenders, but only to the extent that the Borrower has the right to terminate its obligations (or to refuse to consummate the Qualitest Acquisition) under the Qualitest Acquisition Agreement as a result of a breach of such representations in the Qualitest Acquisition Agreement, are true and correct.

19. Payoff documentation providing evidence satisfactory to the Administrative Agent that the Existing Credit Agreement has been terminated and cancelled (along with all of the agreements, documents and instruments delivered in connection therewith) and all Indebtedness owing thereunder has been repaid (except to the extent being so repaid by the initial Revolving Loans) and any and all liens thereunder have been terminated.

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EX-10.89.3

Exhibit 10.89.3

PLEDGE AND SECURITY AGREEMENT

THIS PLEDGE AND SECURITY AGREEMENT (as the same may be amended, restated, supplemented or otherwise modified from time to time, this “Security Agreement”) is entered into as of November 30, 2010 by and among ENDO PHARMACEUTICALS HOLDINGS INC., a Delaware corporation (the “Borrower”), the Subsidiaries of the Borrower listed on the signature pages hereto (together with the Borrower, the “Initial Grantors,” and together with any additional Material Domestic Subsidiaries, whether now existing or hereafter formed or acquired which become parties to this Security Agreement from time to time, in accordance with the terms of the Credit Agreement (as defined below), by executing a Supplement to Pledge and Security Agreement hereto in substantially the form of Annex I, the “Grantors”), and JPMORGAN CHASE BANK, N.A., a national banking association, in its capacity as administrative agent (the “Administrative Agent”) for itself and for the Secured Parties (as defined in the Credit Agreement identified below).

PRELIMINARY STATEMENT

The Borrower, the Administrative Agent and the Lenders are entering into a Credit Agreement dated as of the date hereof (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”). The Grantors are entering into this Security Agreement in order to induce the Lenders to enter into and extend credit to the Borrower under the Credit Agreement.

ACCORDINGLY, the Grantors and the Administrative Agent, on behalf of the Secured Parties, hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1. Terms Defined in UCC. Terms defined in the UCC which are not otherwise defined in this Security Agreement are used herein as defined in the UCC.

1.2. Terms Defined in the Credit Agreement. All capitalized terms used herein and not otherwise defined herein or in the UCC shall have the meanings assigned to such terms in the Credit Agreement.

1.3. Definitions of Certain Terms Used Herein. As used in this Security Agreement, in addition to the terms defined in the Preliminary Statement, the following terms shall have the following meanings:

“Accounts” shall have the meaning set forth in Article 9 of the UCC.

“Article” means a numbered article of this Security Agreement, unless another document is specifically referenced.

“Chattel Paper” shall have the meaning set forth in Article 9 of the UCC.

“Collateral” means all Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Equipment, Farm Products, Fixtures, General Intangibles, Goods, Instruments, Inventory, Investment Property, letters of credit, Letter-of-Credit Rights, Pledged Deposits, Supporting Obligations and Other Collateral, wherever located, in which any Grantor now has or hereafter acquires any right or interest, and the proceeds (including Stock Rights), insurance proceeds and products thereof, together with all books and records, customer lists, credit files, computer files, programs, printouts and other computer materials and records related thereto; provided that Collateral shall exclude Excluded Assets.

“Commercial Tort Claims” means those certain currently existing commercial tort claims, as defined in the UCC of any Grantor, including each commercial tort claim specifically described in Exhibit “F”.

“Control” shall have the meaning set forth in Article 8 or, if applicable, in Section 9-104, 9-105, 9-106 or 9-107 of Article 9 of the UCC.

“Copyrights” means, with respect to any Grantor, all of such Grantor’s right, title, and interest in and to the following: (a) all copyrights, rights and interests in copyrights, works protectable by copyright, copyright registrations, and copyright applications; (b) all extensions of any of the foregoing; (c) all income, royalties, damages, and payments now or hereafter due and/or payable under any of the foregoing, including, without limitation, damages or payments for past or future infringements for any of the foregoing; (d) the right to sue for past, present, and future infringements of any of the foregoing; and (e) all rights corresponding to any of the foregoing throughout the world.

“Deposit Account Control Agreement” means an agreement, in form and substance satisfactory to the Administrative Agent, among any Grantor, a banking institution holding such Grantor’s funds, and the Administrative Agent with respect to collection and Control of all deposits and balances held in a deposit account maintained by any Grantor with such banking institution.

“Deposit Accounts” shall have the meaning set forth in Article 9 of the UCC.

“Documents” shall have the meaning set forth in Article 9 of the UCC.

“Equipment” shall have the meaning set forth in Article 9 of the UCC.

“Excluded Accounts” means (i) Payroll Accounts, (ii) Deposit Accounts consisting of withheld income taxes and federal, state or local employment taxes in such amounts as are required in the reasonable judgment of the Grantor in the ordinary course of business to be paid to the Internal Revenue Service or state or local government agencies with respect to current or former employees of any of the Loan Parties, (iii) Deposit Accounts consisting of amounts required to be paid over to an employee benefit plan pursuant to DOL Reg. Sec. 2510.3-102 on behalf of or for the benefit of employees of one or more Loan Parties and (iv) any Deposit Account the maximum daily balance of which does not exceed $50,000 individually, or in the aggregate, together with the maximum daily balance of all such other Deposit Accounts excluded pursuant to this definition at any time, $250,000.

“Excluded Assets” means “Excluded Assets” as defined in the Credit Agreement; provided, however, that all Equity Interests described on Exhibit “C” hereto shall not constitute Excluded Assets.

“Exhibit” refers to a specific exhibit to this Security Agreement, unless another document is specifically referenced.

“Farm Products” shall have the meaning set forth in Article 9 of the UCC.

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“Fixtures” shall have the meaning set forth in Article 9 of the UCC.

“General Intangibles” shall have the meaning set forth in Article 9 of the UCC, including, without limitation, payment intangibles, contract rights, rights to payment, rights arising under common law, statutes, or regulations, choses or things in action, goodwill (including the goodwill associated with any Trademark), Patents, Trademarks, Copyrights, URLs and domain names, other industrial or Intellectual Property or rights therein or applications therefor, whether under license or otherwise, programs, programming materials, blueprints, drawings, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, rights to payment and other rights under any royalty or licensing agreements, including Licenses, infringement claims, computer programs, information contained on computer disks or tapes, software, literature, reports, catalogs, pension plan refunds, pension plan refund claims, insurance premium rebates, tax refunds, and tax refund claims, interests in a partnership or limited liability company which do not constitute a security under Article 8 of the Code, and any other personal property other than Commercial Tort Claims, money, Accounts, Chattel Paper, Deposit Accounts, Goods, Investment Property, negotiable Collateral, and oil, gas, or other minerals before extraction.

“Goods” shall have the meaning set forth in Article 9 of the UCC.

“Instruments” shall have the meaning set forth in Article 9 of the UCC.

“Intellectual Property” means all Patents, Trademarks, Copyrights and any other intellectual property.

“Inventory” shall have the meaning set forth in Article 9 of the UCC.

“Investment Property” shall have the meaning set forth in Article 9 of the UCC.

“Letter-of-Credit Rights” shall have the meaning set forth in Article 9 of the UCC.

“Licensed IP” means any Intellectual Property owned by a Grantor that is (a) not necessary or useful (or, to the extent such Intellectual Property has previously been necessary or useful, is no longer necessary or useful) in any material respect in the conduct of the business of such Grantor and (b) is Exclusively Licensed in the ordinary course of business to a Person (which is not an Affiliate of the Borrower) under the terms of a license agreement that are fair and reasonable to such Grantor (as determined in the reasonable good faith judgment of the Board of Directors of such Grantor).

“Licenses” means, with respect to any Grantor, all of such Grantor’s right, title, and interest in and to (a) any and all licensing agreements or similar arrangements in and to its Patents, Copyrights, or Trademarks, (b) all income, royalties, damages, claims, and payments now or hereafter due or payable under and with respect thereto, including, without limitation, damages and payments for past and future breaches thereof, and (c) all rights to sue for past, present, and future breaches thereof.

“Other Collateral” means any property of the Grantors, not included within the defined terms Accounts, Chattel Paper, Commercial Tort Claims, Copyrights, Deposit Accounts, Documents, Equipment, Fixtures, Farm Products, General Intangibles, Goods, Instruments, Inventory, Investment Property, Letter-of-Credit Rights, Licenses, Patents, Pledged Deposits, Supporting Obligations and Trademarks, including, without limitation, all cash on hand, letters of credit, Stock Rights or any other deposits (general or special, time or demand, provisional or final) with any bank or other financial institution, it being intended that the Collateral include all real and personal property of the Grantors.

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“Patents” means, with respect to any Person, all of such Person’s right, title, and interest in and to: (a) any and all patents and patent applications; (b) all inventions and improvements described and claimed therein; (c) all reissues, divisions, continuations, renewals, extensions, and continuations-in-part thereof; (d) all income, royalties, damages, claims, and payments now or hereafter due or payable under and with respect thereto, including, without limitation, damages and payments for past and future infringements thereof; (e) all rights to sue for past, present, and future infringements thereof; and (f) all rights corresponding to any of the foregoing throughout the world.

“Payroll Account” means any Deposit Account of a Grantor that is used by such Grantor solely as a payroll account for the employees of such Grantor.

“Pledged Collateral” means all Instruments, Securities and other Investment Property of the Grantors, whether or not physically delivered to the Administrative Agent pursuant to this Security Agreement.

“Pledged Deposits” means all time deposits of money (other than Deposit Accounts and Instruments), whether or not evidenced by certificates, which a Grantor may from time to time designate as pledged to the Administrative Agent or to any Secured Party as security for any Secured Obligations, and all rights to receive interest on said deposits.

“Receivables” means the Accounts, Chattel Paper, Documents, Investment Property, Instruments or Pledged Deposits, and any other rights or claims to receive money which are General Intangibles or which are otherwise included as Collateral.

“Section” means a numbered section of this Security Agreement, unless another document is specifically referenced.

“Security” shall have the meaning set forth in Article 8 of the UCC.

“Securities Account” has the meaning set forth in Article 8 of the UCC.

“Stock Rights” means any securities, dividends, instruments or other distributions and any other right or property which any Grantor shall receive or shall become entitled to receive for any reason whatsoever with respect to, in substitution for or in exchange for any securities or other ownership interests in a corporation, partnership, joint venture or limited liability company constituting Collateral and any securities, any right to receive securities and any right to receive earnings, in which any Grantor now has or hereafter acquires any right, issued by an issuer of such securities.

“Supporting Obligation” shall have the meaning set forth in Article 9 of the UCC.

“Trademarks” means, with respect to any Person, all of such Person’s right, title, and interest in and to the following: (a) all trademarks (including service marks), trade names, trade styles, trade dress and the registrations and applications for registration thereof and the goodwill of the business symbolized by the foregoing; (b) all licenses of the foregoing, whether as licensee or licensor; (c) all renewals of the foregoing; (d) all income, royalties, damages, and payments now or hereafter due or payable with respect thereto, including, without limitation, damages, claims, and payments for past and future infringements thereof; (e) all rights to sue for past, present, and future infringements of the foregoing, including the right to settle suits involving claims and demands for royalties owing; and (f) all rights corresponding to any of the foregoing throughout the world.

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The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms.

ARTICLE II

GRANT OF SECURITY INTEREST

Each of the Grantors hereby pledges and grants to the Administrative Agent, on behalf of and for the benefit of the Secured Parties, a security interest in all of such Grantor’s right, title and interest, whether now owned or hereafter acquired, in and to the Collateral to secure the prompt and complete payment and performance of the Secured Obligations. For the avoidance of doubt, the grant of a security interest herein shall not be deemed to be an outright assignment of intellectual property rights owned by the Grantors.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Each of the Initial Grantors represents and warrants to the Administrative Agent and the Secured Parties, and each Grantor that becomes a party to this Security Agreement pursuant to the execution of a Supplement to Pledge and Security Agreement in substantially the form of Annex I represents and warrants (after giving effect to supplements to each of the Exhibits hereto with respect to such subsequent Grantor as attached to such Supplement to Pledge and Security Agreement), that:

3.1. Title, Authorization, Validity and Enforceability. Such Grantor has good and valid rights in or the power to transfer the Collateral owned by it and title to the Collateral with respect to which it has purported to grant a security interest hereunder, free and clear of all Liens except for Liens permitted under Section 4.1.6 hereof, and has full corporate, limited liability company or partnership, as applicable, power and authority to grant to the Administrative Agent the security interest in such Collateral pursuant hereto. The execution and delivery by such Grantor of this Security Agreement have been duly authorized by proper corporate, limited liability company, limited partnership or partnership, as applicable, proceedings, and this Security Agreement constitutes a legal, valid and binding obligation of such Grantor and creates a security interest which is enforceable against such Grantor in all Collateral it now owns or hereafter acquires, except as enforceability may be limited by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization or similar laws relating to or affecting the enforcement of creditors’ rights generally, (ii) general equitable principles (whether considered in a proceeding in equity or at law), and (iii) requirements of reasonableness, good faith and fair dealing. When financing statements have been filed in the appropriate offices against such Grantor in the locations listed in Exhibit “D”, the Administrative Agent will have a fully perfected first priority security interest in the Collateral owned by such Grantor in which a security interest may be perfected by filing of a financing statement under the UCC, subject only to Liens permitted under Section 4.1.6 hereof.

3.2. Conflicting Laws and Contracts. Neither the execution and delivery by such Grantor of this Security Agreement, the creation and perfection of the security interest in the Collateral granted hereunder, nor compliance with the terms and provisions hereof will (i) violate any applicable law or regulation or the charter, by-laws or other organizational documents of such Grantor or any order of any Governmental Authority, or (ii) violate in any material respect or result in a default under any indenture, material agreement or other material instrument binding upon such Grantor or its assets, or give rise to a right thereunder to require any payment to be made by such Grantor, or (iii) result in the creation or imposition of any Lien on any asset of such Grantor, other than Liens created under the Loan Documents.

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3.3. Principal Location. As of the Effective Date, such Grantor’s location of its chief executive office is disclosed in Exhibit “A”.

3.4. No Other Names; Etc. Within the five-year period ending as of the date such Person becomes a Grantor hereunder, such Grantor has not conducted business under any name, changed its jurisdiction of formation, merged with or into or consolidated with any other Person, except as disclosed in Exhibit “A”. The name in which such Grantor has executed this Security Agreement is the exact name as it appears in such Grantor’s organizational documents, as amended, as filed with such Grantor’s jurisdiction of organization as of the date such Person becomes a Grantor hereunder.

3.5. Filing Requirements. As of the Effective Date, none of the Collateral owned by such Grantor is of a type for which security interests or liens may be perfected by filing under any federal statute except for Patents, Trademarks and Copyrights held by such Grantor and described in Exhibit “B”.

3.6. No Financing Statements, Security Agreements. No financing statement or security agreement describing all or any portion of the Collateral which has not lapsed or been terminated naming such Grantor as debtor has been filed or is of record in any jurisdiction except financing statements (i) naming the Administrative Agent on behalf of the Secured Parties as the secured party and (ii) in respect of Liens permitted by Section 6.02 of the Credit Agreement; provided, that nothing herein shall be deemed to constitute an agreement to subordinate any of the Liens of the Administrative Agent under the Loan Documents to any Liens otherwise permitted under Section 6.02 of the Credit Agreement.

3.7. Federal Employer Identification Number; State Organization Number; Jurisdiction of Organization. As of the Effective Date, such Grantor’s federal employer identification number is, and if such Grantor is a registered organization, such Grantor’s State of organization, type of organization and State of organization identification number are, listed in Exhibit “F”.

3.8. Pledged Securities and Other Investment Property. As of the Effective Date, Exhibit “C” sets forth a complete and accurate list of the Instruments, Securities and other Investment Property constituting Collateral and delivered to the Administrative Agent. Each Grantor is the direct and beneficial owner of each Instrument, Security and other type of Investment Property listed in Exhibit “C” as being owned by it, free and clear of any Liens, except for the security interest granted to the Administrative Agent for the benefit of the Secured Parties hereunder or as permitted by Section 6.02 of the Credit Agreement. Each Grantor further represents and warrants that (i) with respect to any certificates delivered to the Administrative Agent representing an ownership interest in a partnership or limited liability company, either such certificates are Securities as defined in Article 8 of the UCC of the applicable jurisdiction as a result of actions by the issuer or otherwise, or, if such certificates are not Securities, such Grantor has so informed the Administrative Agent so that the Administrative Agent may take steps to perfect its security interest therein as a General Intangible and (ii) to the extent requested by the Administrative Agent, all such Pledged Collateral held by a securities intermediary is covered by a control agreement among such Grantor, the securities intermediary and the Administrative Agent pursuant to which the Administrative Agent has Control.

3.9. Intellectual Property.

3.9.1 Exhibit “B” contains a complete and accurate listing (but only in all material respects with respect to state and foreign Intellectual Property) as of the Effective Date of all (A) applications and registrations for Intellectual Property owned by each of the Grantors, including, but not limited to the following: (i) state, U.S. and foreign trademark registrations and applications for trademark registration, (ii) U.S. and foreign patents and patent applications, together with all reissuances, continuations, continuations in part, revisions, extensions, and

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reexaminations thereof, (iii) U.S. and foreign copyright registrations and applications for registration, (iv) foreign industrial design registrations and industrial design applications and (v) domain names and (B) Licenses for all forms of Intellectual Property described in clauses (A)(i)-(iii) above that are owned by a third party and licensed to the Grantors or otherwise used by the Grantors under contract that are material to the business of the Grantors other than off-the-shelf software and software subject to shrink-wrap, click-wrap and other generally commercially available licenses, and the names of any Person who has been granted rights in respect thereof outside of the ordinary course of business. With respect to the Intellectual Property set forth in clauses (A)(i)-(iii) above, all of the U.S. registrations, applications for registration or applications for issuance are recorded or are in the process of being recorded in the name of the applicable Grantor.

3.9.2 Such registered Intellectual Property is valid, subsisting, unexpired and enforceable and has not been abandoned or adjudged invalid or unenforceable, in whole or in part except as could not be reasonably expected to result in a Material Adverse Effect.

3.9.3 As of the Effective Date, except as disclosed in Exhibit “B” and as would not be material, (i) no Person other than the respective Grantor has any right or interest of any kind or nature in or to the Intellectual Property set forth in Sections 3.9.1(A)(i) through 3.9.1(A)(v), including any right to sell, license, lease, transfer, distribute, use or otherwise exploit such Intellectual Property or any portion thereof outside of the ordinary course (including licenses and other grants made in the ordinary course) of the respective Grantor’s business and (ii) each Grantor has good, marketable and exclusive title to, and the valid and enforceable power and right to sell, license, transfer, distribute, use and otherwise exploit, the Intellectual Property set forth in Sections 3.9.1(A)(i) through 3.9.1(A)(v).

3.9.4 Each Grantor has taken or caused to be taken reasonable steps so that none of its material Intellectual Property, the value of which to the Grantors is contingent upon maintenance of the confidentiality thereof, has been disclosed by such Grantor to any Person other than employees, contractors, customers, representatives, agents of the Grantors and other Persons, in each case who are parties to customary confidentiality and nondisclosure agreements or obligations with the Grantors.

3.9.5 To each Grantor’s knowledge, no Person is currently violating, infringing upon or breaching, any of the rights of the Grantors to the Intellectual Property or is breaching any duty or obligation owed to the Grantors in respect of the Intellectual Property except where those violations, infringements or breaches, individually or in the aggregate, could not be reasonably expected to result in a Material Adverse Effect.

3.9.6 No settlement or consents, covenants not to sue, nonassertion assurances, or releases have been entered into by any Grantor, or to any Grantor’s knowledge, to which any Grantor is bound, that adversely affects its rights to own or use its Intellectual Property except as could not be reasonably expected to result in a Material Adverse Effect, in each case individually or in the aggregate.

3.9.7 No Grantor has received any written notice that remains outstanding challenging the validity, enforceability, or ownership of any of its Intellectual Property except where those challenges could not reasonably be expected to result in a Material Adverse Effect, and to such Grantor’s knowledge at the date hereof there is no valid basis upon which such a challenge reasonably could be made.

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3.9.8 Each Grantor owns directly or is entitled to use, by license or otherwise, all Intellectual Property necessary for the conduct of such Grantor’s business.

3.9.9 Each Grantor uses adequate standards of quality in the manufacture, distribution, and sale of all products sold and in the provision of all services rendered under or in connection with all trademarks and has taken commercially reasonable action necessary to insure that all licensees of the trademarks owned or licensed by such Grantor use such adequate standards of quality, except where the failure to use adequate standards of quality could not reasonably be expected to result in a Material Adverse Effect.

3.9.10 The consummation of the transactions contemplated by the Loan Documents will not result in the termination or material impairment of any of the Grantors’ rights in their material Intellectual Property.

3.10. Deposit Accounts and Securities Accounts. As of the Effective Date, all of such Grantor’s Deposit Accounts and Securities Accounts are listed on Exhibit “G” (such Exhibit to be supplemented from time to time in accordance with Section 4.11).

ARTICLE IV

COVENANTS

From the date of this Security Agreement and thereafter until this Security Agreement is terminated, each of the Initial Grantors agrees, and from and after the effective date of any Supplement to Pledge and Security Agreement applicable to any Grantor (and after giving effect to supplements to each of the Exhibits hereto with respect to such subsequent Grantor as attached to such Supplement to Pledge and Security Agreement) and thereafter until this Security Agreement is terminated each such subsequent Grantor agrees:

4.1. General.

4.1.1 Inspection. Each Grantor will permit any representatives designated by the Administrative Agent or any Secured Party (pursuant to a request made through the Administrative Agent), at reasonable times upon reasonable prior notice (but not more than once annually if no Event of Default shall exist), (i) to inspect the Collateral, (ii) to examine and make copies of the records of such Grantor relating to the Collateral and (iii) to discuss the Collateral and the related records of such Grantor with, and to be advised as to the same by, such Grantor’s officers and employees (and, in the case of any Receivable, with any person or entity which is or may be obligated thereon), and all reasonable out-of-pocket expenses incurred by the Administrative Agent or such Secured Party in connection with this Section 4.1.1 shall be at such Grantor’s expense.

4.1.2 Taxes. Such Grantor will pay when due all taxes, assessments and governmental charges and levies upon the Collateral owned by such Grantor, except (i) those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside in accordance with GAAP and with respect to which no Lien exists, and (ii) those which by reason of the amount involved or the remedies available to the taxing authority could not reasonably be expected to have a Material Adverse Effect.

4.1.3 Records and Reports. Each Grantor shall keep and maintain, in all material respects, complete, accurate and proper books and records with respect to the Collateral owned by

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such Grantor, and furnish to the Administrative Agent, with sufficient copies for each of the Secured Parties, such reports relating to the Collateral as the Administrative Agent shall from time to time reasonably request; provided that unless an Event of Default has occurred and is continuing, such request may be made by the Administrative Agent no more than once per calendar quarter.

4.1.4 Financing Statements and Other Actions; Defense of Title. Each Grantor hereby authorizes the Administrative Agent to file, and if requested will execute and deliver to the Administrative Agent, all financing statements describing the Collateral owned by such Grantor and other documents and take such other actions as may from time to time reasonably be requested by the Administrative Agent in order to maintain a perfected security interest in and, if applicable, Control of, the Collateral owned by such Grantor, subject to Liens permitted under Section 6.02 of the Credit Agreement, provided that nothing herein shall be deemed to constitute an agreement to subordinate any of the Liens of the Administrative Agent under the Loan Documents to any Liens otherwise permitted under Section 6.02 of the Credit Agreement. Such financing statements may describe the Collateral in the same manner as described herein or may contain an indication or description of collateral that describes such property in any other manner as the Administrative Agent may determine, in its sole discretion, is necessary, advisable or prudent to ensure that the perfection of the security interest in the Collateral granted to the Administrative Agent herein, including, without limitation, describing such property as “all assets of the Debtor whether now owned or hereafter acquired and wheresoever located, including all accessions thereto and proceeds thereof.” Each Grantor will take any and all actions necessary to defend title to any material portion of the Collateral owned by such Grantor against all persons and to defend the security interest of the Administrative Agent in such Collateral and the priority thereof against any Lien not expressly permitted hereunder.

4.1.5 Disposition of Collateral. No Grantor will sell, lease or otherwise dispose of the Collateral owned by such Grantor except dispositions specifically permitted pursuant to Section 6.03 of the Credit Agreement.

4.1.6 Liens. No Grantor will create, incur, or suffer to exist any Lien on the Collateral owned by such Grantor except Liens permitted pursuant to Section 6.02 of the Credit Agreement, provided, that nothing herein shall be deemed to constitute an agreement to subordinate any of the Liens of the Administrative Agent under the Loan Documents to any Liens otherwise permitted under Section 6.02 of the Credit Agreement.

4.1.7 Change in Corporate Existence, Type or Jurisdiction of Organization, Location, Name. Each Grantor will:

(i) preserve its existence and corporate structure as in effect on the Effective Date; and

(ii) not change its jurisdiction of organization,

unless, in each such case, such Grantor shall have given the Administrative Agent not less than fifteen (15) days’ prior written notice of such event or occurrence (or such shorter period as may be acceptable to the Administrative Agent in its sole discretion).

4.1.8 Other Financing Statements. Each Grantor acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement filed in connection herewith without the prior written consent of the Administrative Agent, subject to such Grantor’s rights under Section 9-509(d)(2) of the UCC.

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4.2. Receivables.

4.2.1 Certain Agreements on Receivables. During the occurrence and continuation of an Event of Default, no Grantor will make or agree to make any discount, credit, rebate or other reduction in the original amount owing on a Receivable or accept in satisfaction of a Receivable less than the original amount thereof. Prior to the occurrence and continuation of an Event of Default under Article VII(a), (b), (h) and (j) of the Credit Agreement, such Grantor may reduce the amount of Accounts arising from the sale of Inventory or the rendering of services in accordance with its present policies and in the ordinary course of business and as otherwise permitted under the Credit Agreement.

4.2.2 Collection of Receivables. Except as otherwise provided in this Security Agreement, each Grantor will collect and enforce, at such Grantor’s sole expense, all amounts due or hereafter due to such Grantor under the Receivables owned by such Grantor.

4.2.3 Delivery of Invoices. Each Grantor will deliver to the Administrative Agent immediately upon its request after the occurrence of an Event of Default duplicate invoices with respect to each Account owned by such Grantor bearing such language of assignment as the Administrative Agent shall specify.

4.3. Instruments, Securities, Chattel Paper, Documents and Pledged Deposits. Each Grantor will (i) deliver to the Administrative Agent immediately upon execution of this Security Agreement the originals of all Chattel Paper, Securities (to the extent certificated) and Instruments (to the extent in possession of such Grantor) constituting a material portion of the Collateral (if any then exist and to the extent in excess of $250,000, individually or in the aggregate), (ii) hold in trust for the Administrative Agent upon receipt and immediately thereafter deliver to the Administrative Agent any Chattel Paper, Securities and Instruments constituting a material portion of the Collateral, (iii) upon the designation of any Pledged Deposits (as set forth in the definition thereof), deliver to the Administrative Agent such Pledged Deposits which are evidenced by certificates included in the Collateral endorsed in blank, marked with such legends and assigned as the Administrative Agent shall specify, and (iv) upon the Administrative Agent’s request, after the occurrence and during the continuance of an Event of Default, deliver to the Administrative Agent (and thereafter hold in trust for the Administrative Agent upon receipt and immediately deliver to the Administrative Agent) any Document evidencing or constituting Collateral.

4.4. Uncertificated Securities and Certain Other Investment Property. Each Grantor will permit the Administrative Agent from time to time to cause the appropriate issuers (and, if held with a securities intermediary, such securities intermediary) of uncertificated securities or other types of Investment Property not represented by certificates which are Collateral owned by such Grantor to mark their books and records with the numbers and face amounts of all such uncertificated securities or other types of Investment Property not represented by certificates and all rollovers and replacements therefor to reflect the Lien of the Administrative Agent granted pursuant to this Security Agreement. To the extent requested by the Administrative Agent, each Grantor will, with respect to Investment Property constituting Collateral owned by such Grantor held with a financial intermediary, to cause such financial intermediary to enter into a control agreement with the Administrative Agent in form and substance reasonably satisfactory to the Administrative Agent.

4.5. Stock and Other Ownership Interests.

4.5.1 Registration of Pledged Securities and other Investment Property. Each Grantor will permit any registrable Collateral owned by such Grantor to be registered in the name of the

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Administrative Agent or its nominee at any time at the option of the Required Lenders following the occurrence and during the continuance of an Event of Default and without any further consent of such Grantor.

4.5.2 Exercise of Rights in Pledged Securities and other Investment Property. Each Grantor will permit the Administrative Agent or its nominee at any time after the occurrence and during the continuance of an Event of Default, without notice, to exercise or refrain from exercising any and all voting and other consensual rights pertaining to the Collateral owned by such Grantor or any part thereof, and to receive all dividends and interest in respect of such Collateral.

4.6. Deposit Accounts. To the extent requested by the Administrative Agent, Grantor will (i) upon the Administrative Agent’s request, cause each bank or other financial institution in which it maintains (a) a Deposit Account (other than Excluded Accounts) to enter into a control agreement with the Administrative Agent, by such time as is reasonably requested by the Administrative Agent and in form and substance satisfactory to the Administrative Agent in order to give the Administrative Agent Control of the Deposit Account or (b) other deposits (general or special, time or demand, provisional or final) to be notified of the security interest granted to the Administrative Agent hereunder and cause each such bank or other financial institution to acknowledge such notification in writing and by such time as is reasonably requested by the Administrative Agent and (ii) upon the Administrative Agent’s request after the occurrence and during the continuance of an Event of Default, promptly deliver to each such bank or other financial institution a letter, in form and substance acceptable to the Administrative Agent, transferring dominion and control over each such other deposit to the Administrative Agent until such time as no Event of Default exists. In the case of deposits maintained with Lenders, the terms of such letter shall be subject to the provisions of the Credit Agreement regarding setoffs.

4.7. Letter-of-Credit Rights. Each Grantor will, upon the Administrative Agent’s request, cause each issuer of a letter of credit in an amount individually or in the aggregate in excess of $250,000, to consent to the assignment of proceeds of the letter of credit in order to give the Administrative Agent Control of the letter-of-credit rights to such letter of credit.

4.8. Federal, State or Municipal Claims. Each Grantor will notify the Administrative Agent of any Collateral owned by such Grantor which constitutes a claim in excess of $1,000,000 against the United States government or any state or local government or any instrumentality or agency thereof, the assignment of which claim is restricted by federal, state or municipal law.

4.9. Intellectual Property.

4.9.1 If, after the date hereof, any Grantor obtains ownership rights to, including, but not limited to filing and acceptance of a statement of use or an amendment to allege use with the United States Patent and Trademark Office, or applies for or seeks registration of (other than registration of an intent to use a Trademark), any new patentable invention, Trademark or Copyright in addition to the Patents, Trademarks and Copyrights described in Exhibit “B”, then such Grantor shall give the Administrative Agent notice thereof, as part of each compliance certificate provided to the Administrative Agent pursuant to the Credit Agreement. Each Grantor agrees promptly upon request by the Administrative Agent to execute and deliver to the Administrative Agent any supplement to this Security Agreement or any other document reasonably requested by the Administrative Agent to evidence any Secured Party’s security interest in such new application or registration in a form appropriate for recording in the applicable federal office. Each Grantor also hereby authorizes the Administrative Agent to modify this Security Agreement unilaterally (i) by amending Exhibit “B” to include any future

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Patents, Trademarks and/or Copyrights of which the Administrative Agent receives notification from such Grantor pursuant hereto and (ii) by recording, in addition to and not in substitution for this Security Agreement, a duplicate original of this Security Agreement containing in Exhibit “B” a description of such future Patents, Trademarks and/or Copyrights.

4.9.2 As of the Effective Date, no Grantor has any interest in, or title to, any applications or registrations for Copyrights, Licenses, applications for or issued Patents or applications or registrations for Trademarks except as set forth in Exhibit “B”. This Agreement is effective to create a valid and continuing Lien on such Copyrights, Licenses, Patents and Trademarks and, upon filing of the Confirmatory Grant of Security Interest in Copyrights with the United States Copyright Office and filing of the Confirmatory Grant of Security Interest in Patents with the United States Patent and Trademark Office, the filing of appropriate financing statements in the jurisdictions listed in Exhibit “E” hereto and the bringing up to date of record ownership thereof, all action necessary or desirable to protect and perfect the security interest in, to and on each Grantor’s material Patents, Trademarks or Copyrights has been taken.

4.10. Commercial Tort Claims. If, after the date hereof, any Grantor identifies the existence of a Commercial Tort Claim having a value reasonably believed by such Grantor to be, individually or in the aggregate, in excess of $250,000 belonging to such Grantor that has arisen in the course of such Grantor’s business in addition to the Commercial Tort Claims described in Exhibit “F”, which are all of such Grantor’s Commercial Tort Claims reasonably believed by such Grantor to be, individually or in the aggregate, in excess of $250,000 as of the Effective Date, then such Grantor shall give the Administrative Agent prompt notice thereof, but in any event not less frequently than quarterly. Each Grantor agrees promptly upon request by the Administrative Agent to execute and deliver to the Administrative Agent any supplement to this Security Agreement or any other document reasonably requested by the Administrative Agent to evidence the grant of a security interest therein in favor of the Administrative Agent.

4.11. Updating of Exhibits to Security Agreement. The Company will provide to the Administrative Agent, concurrently with the delivery of the certificate of a Financial Officer of the Company as required by Section 5.01(c) of the Credit Agreement, updated versions of the Exhibits to this Security Agreement (provided that if there have been no changes to any such Exhibits since the previous updating thereof required hereby, the Borrower shall indicate that there has been “no change” to the applicable Exhibit(s)).

ARTICLE V

DEFAULT

5.1. Acceleration and Remedies.

5.1.1 Upon the acceleration of the Obligations under the Credit Agreement pursuant to Article VII thereof, the Obligations under the Credit Agreement and, to the extent provided for under the Swap Agreements and the Banking Services Agreements evidencing the same, the Swap Obligations and the Banking Services Obligations, shall immediately become due and payable without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and the Administrative Agent may, with the concurrence or at the direction of the Required Lenders, exercise any or all of the following rights and remedies:

(i) Those rights and remedies provided in this Security Agreement, the Credit Agreement, or any other Loan Document, provided that this clause (i) shall not be understood to limit

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any rights or remedies available to the Administrative Agent and the Secured Parties prior to a Default.

(ii) Those rights and remedies available to a secured party under the UCC (whether or not the UCC applies to the affected Collateral) or under any other applicable law (including, without limitation, any law governing the exercise of a bank’s right of setoff or bankers’ lien) when a debtor is in default under a security agreement.

(iii) Give notice of sole control or any other instruction under any Deposit Account Control Agreement or other control agreement with any securities intermediary and take any action therein with respect to such Collateral.

(iv) Without notice except as specifically provided in Section 8.1 hereof or elsewhere herein, sell, lease, assign, grant an option or options to purchase or otherwise dispose of, deliver, or realize upon, the Collateral or any part thereof in one or more parcels at public or private sale or sales (which sales may be adjourned or continued from time to time with or without notice and may take place at any Grantor’s premises of elsewhere), for cash, on credit or for future delivery without assumption of any credit risk, and upon such other terms as the Administrative Agent may deem commercially reasonable.

(v) Concurrently with written notice to the applicable Grantor, transfer and register in its name or in the name of its nominee the whole or any part of the Pledged Collateral, to exchange certificates or instruments representing or evidencing Pledged Collateral for certificates or instruments of smaller or larger denominations, to exercise the voting and all other rights as a holder with respect thereto, to collect and receive all cash dividends, interest, principal and other distributions made thereon and to otherwise act with respect to the Pledged Collateral as though the Administrative Agent was the outright owner thereof.

5.1.2 The Administrative Agent, on behalf of the Secured Parties, may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral, and such compliance will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.

5.1.3 The Administrative Agent shall have the right upon any such public sale or sales and, to the extent permitted by law, upon any such private sale or sales, to purchase for the benefit of the Administrative Agent and the other Secured Parties, the whole or any part of the Collateral so sold, free of any right of equity redemption, which equity redemption the Grantor hereby expressly releases.

5.1.4 Until the Administrative Agent is able to effect a sale, lease, or other disposition of Collateral, the Administrative Agent shall have the right to hold or use Collateral, or any part thereof, to the extent that it deems appropriate for the purpose of preserving Collateral or its value or for any other purpose deemed appropriate by the Administrative Agent. The Administrative Agent may, if it so elects, seek the appointment of a receiver or keeper to take possession of Collateral and to enforce any of the Administrative Agent’s remedies (for the benefit of the Administrative Agent and other Secured Parties), with respect to such appointment without prior notice or hearing as to such appointment.

5.1.5 Notwithstanding the foregoing, neither the Administrative Agent nor any other Secured Party shall be required to (i) make any demand upon, or pursue or exhaust any of their

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rights or remedies against, any Grantor, any other obligor, guarantor, pledgor or any other Person with respect to the payment of the Secured Obligations or to pursue or exhaust any of their rights or remedies with respect to any Collateral therefor or any direct or indirect guarantee thereof, (ii) marshal the Collateral or any guarantee of the Secured Obligations or to resort to the Collateral or any such guarantee in any particular order, or (iii) effect a public sale of any Collateral.

5.1.6 Each Grantor recognizes that the Administrative Agent may be unable to effect a public sale of any or all the Pledged Collateral and may be compelled to resort to one or more private sales thereof in accordance with Section 5.1.1 above. Each Grantor also acknowledges that any private sale may result in prices and other terms less favorable to the seller than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall not be deemed to have been made in a commercially unreasonable manner solely by virtue of such sale being private. The Administrative Agent shall be under no obligation to delay a sale of any of the Pledged Collateral for the period of time necessary to permit any Grantor or the issuer of the Pledged Collateral to register such securities for public sale under the Securities Act of 1933, as amended, or under applicable state securities laws, even if the applicable Grantor and the issuer would agree to do so.

5.2. Grantors’ Obligations Upon Event of Default. Upon the request of the Administrative Agent after the occurrence of an Event of Default, each Grantor will:

5.2.1 Assembly of Collateral. Assemble and make available to the Administrative Agent the Collateral and all records relating thereto at any place or places specified by the Administrative Agent.

5.2.2 Secured Party Access. Permit the Administrative Agent, by the Administrative Agent’s representatives and agents, to enter, occupy and use any premises where all or any part of the Collateral, or the books and records relating thereto, or both, are located, to take possession of all or any part of the Collateral, or the books and records relating thereto, or both, to remove all or any part of the Collateral, or the books and records relating thereto, or both, and to conduct sales of the Collateral, without any obligation to pay the Grantor for such use and occupancy.

5.2.3 Prepare and file, or cause an issuer of Pledged Collateral to prepare and file, with the Securities and Exchange Commission or any other applicable government agency, registration statements, a prospectus and such other documentation in connection with the Pledged Collateral as the Administrative Agent may request, all in form and substance satisfactory to the Administrative Agent, and furnish to the Administrative Agent, or cause an issuer of Pledged Collateral to furnish to the Administrative Agent, any information regarding the Pledged Collateral in such detail as the Administrative Agent may specify.

5.2.4 Take, or cause an issuer of Pledged Collateral to take, any and all actions necessary to register or qualify the Pledged Collateral to enable the Administrative Agent to consummate a public sale or other disposition of the Pledged Collateral.

5.3. License. The Administrative Agent is hereby granted a license or other right to use, following the occurrence and during the continuance of an Event of Default and the acceleration of the Obligations under the Credit Agreement pursuant to Article VII thereof, without charge, each Grantor’s labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, customer lists and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral, and, following the occurrence and during the continuance of an Event of Default and the acceleration of the Obligations

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under the Credit Agreement pursuant to Article VII thereof, such Grantor’s rights under all licenses and all franchise agreements shall inure to the Administrative Agent’s benefit, to the extent not in violation of any agreements thereto. In addition, each Grantor hereby irrevocably agrees that the Administrative Agent may, following the occurrence and during the continuance of an Event of Default and the acceleration of the Obligations under the Credit Agreement pursuant to Article VII thereof, sell any of such Grantor’s Collateral directly to any person, including without limitation persons who have previously purchased such Grantor’s Collateral from such Grantor and in connection with any such sale or other enforcement of the Administrative Agent’s rights under this Security Agreement, may sell Collateral which bears any trademark owned by or licensed to such Grantor and any Collateral that is covered by any copyright owned by or licensed to such Grantor and the Administrative Agent may finish any work in process and affix any trademark owned by or licensed to such Grantor and sell such Collateral as provided herein; provided that the applicable Grantor shall have such rights of quality control and inspection which are reasonably necessary to maintain the validity and enforceability of such trademarks. Each Grantor’s rights of quality control and inspection shall not be unreasonably asserted so long as the Administrative Agent (or its licensee or agent) maintains quality control standards at least as high as those maintained by the such Grantor prior to the occurrence of an Event for Default.

ARTICLE VI

WAIVERS, AMENDMENTS AND REMEDIES

No delay or omission of the Administrative Agent or any Secured Party to exercise any right or remedy granted under this Security Agreement shall impair such right or remedy or be construed to be a waiver of any Default or an acquiescence therein, and any single or partial exercise of any such right or remedy shall not preclude any other or further exercise thereof or the exercise of any other right or remedy. No waiver, amendment or other variation of the terms, conditions or provisions of this Security Agreement whatsoever shall be valid unless in writing signed by the Administrative Agent and each Grantor, and then only to the extent in such writing specifically set forth, provided that the addition of any Material Domestic Subsidiary as a Grantor hereunder by execution of a Supplement to Pledge and Security Agreement in the form of Annex I (with such modifications as shall be reasonably acceptable to the Administrative Agent) shall not require receipt of any consent from or execution of any documentation by any other Grantor party hereto. All rights and remedies contained in this Security Agreement or by law afforded shall be cumulative and all shall be available to the Administrative Agent and the Secured Parties until the Secured Obligations have been paid in full.

ARTICLE VII

PROCEEDS; COLLECTION OF RECEIVABLES

7.1. Lockboxes. Upon request of the Administrative Agent after the occurrence of an Event of Default, each Grantor shall execute and deliver to the Administrative Agent irrevocable lockbox agreements in the form provided by or otherwise acceptable to the Administrative Agent, which agreements shall be accompanied by an acknowledgment by the bank where the lockbox is located of the Lien of the Administrative Agent granted hereunder and of irrevocable instructions to wire all amounts collected therein to a special collateral account at the Administrative Agent.

7.2. Collection of Receivables. The Administrative Agent may at any time after the occurrence of an Event of Default, by giving each Grantor written notice, elect to require that the Receivables be paid directly to the Administrative Agent for the benefit of the Secured Parties. In such event, each Grantor shall, and shall permit the Administrative Agent to, promptly notify the account debtors or obligors under the Receivables owned by such Grantor of the Administrative Agent’s interest

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therein and direct such account debtors or obligors to make payment of all amounts then or thereafter due under such Receivables directly to the Administrative Agent. Upon receipt of any such notice from the Administrative Agent, each Grantor shall thereafter hold in trust for the Administrative Agent, on behalf of the Secured Parties, all amounts and proceeds received by it with respect to the Receivables and Other Collateral and immediately and at all times thereafter deliver to the Administrative Agent all such amounts and proceeds in the same form as so received, whether by cash, check, draft or otherwise, with any necessary endorsements. The Administrative Agent shall hold and apply funds so received as provided by the terms of Sections 7.3 and 7.4 hereof.

7.3. Special Collateral Account. The Administrative Agent may, at any time after the occurrence and during the continuation of an Event of Default, require all cash proceeds of the Collateral to be deposited in a special non-interest bearing cash collateral account with the Administrative Agent and held there as security for the Secured Obligations. No Grantor shall have any control whatsoever over said cash collateral account. The Administrative Agent may (and shall, at the direction of the Required Lenders), from time to time, apply the collected balances in said cash collateral account to the payment of the Secured Obligations then due.

7.4. Application of Proceeds. The proceeds of the Collateral shall be applied by the Administrative Agent to payment of the Secured Obligations as provided under Section 2.18 of the Credit Agreement.

ARTICLE VIII

GENERAL PROVISIONS

8.1. Notice of Disposition of Collateral; Condition of Collateral. Each Grantor hereby waives notice of the time and place of any public sale or the time after which any private sale or other disposition of all or any part of the Collateral may be made. To the extent such notice may not be waived under applicable law, any notice made shall be deemed reasonable if sent to the Borrower, addressed as set forth in Article IX, at least ten (10) days prior to (i) the date of any such public sale or (ii) the time after which any such private sale or other disposition may be made. The Administrative Agent shall have no obligation to clean-up or otherwise prepare the Collateral for sale. To the maximum extent permitted by applicable law, each Grantor waives all claims, damages, and demands against the Administrative Agent or any other Secured Party arising out of the repossession, retention or sale of the Collateral, except such as arise solely out of the gross negligence or willful misconduct of the Administrative Agent or such other Secured Party as finally determined by a court of competent jurisdiction. To the extent it may lawfully do so, each Grantor absolutely and irrevocably waives and relinquishes the benefit and advantage of, and covenants not to assert against the Administrative Agent or any other Secured Party, any valuation, stay, appraisal, extension, moratorium, redemption or similar laws and any and all rights or defenses it may have as a surety now or hereafter existing which, but for this provision, might be applicable to the sale of any Collateral made under the judgment, order or decree of any court, or privately under the power of sale conferred by this Security Agreement, or otherwise. Except as otherwise specifically provided herein, each Grantor hereby waives presentment, demand, protest or any notice (to the maximum extent permitted by applicable law) of any kind in connection with this Security Agreement or any Collateral.

8.2. Limitation on Administrative Agent’s and other Secured Parties’ Duty with Respect to the Collateral. The Administrative Agent shall have no obligation to clean-up or otherwise prepare the Collateral for sale. The Administrative Agent and each other Secured Party shall use reasonable care with respect to the Collateral in its possession or under its control. Neither the Administrative Agent nor any other Secured Party shall have any other duty as to any Collateral in its possession or control or in the possession or control of any agent or nominee of the Administrative Agent or such other Secured Party, or

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any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto. To the extent that applicable law imposes duties on the Administrative Agent to exercise remedies in a commercially reasonable manner, each Grantor acknowledges and agrees that it is commercially reasonable for the Administrative Agent (i) to fail to incur expenses deemed significant by the Administrative Agent to prepare Collateral for disposition or otherwise to transform raw material or work in process into finished goods or other finished products for disposition, (ii) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against account debtors or other Persons obligated on Collateral or to remove Liens on or any adverse claims against Collateral, (iv) to exercise collection remedies against account debtors and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other Persons, whether or not in the same business as such Grantor, for expressions of interest in acquiring all or any portion of such Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capacity of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, such as title, possession or quiet enjoyment, (xi) to purchase insurance or credit enhancements to insure the Administrative Agent against risks of loss, collection or disposition of Collateral or to provide to the Administrative Agent a guaranteed return from the collection or disposition of Collateral, or (xii) to the extent deemed appropriate by the Administrative Agent, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist the Administrative Agent in the collection or disposition of any of the Collateral. Each Grantor acknowledges that the purpose of this Section 8.2 is to provide non-exhaustive indications of what actions or omissions by the Administrative Agent would be commercially reasonable in the Administrative Agent’s exercise of remedies against the Collateral and that other actions or omissions by the Administrative Agent shall not be deemed commercially unreasonable solely on account of not being indicated in this Section 8.2. Without limitation upon the foregoing, nothing contained in this Section 8.2 shall be construed to grant any rights to any Grantor or to impose any duties on the Administrative Agent that would not have been granted or imposed by this Security Agreement or by applicable law in the absence of this Section 8.2.

8.3. Compromises and Collection of Collateral. Each Grantor and the Administrative Agent recognize that setoffs, counterclaims, defenses and other claims may be asserted by obligors with respect to certain of the Receivables, that certain of the Receivables may be or become uncollectible in whole or in part and that the expense and probability of success in litigating a disputed Receivable may exceed the amount that reasonably may be expected to be recovered with respect to a Receivable. In view of the foregoing, each Grantor agrees that the Administrative Agent may at any time and from time to time, if an Event of Default has occurred and is continuing, compromise with the obligor on any Receivable, accept in full payment of any Receivable such amount as the Administrative Agent in its sole discretion shall determine or abandon any Receivable, and any such action by the Administrative Agent shall be commercially reasonable so long as the Administrative Agent acts in good faith based on information known to it at the time it takes any such action.

8.4. Secured Party Performance of Grantor’s Obligations. Without having any obligation to do so, the Administrative Agent may perform or pay any obligation which any Grantor has agreed to perform or pay in this Security Agreement and such Grantor shall reimburse the Administrative Agent for any reasonable amounts paid by the Administrative Agent pursuant to this Section 8.4. Each Grantor’s obligation to reimburse the Administrative Agent pursuant to the preceding sentence shall be a Secured Obligation payable on demand.

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8.5. Authorization for Secured Party to Take Certain Action. Each Grantor irrevocably authorizes the Administrative Agent at any time and from time to time in the sole discretion of the Administrative Agent and appoints the Administrative Agent as its attorney in fact (i) to execute on behalf of such Grantor as debtor and to file financing statements necessary or desirable in the Administrative Agent’s sole discretion to perfect and to maintain the perfection and priority of the Administrative Agent’s security interest in the Collateral, (ii) after the occurrence and during the continuance of an Event of Default, to indorse and collect any cash proceeds of the Collateral, (iii) to file a carbon, photographic or other reproduction of this Security Agreement or any financing statement with respect to the Collateral as a financing statement and to file any other financing statement or amendment of a financing statement (which does not add new collateral or add a debtor) in such offices as the Administrative Agent in its sole discretion deems necessary or desirable to perfect and to maintain the perfection and priority of the Administrative Agent’s security interest in the Collateral, (iv) to contact and enter into one or more agreements with the issuers of uncertificated securities which are Collateral owned by such Grantor and which are Securities or with financial intermediaries holding other Investment Property as may be necessary or advisable to give the Administrative Agent Control over such Securities or other Investment Property, (v) after the occurrence and during the continuance of an Event of Default, to enforce payment of the Instruments, Accounts and Receivables in the name of the Administrative Agent or such Grantor, (vi) after the occurrence and during the continuance of an Event of Default, to apply the proceeds of any Collateral received by the Administrative Agent to the Secured Obligations as provided in Article VII and (vii) to discharge past due taxes, assessments, charges, fees or Liens on the Collateral (except for such Liens as are specifically permitted hereunder or under any other Loan Document), and each Grantor agrees to reimburse the Administrative Agent on demand for any reasonable payment made or any reasonable expense incurred by the Administrative Agent in connection therewith, provided that this authorization shall not relieve any Grantor of any of its obligations under this Security Agreement or under the Credit Agreement.

8.6. Specific Performance of Certain Covenants. Each Grantor acknowledges and agrees that a breach of any of the covenants contained in Sections 4.1.5, 4.1.6, 4.3, 5.2, or 8.8 or in Article VII hereof will cause irreparable injury to the Administrative Agent and the Secured Parties, that the Administrative Agent and Secured Parties have no adequate remedy at law in respect of such breaches and therefore agrees, without limiting the right of the Administrative Agent or the Secured Parties to seek and obtain specific performance of other obligations of the Grantors contained in this Security Agreement, that the covenants of the Grantors contained in the Sections referred to in this Section 8.6 shall be specifically enforceable against the Grantors.

8.7. Use and Possession of Certain Premises. Upon the occurrence of an Event of Default and the acceleration of the Obligations under the Credit Agreement pursuant to Article VII thereof, the Administrative Agent shall be entitled to occupy and use any premises owned or leased by the Grantors where any of the Collateral or any records relating to the Collateral are located until the Secured Obligations are paid or the Collateral is removed therefrom, whichever first occurs, without any obligation to pay any Grantor for such use and occupancy.

8.8. Dispositions Not Authorized. No Grantor is authorized to sell or otherwise dispose of the Collateral except as set forth in Section 4.1.5 hereof and notwithstanding any course of dealing between any Grantor and the Administrative Agent or other conduct of the Administrative Agent, no authorization to sell or otherwise dispose of the Collateral (except as set forth in Section 4.1.5 hereof) shall be binding upon the Administrative Agent or the Secured Parties unless such authorization is in writing signed by the Administrative Agent with the consent or at the direction of the Required Lenders.

8.9. Reinstatement. This Security Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against any Grantor for liquidation or

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reorganization, should any Grantor become insolvent or make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be appointed for all or any significant part of any Grantor’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Secured Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Secured Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Secured Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

8.10. Benefit of Agreement. The terms and provisions of this Security Agreement shall be binding upon and inure to the benefit of the Grantors, the Administrative Agent and the Secured Parties and their respective successors and assigns (including all persons who become bound as a debtor to this Security Agreement), except that the Grantors shall not have the right to assign their rights or delegate their obligations under this Security Agreement or any interest herein, without the prior written consent of the Administrative Agent. No sales of participations, assignments, transfers, or other dispositions of any agreement governing the Secured Obligations or any portion thereof or interest therein shall in any manner impair the Lien granted to the Administrative Agent, for the benefit of the Administrative Agent and the other Secured Parties, hereunder.

8.11. Survival of Representations. All representations and warranties of the Grantors contained in this Security Agreement shall survive the execution and delivery of this Security Agreement.

8.12. Taxes and Expenses. Any taxes (including income taxes) payable or ruled payable by a Federal or State authority in respect of this Security Agreement shall be paid by the Grantors, together with interest and penalties, if any. The Grantors shall reimburse the Administrative Agent for any and all reasonable out-of-pocket expenses (including reasonable attorneys’, auditors’ and accountants’ fees) paid or incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, collection and enforcement of this Security Agreement and in the audit, analysis, administration, collection, preservation or sale of the Collateral (including the expenses and charges associated with any periodic or special audit of the Collateral). Any and all costs and expenses incurred by the Grantors in the performance of actions required pursuant to the terms hereof shall be borne solely by the Grantors.

8.13. Headings. The title of and section headings in this Security Agreement are for convenience of reference only, and shall not govern the interpretation of any of the terms and provisions of this Security Agreement.

8.14. Termination. This Security Agreement shall continue in effect (notwithstanding the fact that from time to time there may be no Secured Obligations outstanding) until (i) any and all commitments to extend credit under the Loan Documents have terminated, and the Credit Agreement has terminated pursuant to its express terms and (ii) all of the Secured Obligations (other than Unliquidated Obligations) have been paid in cash and in full (or with respect to any outstanding Letters of Credit, such Letter of Credit has been Cash Collateralized or a backup Letter of Credit has been delivered to the Administrative Agent as required by the Credit Agreement) and no commitments of the Administrative Agent or the Secured Parties which would give rise to any Obligations are outstanding.

8.15. Entire Agreement. This Security Agreement embodies the entire agreement and understanding between the Grantors and the Administrative Agent relating to the Collateral and supersedes all prior agreements and understandings among the Grantors and the Administrative Agent relating to the Collateral.

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8.16. Governing Law; Jurisdiction; Waiver of Jury Trial.

8.16.1 THIS SECURITY AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

8.16.2 Each Grantor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Security Agreement or any other Loan Document, or for recognition or enforcement of any judgment, and each Grantor hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each Grantor agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Security Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Security Agreement or any other Loan Document against any Grantor or its properties in the courts of any jurisdiction.

8.16.3 Each Grantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Security Agreement or any other Loan Document in any court referred to in Section 8.16.2. Each Grantor hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

8.16.4 Each party to this Security Agreement irrevocably consents to service of process in the manner provided for notices in Article IX of this Security Agreement, and each of the Grantors hereby appoints the Borrower as its agent for service of process. Nothing in this Security Agreement or any other Loan Document will affect the right of any party to this Security Agreement to serve process in any other manner permitted by law.

8.16.5 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH GRANTOR (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER GRANTOR HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER GRANTOR WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER GRANTORS HAVE BEEN INDUCED TO ENTER INTO THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

8.17. Indemnity. Each Grantor hereby agrees, jointly with the other Grantors and severally, to indemnify the Administrative Agent, the Secured Parties, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless

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from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee (but excluding any Excluded Taxes), incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of this Security Agreement or any other Loan Document, or the manufacture, purchase, acceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of any Collateral (including, without limitation, latent and other defects, whether or not discoverable by the Administrative Agent or the Secured Parties or any Grantor, and any claim for patent, trademark or copyright infringement); provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or any of its Related Parties.

8.18. Severability. Any provision in this Security Agreement that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of this Security Agreement are declared to be severable.

8.19. Counterparts. This Security Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Security Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Security Agreement.

8.20. Licensed IP.

8.20.1 With respect to licensed Intellectual Property that has been licensed by a Grantor prior to the Effective Date and the terms of the applicable license agreement related thereto provide a limitation that such Grantor shall not assign, transfer, encumber or grant rights in or with respect to such licensed Intellectual Property inconsistent with the rights granted to the licensee under such license agreement (or a similar limitation), the parties hereto acknowledge and agree that, notwithstanding anything in this Agreement or any other Loan Documents to the contrary, nothing in this Agreement or the other Loan Documents shall grant in favor of the Administrative Agent or any other Secured Party any rights or remedies that disturb, diminish or interfere with the rights of such licensee with respect to such licensed Intellectual Property under such license agreement; provided that nothing contained in this Section 8.20.1 shall limit the right of the Administrative Agent or any other Secured Party (i) to commence or maintain any action or proceeding against such Grantor in connection with such Grantor’s failure to comply with this Agreement or the other Loan Documents or (ii) upon the occurrence and during the continuation of an Event of Default, to exercise the rights of such Grantor under such license agreements.

8.20.2 In the event that, after the Effective Date, (i) any Grantor wishes to Exclusively License any Intellectual Property pursuant to which such Intellectual Property could qualify as Licensed IP and (ii) the proposed licensee under such Exclusive License arrangement requires, as a condition or requirement to such arrangement, that the Administrative Agent enter into a non-disturbance agreement (or similar agreement), the Administrative Agent hereby agrees to negotiate in good faith with such Grantor and licensee to enter into a non-disturbance agreement in the form attached as Exhibit “H” hereto (with such modifications thereto as are acceptable in the reasonable judgment of the Administrative Agent).

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8.20.3 With respect to Intellectual Property that has been exclusively licensed to a Grantor, such Grantor: (i) agrees to promptly (but no later than within 14 days after the Effective Date (or such later date as is agreed to by the Administrative Agent) with respect to licensed Intellectual Property that has been licensed prior to the Effective Date) (a) provide copies of the license agreements related thereto to the Administrative Agent and (b) cause such license agreements to be filed with the applicable federal office in the United States and (ii) authorizes the Administrative Agent to record its security interest with respect to such license agreement in such office.

ARTICLE IX

NOTICES

9.1. Sending Notices. Any notice required or permitted to be given under this Security Agreement shall be sent (and deemed received) in the manner and to the addresses set forth in Section 9.01 of the Credit Agreement. Any notice delivered to the Borrower shall be deemed to have been delivered to all of the Grantors.

9.2. Change in Address for Notices. Each of the Grantors, the Administrative Agent and the Lenders may change the address for service of notice upon it by a notice in writing to the other parties.

ARTICLE X

THE ADMINISTRATIVE AGENT

JPMorgan Chase Bank, N.A. has been appointed Administrative Agent for the Secured Parties hereunder pursuant to Article VIII of the Credit Agreement. It is expressly understood and agreed by the parties to this Security Agreement that any authority conferred upon the Administrative Agent hereunder is subject to the terms of the delegation of authority made by the Secured Parties to the Administrative Agent pursuant to the Credit Agreement, and that the Administrative Agent has agreed to act (and any successor Administrative Agent shall act) as such hereunder only on the express conditions contained in such Article VIII. Any successor Administrative Agent appointed pursuant to Article VIII of the Credit Agreement shall be entitled to all the rights, interests and benefits of the Administrative Agent hereunder.

[Signature Pages Follow]

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IN WITNESS WHEREOF, each of the Grantors and the Administrative Agent have executed this Security Agreement as of the date first above written.

ENDO PHARMACEUTICALS HOLDINGS INC., as a Grantor		GENERICS INTERNATIONAL (US), INC., as a Grantor
By:	/s/ Alan G. Levin	By:	/s/ Alan G. Levin

Name:  Alan G. Levin Name:  Alan G. Levin

Title:  Executive Vice President and Chief Financial Officer Title:  Executive Vice President and Chief Financial Officer

ENDO PHARMACEUTICALS VALERA INC., as a Grantor		HEALTHTRONICS, INC., as a Grantor
By:	/s/ Alan G. Levin	By:	/s/ James Whittenburg

Name:  Alan G. Levin Name:  James Whittenburg

Title:  Executive Vice President and Chief Financial Officer Title:  President and Chief Executive Officer

ENDO PHARMACEUTICALS SOLUTIONS INC., as a Grantor		ENDO PHARMACEUTICALS INC., as a Grantor
By:	/s/ Alan G. Levin	By:	/s/ Alan G. Levin

Name:  Alan G. Levin Name:  Alan G. Levin

Title:  Executive Vice President and Chief Financial Officer Title:  Executive Vice President and Chief Financial Officer

PENWEST PHARMACEUTICALS CO., as a Grantor
By:	/s/ Alan G. Levin

Name:  Alan G. Levin

Title:  Executive Vice President and Chief Financial Officer

Signature Page to Pledge and Security Agreement

JPMORGAN CHASE BANK, N.A., as Administrative Agent
By:	/s/ Deborah R. Winkler

Name:  Deborah R. Winkler

Title:  Vice President

Signature Page to Pledge and Security Agreement

EXHIBIT “H”

(See Section 8.20 of Security Agreement)

FORM OF NON-DISTURBANCE AGREEMENT

NON-DISTURBANCE AGREEMENT

This Non-Disturbance Agreement (“Agreement”) is entered into as of [________________] (the “Effective Date”) by and among [Name of Licensee] a [__________ corporation] and having a principal place of business at [________________] (“Licensee”), Endo Pharmaceuticals Inc., a corporation organized and existing under the laws of Delaware, United States, and having a principal place of business at 100 Endo Boulevard, Chadds Ford, Pennsylvania 19317, United States (“Endo”), and JPMorgan Chase Bank, N.A. in its capacity as administrative agent (“Agent”) under the Credit Agreement referred to below. All capitalized terms used but not defined in this Agreement have the same meanings given such terms in the Subject Agreement (as defined below). In this Agreement, “Reservations” means all limitations on enforcement by applicable laws relating to insolvency, reorganisation and other applicable laws generally affecting the rights of creditors and all actions taken by, and orders issued by, courts or court-appointed administrators involved in insolvency or reorganization proceedings concerning Endo and the Endo Intellectual Property (as defined below).

WHEREAS, Licensee and Endo entered into a [AGREEMENT TITLE TO COME] effective ________, attached hereto as Exhibit A (the “Subject Agreement”) pursuant to which Endo granted to Licensee certain rights and licenses under certain of its intellectual property as set forth in the Subject Agreement (“Endo Intellectual Property”) to [TO COME] (the “License Rights”);

WHEREAS, Endo Pharmaceuticals Holdings Inc. (the parent company of Endo), as borrower (“Holdings”), the lenders from time to time party thereto and Agent, are parties to that certain Credit Agreement, dated as of November 30, 2010 (as amended, restated, supplemented and otherwise modified from time to time, the “Credit Agreement”).

WHEREAS, pursuant to that certain Guaranty, dated as of November 30, 2010 (as amended, restated, supplemented and otherwise modified from time to time, the “Guaranty”), Endo and certain of Holdings’ other subsidiaries (the “Subsidiary Guarantors”) have guaranteed the obligations of Holdings under the Credit Agreement.

WHEREAS, in order to secure their obligations under the Credit Agreement and the Guaranty, Holdings and the Subsidiary Guarantors have granted in favor of Agent, for the benefit of the Secured Parties (as defined in the Credit Agreement), a security interest in all of their rights, title and interest in and to substantially all of their personal property, including the Endo Intellectual Property and Endo’s rights under the Subject Agreement, pursuant to that certain Pledge and Security Agreement, dated as of November 30, 2010 (as amended, restated, supplemented and otherwise modified from time to time, the “Security Agreement”);

WHEREAS, Endo and Licensee have requested that Agent agree not to disturb Licensee’s License Rights in the event that Agent exercises any or all of its rights and remedies under the Credit Agreement, Guaranty or Security Agreement or applicable law with respect to the Endo Intellectual Property or the License Rights (an “Enforcement Action”); provided that Licensee is not then in breach in any material respect of its obligations under the Subject Agreement after any notice and cure period, if any, provided therein; and

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WHEREAS, Agent has agreed to execute and deliver this Agreement to effect such non-disturbance of Licensee’s License Rights on and subject to the terms and conditions set forth in this Agreement;

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

1. Acknowledgements and Agreements.

(a) Licensee acknowledges that the Endo Intellectual Property and Subject Agreement constitutes “Collateral” under and as defined in the Security Agreement and hereby consents thereto. In the event that Agent notifies Licensee of the exercise of Agent’s rights and remedies under the Credit Agreement and/or the Security Agreement to such Collateral and requests Licensee to render performance of its obligations under the Subject Agreement to Agent or any Foreclosure Purchaser (as defined below), Licensee shall render such performance directly to Agent (or its nominee), the relevant Foreclosure Purchaser or as Agent may otherwise request. Licensee shall be entitled to rely on the notices and demands given by Agent under this Section 1, and Endo agrees to release, indemnify, hold harmless and defend Licensee from and against any and all loss, claim, damage or liability (including reasonable attorney’s fees) arising out of Licensee’s compliance with such notice or demand, except if such loss is related to Licensee’s noncompliance with the Subject Agreement.

(b) Agent acknowledges and agrees that it shall not take any action pursuant to the Credit Agreement, the Security Agreement or any other related documents with respect to the Endo Intellectual Property or the Subject Agreement in any manner that would disturb, diminish or interfere with the rights of Licensee under the Subject Agreement (including without limitation the License Rights) so long as Licensee is not in breach in any material respect of any of its obligations under the Subject Agreement (after the expiration of any grace or cure period); provided that nothing in this clause (b) shall limit or restrict Agent’s right to take any Enforcement Action with respect to the Endo Intellectual Property or the License Rights in accordance with Section 2 below or with respect to any other assets of Endo, Holdings or their relevant subsidiaries.

2. Foreclosure.

(a) In the absence of an Insolvency Proceeding (as defined below), in the event Agent takes any Enforcement Action, so long as Licensee complies with this Agreement and is not in breach in any material respect of any of its obligations under the Subject Agreement (after the expiration of any grace or cure period), (i) Agent agrees that the Subject Agreement shall continue in effect in accordance with its terms between Endo and Licensee prior to any sale, transfer or other disposition of the Subject Agreement (other than to Agent) in connection with such Enforcement Action and (ii) if and to the extent that Agent causes or approves the sale or transfer of the Endo Intellectual Property, Agent agrees that any purchaser or acquirer of the Endo Intellectual Property (a “Foreclosure Purchaser”) shall acquire the Endo Intellectual Property subject to the Subject Agreement (it being understood and agreed that Agent may terminate the Subject Agreement in the event the Licensee is in breach in any material respect of any of its obligations thereunder) or, to the extent that the Subject Agreement is extinguished as a result of such Enforcement Action, whether pursuant to applicable law or otherwise, Agent shall not assert any objection to a new license agreement being put into effect between the Foreclosure Purchaser and Licensee, with substantially the same provisions as contained in the Subject Agreement.

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For purposes hereof, “Insolvency Proceeding” means any proceeding in respect of bankruptcy, insolvency, winding up, receivership, dissolution or assignment for the benefit of creditors, in each of the foregoing events whether under the Bankruptcy Code or any similar federal, state or foreign bankruptcy, insolvency, reorganization, receivership or similar law.

(b) After the commencement of an Insolvency Proceeding against Endo or any of the Subsidiary Guarantors, so long as Licensee complies with this Agreement and is not in breach in any material respect of any of its obligations under the Subject Agreement (after the expiration of any grace or cure period), (i) Agent shall not any take any action the effect of which is to cause the Subject Agreement to no longer continue in effect in accordance with its terms between Endo and Licensee, (ii) if the Endo Intellectual Property is sold, transferred or otherwise disposed of, whether pursuant to an order of a bankruptcy court or otherwise, Agent shall not take any action the effect of which is to cause the Subject Agreement to no longer continue in effect in accordance with its terms after giving effect to such sale, transfer or disposition.

(c) For the avoidance of doubt, (i) nothing in this Section 2 shall be construed to limit Licensee’s License Rights so long as Licensee complies with this Agreement and is not in breach in any material respect of its obligations under the Subject Agreement after any notice and cure period provided in the Subject Agreement, and (ii) until the acquisition by Agent of title to the Endo Intellectual Property after the occurrence of a Enforcement Action or Insolvency Proceeding, nothing in this Section 2 shall require Agent itself to become party to or otherwise undertake any liabilities or other obligations under or in relation to the Subject Agreement.

(d) Endo shall (i) promptly on demand reimburse Agent for the amount of all out-of-pocket costs and expenses reasonably incurred by Agent to comply with the obligations under this Agreement, and (ii) indemnify and hold harmless Indemnified Persons against any losses, claims, damages, liabilities and expenses (including reasonable attorneys fees) incurred by such party to the extent arising from this Agreement or the compliance with the obligations of Agent under this Agreement. Endo and Licensee shall have no liability under the preceding provisions of this Section 2(d) to Agent (x) to the extent that any costs, expenses, losses, claims, damages, liabilities and expenses are determined by a court of competent jurisdiction to have resulted from any Indemnified Person’s gross negligence or willful misconduct, (y) for any special, consequential or exemplary damages, including without limitation loss of anticipated profits and (z) from and after the date that Endo or Licensee waives compliance by Agent with this Agreement. “Indemnified Person” means Agent and Agent’s affiliates and the respective directors, officers, employees, agents and advisors of Agent and Agent’s affiliates.

3. Mutual Representations, Warranties and Covenants. Each of Licensee and Endo represents, warrants and covenants to each of the other parties as follows:

(a) Corporate Existence and Power. It is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated or organized, and has full corporate or limited liability company power and authority and the legal right to own and operate its property and assets and to carry on its business as it is now being conducted and as contemplated in this Agreement.

(b) 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

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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.

(c) No Conflict. It has not entered, and shall not enter, into any agreement with any third party that is in conflict with the rights granted to each other party under this Agreement, and has not taken and shall not take any action that would in any way prevent it from granting the rights granted to each other party under this Agreement, or that would otherwise materially conflict with or adversely affect the rights granted to each other party under this Agreement. Its performance and execution of this Agreement does not and will not result in a breach of any other contract to which it is a party.

(d) Security Interest. Endo has not granted and will not grant to Licensee, and Licensee has not taken and will not take, a security interest in the Endo Intellectual Property.

4. Miscellaneous.

(a) Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

(b) Governing Law. This Agreement shall be governed by and interpreted under, and any court action or alternative dispute proceeding pursuant to this Agreement shall apply, New York law excluding its conflicts of laws principles.

(c) Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions or affecting the enforceability of such provision in any other jurisdiction.

(d) Captions. The captions in this Agreement are for convenience of reference only and shall not define or limit any of the terms or provisions of this Agreement.

(e) Notices. Any notice required or permitted to be given or made under this Agreement by one of the parties to the other shall be in writing and shall be deemed to have been delivered (a) upon personal delivery or (b) the third business day next following deposit with a reputable courier, as follows (or at such other addresses as may have been furnished in writing by one of the Parties to the other as provided in this Section 4(e)):

For Endo:   Endo Pharmaceuticals Inc. 100 Endo Boulevard Chadds Ford, Pennsylvania 19317 United States Attention: President & CEO   With a copy to:   [            ] For Licensee:   [            ]

4

For Agent:

JPMorgan Chase Bank, N.A., as administrative agent

270 Park Avenue

New York, New York 10017

Attention:

(f) Entire Agreement. This Agreement, together with all exhibits, constitutes the entire agreement and understanding of the parties with respect to the subject matter of this Agreement, and supersedes any and all prior negotiations, correspondence, agreements, understandings duties or obligations between the parties with respect to the subject matter of this Agreement.

(g) Assignment. If and to the extent that Endo assigns the Subject Agreement, or any of its rights thereunder, in accordance with the Subject Agreement, it may and shall assign (and/or novate, if applicable) immediately to such assignee all of its corresponding rights and obligations under this Agreement. If and to the extent that Licensee assigns the Subject Agreement, or any of its rights thereunder, in accordance with the Subject Agreement, it may and shall assign (and/or novate, if applicable) immediately to such assignee all of its corresponding rights and obligations under this Agreement. If and to the extent that Agent assigns the Credit Agreement, or any of its rights thereunder, or is succeeded in interest thereunder, it may and shall assign (and/or novate, if applicable) immediately to such assignee or successor all of its corresponding rights and obligations under this Agreement. Except as expressly provided above, no party to this Agreement shall have the right to assign this Agreement, nor any of its rights hereunder, nor delegate any of its obligations hereunder, without the prior written consent of each other party, which shall not be unreasonably withheld or delayed. Any attempt to assign this Agreement in breach of the foregoing shall be void. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and each of their successors and permitted assigns.

(h) Amendments, Etc. No amendment, modification or waiver of any provision of this Agreement shall in any way be effective unless the same shall be in writing and signed by Endo, Licensee and Agent. Furthermore, Endo and Licensee agree that, during the occurrence and continuation of an Event of Default (as defined in the Credit Agreement), they shall not, without the prior written consent of Agent, modify, alter, terminate or amend the terms of the Subject Agreement in any way that (i) materially decreases any payment obligations of Licensee to Endo or (ii) otherwise materially and adversely affects the payment of amounts owed to Endo under the Subject Agreement.

[SIGNATURES ON NEXT PAGE]

5

IN WITNESS WHEREOF, the undersigned have executed this Non-Disturbance Agreement as of the date first written above.

[LICENSEE]
By:
	Name:
	Its:
ENDO PHARMACEUTICALS INC.
By:
	Name:
	Title:
JPMORGAN CHASE BANK, N.A., AS ADMINISTRATIVE AGENT
By:
	Name:
	Title:

6

EXHIBIT A

[SUBJECT AGREEMENT]

7

ANNEX I

SUPPLEMENT

to

PLEDGE AND

SECURITY AGREEMENT

Reference is hereby made to the Pledge and Security Agreement (as amended, restated, supplemented or otherwise modified from time to time, the “Agreement”), dated as of November 30, 2010, made by each of ENDO PHARMACEUTICALS HOLDINGS INC., a Delaware corporation (the “Borrower”) and the other Subsidiaries of the Borrower listed on the signature pages thereto (together with the Borrower, the “Initial Grantors”, and together with any additional Subsidiaries, including the undersigned, which become parties thereto by executing a Supplement to Pledge and Security Agreement in substantially the form hereof, the “Grantors”), in favor of the Administrative Agent. Capitalized terms used herein and not defined herein shall have the meanings given to them in the Agreement.

By its execution below, the undersigned, [NAME OF NEW GRANTOR], a [_________________] [corporation/limited liability company/limited partnership] (the “New Grantor”) agrees to become, and does hereby become, a Grantor under the Agreement and agrees to be bound by the Agreement as if originally a party thereto. The New Grantor hereby pledges and grants to the Administrative Agent, on behalf of and for the benefit of the Secured Parties, a security interest in all of the New Grantor’s right, title and interest, whether now owned or hereafter acquired, in and to the Collateral to secure the prompt and complete payment and performance of the Secured Obligations. For the avoidance of doubt, the grant of a security interest herein shall not be deemed to be an outright assignment of intellectual property rights owned by the New Grantor.

By its execution below, the undersigned represents and warrants as to itself that all of the representations and warranties contained in the Agreement are true and correct in all respects as of the date hereof. The New Grantor represents and warrants that the supplements to the Exhibits to the Agreement attached hereto are true and correct in all respects and that such supplements set forth all information required to be scheduled under the Agreement with respect to the New Grantor. The New Grantor shall take all steps necessary and required under the Agreement to perfect, in favor of the Administrative Agent, a first-priority security interest in and lien against the New Grantor’s Collateral.

THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, the New Grantor has executed and delivered this Annex I counterpart to the Agreement as of this ___________ day of ____________, 20___.

[NAME OF NEW GRANTOR]

By: 

Title: 

1

EXHIBIT “A”

(See Sections 3.3 and 3.4 of Security Agreement)

Prior names, jurisdiction of formation, place of business (if Grantor has only one place of business), chief executive office (if Grantor has more than one place of business), mergers and mailing address:

Grantor	Prior Name	Jurisdiction	Principal   Place of   Business	Chief Executive Office / Mailing Address	Significant Mergers or Acquisitions
Endo Pharmaceuticals Holdings Inc.	N/A	Delaware	US	100 Endo Boulevard Chadds Ford, PA 19317	N/A
Endo Pharmaceuticals Inc.	N/A	Delaware	US	100 Endo Boulevard Chadds Ford, PA 19317	Acquisition of RxKinetix, Inc. on 10/12/2006. Acquisition of Indevus Pharmaceuticals, Inc. on 3/23/2009 Acquisition of HealthTronics, Inc. on 7/12/2010 Acquisition of Penwest Pharmaceuticals Co. on 11/4/2010
Endo Pharmaceuticals Solutions Inc.	Indevus Pharmaceuticals Inc.	Delaware	US	100 Endo Boulevard Chadds Ford, PA 19317	Acquisition of Valera Pharmaceuticals, Inc. on 4/18/2007
Endo Pharmaceuticals Valera Inc.	Valera Pharmaceuticals   Inc.	Delaware	US	100 Endo Boulevard Chadds Ford, PA 19317 / 8 Clarke Drive Cranbury, NJ 08512	N/A
HealthTronics, Inc.	N/A	Georgia	US	9825 Spectrum Drive Bldg 3 Austin, TX 78717	See attached.
Generics International (US), Inc.1	N/A	Delaware	US	120, 130, 150 Vintage Drive Huntsville, AL 35811	N/A
Penwest Pharmaceuticals Co.	Edward Mendall Co., Inc.	Washington	US	100 Endo Boulevard Chadds Ford, PA 19317	N/A

¹ Pending closing of Qualitest acquisition pursuant to the Stock Purchase Agreement by and among Endo Pharmaceuticals Inc., Endo Pharmaceuticals Holdings Inc., Generics International (US Parent) Inc. and Apax Quartz (Cayman) L.P. dated as of September 28, 2010 (“SPA”).

EXHIBIT “B”

(See Sections 3.5 and 3.9 of Security Agreement)

Patents, copyrights and trademarks protected under federal law:

Patents

See attached.

Copyrights

See attached.

Trademarks

See attached.

2

EXHIBIT “C”

List of Pledged Securities

(See Section 3.8 of Security Agreement)

A. STOCKS:

Grantor	Issuer	Certificate Number	Number of Shares	Class of Shares
Endo Pharmaceuticals Holdings Inc.	Endo Pharmaceuticals Inc.	7	1,000	Common
Endo Pharmaceuticals Holdings Inc.	HealthTronics, Inc.	1	1	Common
Endo Pharmaceuticals Inc.	Endo Pharma Canada Inc.	C-2	65	Common
Endo Pharmaceuticals Inc.	Endo Pharma Ireland Limited	2	16,250	Common
Endo Pharmaceuticals Inc.	Endo Pharmaceuticals Solutions Inc.	1	1	Common
Endo Pharmaceuticals Inc.	Penwest Pharmaceuticals Co.	1	1,000	Common
Endo Pharmaceuticals Inc.	Generics International (US Parent), Inc.2	2	1,000	Common
Endo Pharmaceuticals Solutions Inc.	IPI Management Corp.	1	1,000	Common
Endo Pharmaceuticals Solutions Inc.	Endo Pharmaceuticals Valera Inc.	1	1,000	Common
Endo Pharmaceuticals Solutions Inc.	Ledgemont Royalty Sub LLC	1	100	LLC Units
HealthTronics, Inc.	Surgicenter Management, Inc.	1	1,000	Common
HealthTronics, Inc.	Prime Medical Operating, Inc.	2	1,000	Common
HealthTronics, Inc.	Ocean Radiation Therapy, Inc.	1	1,000	Common
HealthTronics, Inc.	Lithotripters, Inc.	31	40,000	Common

² Pledge of Generics International (US Parent), Inc. pending closing of Qualitest Acquisition pursuant to the SPA.

HealthTronics, Inc.	Medstone International, Inc.	5	1,000	Common
HealthTronics, Inc.	Litho Management, Inc.	11	1,000	Common
HealthTronics, Inc.	Healthtronics Laboratory Solutions, Inc.	1	90	Common
		3	350
		6	35
HealthTronics, Inc.	Florida Lithology No. 2, Inc.	1	1,000	Common
HealthTronics, Inc.	Endocare, Inc.	1	1,000	Common
HealthTronics, Inc.	Advanced Medical Partners, Inc.	9	7,887	Common
HealthTronics, Inc.	SanuWave Health, Inc.	1277	138,782	Common

B. BONDS:

Issuer	Number	Face Amount	Coupon Rate	Maturity
None

C. GOVERNMENT SECURITIES:

Issuer	Number	Type	Face Amount	Coupon Rate	Maturity
None

D. OTHER SECURITIES OR OTHER INVESTMENT PROPERTY

(CERTIFICATED AND UNCERTIFICATED):

Issuer	Description of Collateral	Percentage Ownership Interest
None.

EXHIBIT “D”

(See Section 3.1 of Security Agreement)

OFFICES IN WHICH FINANCING STATEMENTS HAVE BEEN FILED

Delaware Secretary of State

Georgia – Office of the Clerk of Superior Court of Fulton County

Washington – Department of Licensing

EXHIBIT “E”

(See Definition of “Commercial Tort Claims”)

COMMERCIAL TORT CLAIMS

Case No. 3:10-cv-00904 MHP; Allmed Systems Inc. dba Lisa Laser USA, Inc. and Lisa Laser Products, OHG v. HealthTronics, Inc. and Does 1 through 20, Inclusive; In the United Stated District Court of the Northern District of California.

Allmed Systems, Inc. d/b/a Lisa Laser USA and Lisa Laser Products OHG sued HealthTronics for breach of contract, breach of implied covenant of good faith and fair dealing, fraud and deceit, negligent misrepresentation, intentional interference with prospective economic relationship/business advantage and violation of California’s unfair competition law. HealthTronics filed counterclaims against Allmed Systems, Inc. d/b/a Lisa Laser USA and Lisa Laser Products OHG for breach of contract, tortious interference with contract and violation of California’s unfair competition law seeking both injunctive relief and monetary damages. To date, none of the parties have disclosed the damages sought in connection with their respective claims.

EXHIBIT “F”

(See Section 3.7 of Security Agreement)

FEDERAL EMPLOYER IDENTIFICATION NUMBER;

STATE ORGANIZATION NUMBER; JURISDICTION OF INCORPORATION

GRANTOR	Federal Employer Identification Number	Type of Organization	State of Organization or Incorporation	State Organization Number
Endo Pharmaceuticals   Holdings Inc.	13-4022871	Corporation	Delaware	2822597
Endo Pharmaceuticals Inc.	52-2035829	Corporation	Delaware	2726665
Endo Pharmaceuticals Solutions Inc.	04-3047911	Corporation	Delaware	2222581
Endo Pharmaceuticals Valera Inc.	13-4119931	Corporation	Delaware	3236297
HealthTronics, Inc.	55-2210668	Corporation	Georgia	K535640
Generics International (US), Inc.3	26-1166489	Corporation	Delaware	4415493
Penwest Pharmaceuticals Co.	91-1513032	Corporation	Washington	601 299 584

³ Pending closing of Qualitest acquisition pursuant to the SPA

EXHIBIT “G”

(See Section 3.10 of Security Agreement)

DEPOSIT ACCOUNTS

Grantor Name	Bank Name	Bank Address	Account #	Account Description
Endo Pharmaceuticals Inc	JP Morgan Chase	1 Chase Manhattan Plaza, New York, NY 10005	304260983	Operating Account
Endo Pharmaceuticals Inc	JP Morgan Chase	1 Chase Manhattan Plaza, New York, NY 10005	9102788347	Lockbox Account
Endo Pharmaceuticals Inc	JP Morgan Chase	1 Chase Manhattan Plaza, New York, NY 10005	601884075	AP Controlled Disbursement
Endo Pharmaceuticals Solutions Inc	JP Morgan Chase	1 Chase Manhattan Plaza, New York, NY 10005	747482362	Lockbox Account
Endo Pharmaceuticals Valera Inc	JP Morgan Chase	1 Chase Manhattan Plaza, New York, NY 10005	747482370	Lockbox Account
Endo Pharmaceuticals Inc	E-Trade	PO Box 1542 Merrifield, VA 22116	6768-3081	Deposit Acct for proceeds from exercised options
Endo Pharmaceuticals Inc	PNC	1600 Market Street Philadelphia, PA 19103	8602147831	Deposit Account
Endo Pharmaceuticals Holdings Inc	PNC	1600 Market Street Philadelphia, PA 19103	8606040441	Operating Account
Endo Pharmaceuticals Inc	Bank of Ireland - Onshore	300 First Stamford Place Stamford, CT 06902	2107936	Deposit Account
HealthTronics, Inc.	SunTrust Bank		1000023407371	Balance less than $50K
HealthTronics, Inc.	Citibank		30739586	Medical Claims
HealthTronics, Inc.	Citibank		38217707	ST Disability Claims
Penwest Pharmaceuticals Co.	Key Bank	66 South Pearl Street Albany, NY 12207	329681000116	Operating Account

Penwest Pharmaceuticals Co.	Key Bank	66 South Pearl Street Albany, NY 12207	190993200129	Disbursement Account
Penwest Pharmaceuticals Co.	JP Morgan Chase Bank, N.A.	106 Corporate Park Drive, Floor 2 White Plains, NY 10604	000000590002546	Payroll Account

SECURITIES ACCOUNTS

Grantor Name	Bank Name	Bank Address	Account #	Account Description
Endo Pharmaceuticals Inc.	UBS	One North Wacker Drive Suite 2500 Chicago, IL 60606	CP 06464 G2	Auction Rate Notes/Investment Account
Endo Pharmaceuticals Inc.	UBS	One North Wacker Drive Suite 2500 Chicago, IL 60606	CP 15257 G2	Investment Account
Endo Pharmaceuticals Inc.	Merrill Lynch	100 Jericho Quadrangle 2nd 242 Jericho NY, 11753	550-07T42	Auction Rate Notes
Endo Pharmaceuticals Inc.	Funds For Institutions	P.O. Box 8118 Boston, MA 02266-8118	263-3492962-3	Treasury Fund
Endo Pharmaceuticals Inc.	JP Morgan Asset Management	P.O. Box 8528 Boston, MA 02266-8528	91733	Money Market Funds
Endo Pharmaceuticals Solutions Inc.	JP Morgan Chase Bank	100 East Broad St. Columbus, OH 43271-0192	7400000600	Custody Account for 16% Notes and Interest
HealthTronics, Inc.	APS Financial		338213942	Holds 1,000 EDAP ADRs
Penwest Pharmaceuticals Co.	Capital Advisors Group	389 Passaic Avenue Suite 200 Fairfield, NJ 07004	DE1325	Investment Account
Penwest Pharmaceuticals Co.	Morgan Stanley	522 5th Avenue 10th Floor New York, NY 10036	PWM 32-78ME6	Investment Account

EX-21

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

The following is a list of subsidiaries of the Company as of December 31, 2010, omitting some subsidiaries which, considered in the aggregate, would not constitute a significant subsidiary.

Subsidiary	State of Incorporation or Organization	Ownership by Endo Pharmaceuticals  Holdings Inc.
Endo Pharmaceuticals Inc.	Delaware	Direct
Endo Pharmaceuticals Solutions Inc.	Delaware	Indirect
HealthTronics, Inc.	Georgia	Direct
Penwest Pharmaceuticals Co.	Washington	Indirect
Generics International (US Parent), Inc.	Delaware	Indirect
Generics Bidco I, LLC	Delaware	Indirect
Generics Bidco II, LLC	Delaware	Indirect
Quartz Specialty Pharmaceuticals, LLC	Delaware	Indirect
Endo Pharma Canada Inc.	New Brunswick	Indirect
Endo Pharma Ireland Limited	Dublin	Indirect
Endo Pharma Delaware Inc.	Delaware	Indirect
CPEC LLC	Delaware	Indirect
IPI Management Corp.	Massachusetts	Indirect
Endo Pharmaceuticals Valera Inc.	Delaware	Indirect
Ledgemont Royalty Sub LLC	Delaware	Indirect
Generics International (US Holdco), Inc.	Delaware	Indirect
Generics International (US Midco), Inc.	Delaware	Indirect
Generics International (US), Inc.	Delaware	Indirect
Moores Mill Properties LLC	Delaware	Indirect
Wood Park Properties LLC	Delaware	Indirect
Vintage Pharmaceuticals, LLC	Delaware	Indirect

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-52648, 333-120968, 333-148339, 333-159590 and 333-171941 on Form S-8 of Endo Pharmaceuticals Holdings Inc. and subsidiaries (the “Company”) of our reports dated February 28, 2011, relating to the consolidated financial statements and financial statement schedule of the Company and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2010.

/s/ DELOITTE & TOUCHE LLP

Philadelphia, Pennsylvania

February 28, 2011

EX-24

Exhibit 24

POWER OF ATTORNEY

Each of the undersigned, hereby constitutes and appoints each of David P. Holveck, Alan G. Levin and Caroline B. Manogue to be his or her true and lawful attorneys-in-fact and agents, with full power of each to act alone, and to sign for the undersigned and in each of their respective names in any and all capacities stated below, this Annual Report on Form 10-K (and any amendments hereto) and to file the same, with exhibits hereto and thereto and other documents in connection herewith and therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Power of Attorney has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Roger H. Kimmel
Roger H. Kimmel	Chairman	February 23, 2011
/s/ John J. Delucca
John J. Delucca	Director	February 23, 2011
/s/ David P. Holveck
David P. Holveck	Director	February 23, 2011
/s/ Nancy J. Hutson
Nancy J. Hutson, Ph.D,	Director	February 23, 2011
/s/ Michael Hyatt
Michael Hyatt	Director	February 23, 2011
/s/ William P. Montague
William P. Montague	Director	February 23, 2011
/s/ Joseph C. Scodari
Joseph C. Scodari	Director	February 23, 2011
/s/ William F. Spengler
William F. Spengler	Director	February 23, 2011

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, David P. Holveck, certify that:

1. I have reviewed this annual report on Form 10-K of Endo Pharmaceuticals Holdings 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 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.

/s/ DAVID P. HOLVECK

David P. Holveck

President and Chief Executive Officer

Date: February 28, 2011

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Alan G. Levin, certify that:

1. I have reviewed this annual report on Form 10-K of Endo Pharmaceuticals Holdings 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 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.

/s/ ALAN G. LEVIN

Alan G. Levin

Executive Vice President, Chief Financial Officer

Date: February 28, 2011

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, David P. Holveck, as President and Chief Executive Officer of Endo Pharmaceuticals Holdings Inc. (the Company), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Annual Report on Form 10-K of the Company for the annual period ended December 31, 2010 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

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

	/s/ DAVID P. HOLVECK
Name:	David P. Holveck
Title:	President and Chief Executive Officer
Date:	February 28, 2011

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

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Alan G. Levin, as Chief Financial Officer of Endo Pharmaceuticals Holdings Inc. (the Company), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Annual Report on Form 10-K of the Company for the annual period ended December 31, 2010 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

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

	/s/ ALAN G. LEVIN
Name:	Alan G. Levin
Title:	Executive Vice President, Chief Financial Officer
Date:	February 28, 2011

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