IPXL Impax Laboratories, Inc. (delisted)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )

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IMPAX LABORATORIES, INC.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement if other than the Registrant)

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30831 Huntwood Avenue
Hayward, California 94544

Dear Stockholder:

     You are cordially invited to attend the 2009 Annual Meeting of Stockholders of Impax Laboratories, Inc. to be held on Tuesday, May 19, 2009 at 9:00 a.m., Pacific Daylight Time, at the Marriott Hotel located at 1770 South Amphlett Blvd., San Mateo, California 94402.

     Details regarding the business to be conducted at the annual meeting are described in the accompanying notice of the annual meeting and proxy statement. We have also made available a copy of our 2008 Annual Report, which includes our audited financial statements and provides information about our business and products. We encourage you to read these materials carefully.

     Your vote is important. Whether you plan to attend the annual meeting in person or not, we hope you will vote as soon as possible. You may vote electronically through the Internet or by telephone, as described in the accompanying materials, or by completing and signing the enclosed proxy card and returning it in the self-addressed envelope provided for your convenience. Please review the instructions on each of your voting options described in this proxy statement.

     On behalf of our board of directors, I would like to express our appreciation for your continued support. We look forward to seeing you at the annual meeting.

April 8, 2009

IMPAX LABORATORIES, INC.
30831 Huntwood Avenue
Hayward, California 94544

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 2009

Important Notice regarding the Availability of Proxy Materials for the
Annual Meeting of Stockholders to be Held on May 19, 2009:
the Proxy Statement and Annual Report to Stockholders
are available at http://www.stocktrans.com/eproxy/impax2009

To Our Stockholders:

     The 2009 Annual Meeting of Stockholders of Impax Laboratories, Inc. will be held on Tuesday, May 19, 2009, at 9:00 a.m., Pacific Daylight Time, at the Marriott Hotel located at 1770 South Amphlett Blvd., San Mateo, California 94402, for the following purposes:

          (i) to elect seven directors, as described in the accompanying proxy statement;

          (ii) to approve the amendment and restatement of our 2002 Equity Incentive Plan to, among other matters, increase the aggregate number of shares of our common stock that may be issued under such plan by 1,900,000 shares;

          (iii) to ratify the adoption of the Preferred Stock Rights Agreement, dated January 20, 2009, by and between Impax and StockTrans, Inc., as rights agent;

          (iv) to ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2009;

          (v) to approve the adjournment of the annual meeting, if necessary, to solicit additional proxies in the event that there are not sufficient votes at the time of such meeting to approve any of the foregoing proposals; and

          (vi)  to transact such other business as may properly come before the annual meeting or any postponement or adjournment thereof.

     You may obtain directions to the Marriott Hotel by contacting it directly at (650) 653-6000 or accessing the hotel’s Web site at http://www.marriott.com/hotels/maps/directions/sfosa-san-mateo-marriott-san-francisco-airport.

     Only stockholders of record at the close of business on March 24, 2009 are entitled to notice of, and to vote at, the annual meeting and at any postponements or adjournments thereof. A list of such stockholders will be available for inspection by our stockholders at our principal executive offices located at 30831 Huntwood Avenue, Hayward, California 94544 during ordinary business hours for the ten-day period prior to the annual meeting.

      YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE URGED TO VOTE YOUR SHARES PROMPTLY TO ENSURE THEY ARE REPRESENTED AT THE ANNUAL MEETING. YOU MAY SUBMIT YOUR PROXY VOTE BY TELEPHONE OR ELECTRONICALLY THROUGH THE INTERNET AS DESCRIBED IN THE FOLLOWING MATERIALS OR BY COMPLETING AND SIGNING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE SELF-ADDRESSED ENVELOPE PROVIDED. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.

By Order of the Board of Directors,

Arthur A. Koch, Jr.
Senior Vice President, Finance,
Chief Financial Officer and Corporate Secretary

Hayward, California
April 8, 2009

TABLE OF CONTENTS

		Page
GENERAL INFORMATION			1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			5
PROPOSAL ONE – ELECTION OF DIRECTORS			8
EXECUTIVE COMPENSATION			15
COMPENSATION COMMITTEE REPORT			47
PROPOSAL TWO – APPROVAL OF AMENDMENT AND RESTATEMENT OF 2002 EQUITY INCENTIVE PLAN			48
PROPOSAL THREE – RATIFICATION OF ADOPTION OF PREFERRED STOCK RIGHTS AGREEMENT			59
PROPOSAL FOUR – RATIFICATION OF APPOINTMENT OF GRANT THORNTON LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			64
PROPOSAL FIVE – APPROVAL OF THE ADJOURNMENT OF THE ANNUAL MEETING, IF NECESSARY			66
AUDIT COMMITTEE REPORT			67
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS			68
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE			69
STOCKHOLDER PROPOSALS			69
ANNUAL REPORT TO STOCKHOLDERS			69

IMPAX LABORATORIES, INC.
30831 Huntwood Avenue
Hayward, California 94544
(510) 476-2000

PROXY STATEMENT
2009 ANNUAL MEETING OF STOCKHOLDERS

GENERAL INFORMATION

General

     This proxy statement is furnished to the holders of our common stock, par value $0.01 per share, in connection with the solicitation of proxies by our board of directors for use at the 2009 Annual Meeting of Stockholders or at any postponement or adjournment thereof. The annual meeting will be held on Tuesday, May 19, 2009, at 9:00, a.m., Pacific Daylight Time, at the Marriott Hotel located at 1770 South Amphlett Blvd., San Mateo, California 94402.

     At the annual meeting, stockholders will consider and vote upon:

	(i)		the election of seven directors, as described in this proxy statement;
	(ii)		the approval of the amendment and restatement of our 2002 Equity Incentive Plan, referred to as the “2002 plan,” to, among other matters, increase the aggregate number of shares of common stock that may be issued under such plan by 1,900,000 shares;
	(iii)		the ratification of the adoption of the Preferred Stock Rights Agreement, dated January 20, 2009, by and between Impax and StockTrans, Inc., as rights agent, referred to as the “rights agreement”;
	(iv)		the ratification of the appointment of Grant Thornton LLP, referred to as “Grant Thornton,” as our independent registered public accounting firm for the fiscal year ending December 31, 2009;
	(v)		the approval of the adjournment of the annual meeting, if necessary, to solicit additional proxies in the event that there are not sufficient votes at the time of such meeting to approve any of the foregoing proposals; and
	(vi)		such other business as may properly come before the annual meeting or any postponement or adjournment thereof.

     References in this proxy statement to “Impax,” “we,” “us,” and “our” mean Impax Laboratories, Inc. and its subsidiaries unless the context of the description indicates otherwise.

     On or about April 8, 2009, the notice of the annual meeting, this proxy statement, the enclosed proxy card and the annual report to stockholders, collectively referred to as the “proxy materials,” will be first sent or given to our stockholders.

Record Date

     Our board set the close of business on March 24, 2009 as the record date for the determination of stockholders entitled to notice of and to vote at the annual meeting. Only stockholders of record at the close of business on March 24, 2009, referred to as the “record date,” are entitled to notice of and to vote at the annual meeting or any postponement or adjournment thereof. On March 24, 2009, there were issued and outstanding 60,502,972 shares of common stock.

Quorum Requirement

     A quorum of stockholders is necessary to hold a valid annual meeting. In order for a quorum to be present at the annual meeting, a majority of the issued and outstanding shares of common stock at the close of business on the record date must be present in person or represented by proxy at the annual meeting. All such shares that are present in person or represented by proxy at the annual meeting will be counted in determining whether a quorum is present, including abstentions and broker non-votes. A broker non-vote occurs when shares held of record by a broker are not voted with respect to a proposal because the broker does not have discretionary voting power with respect to that proposal and has not received voting instructions from the beneficial owner.

Votes Required

     Each share of common stock is entitled to one vote on each matter to be presented at the annual meeting. Directors are elected (Proposal One) by a plurality of the votes of the shares of common stock that are present in person or represented by proxy at the annual meeting. Under Delaware law, an abstention or a broker non-vote will have no legal effect on the election of directors. Therefore, the seven nominees for director receiving the most “FOR” votes will be elected to serve on the board.

     The approval to amend and restate our 2002 plan to, among other matters, increase the number of shares of common stock that may be issued under such plan by 1,900,000 shares (Proposal Two), the ratification of the adoption of the rights agreement (Proposal Three), the ratification of the appointment of Grant Thornton as our independent registered public accounting firm for the fiscal year ending December 31, 2009 (Proposal Four), the approval of the adjournment of the annual meeting, if necessary, to solicit additional proxies in the event that there are not sufficient votes at the time of such meeting to approve any of the foregoing proposals (Proposal Five) and the approval of any other business as may properly come before the annual meeting, or any postponement or adjournment thereof, will require the affirmative vote of the holders of a majority in voting power of the shares of common stock that are present in person or represented by proxy at the annual meeting. Under Delaware law, an abstention on any of these proposals will have the same legal effect as an “against” vote. A broker non-vote will not be counted as having been voted on, or as a vote “against,” any of these proposals or the approval of any other business as may properly come before the annual meeting, or any postponement or adjournment thereof.

Voting of Shares

     If your shares of common stock are registered directly in your name with our transfer agent, StockTrans, Inc., you are considered, with respect to those shares, the stockholder of record. Stockholders of record may vote in person at the annual meeting or by proxy using the enclosed proxy card, by telephone or electronically through the Internet.

     The deadline for stockholders of record to vote by telephone or electronically through the Internet is 11:59 p.m., prevailing time, on May 18, 2009. Set forth below is a summary of the three voting methods which stockholders of record may utilize to submit their votes by proxy:

      Vote by Telephone — 1-866-578-5350. Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week. Have your proxy card in hand when you call. You will be prompted to enter your control number, which is located on your proxy card and then follow the directions given.

      Vote Electronically through the Internet — http://www.votestock.com. Use the Internet to vote your proxy 24 hours a day, 7 days a week. Have your proxy card in hand when you access the Web site. You will be prompted to enter your control number, which is located on your proxy card to create and submit an electronic ballot.

      Vote by Mail — Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided you.

     Whether or not you plan to attend the annual meeting, we urge you to vote promptly using one of these methods to ensure your vote is counted.

      If you vote by telephone or electronically through the Internet, you do not need to return your proxy card.

     Please note that although there is no charge to you for voting by telephone or electronically through the Internet, there may be costs associated with electronic or telephonic access such as usage charges of Internet service providers and telephone companies. We do not cover these costs; they are solely your responsibility. Please note, the telephone and Internet voting procedures available to you are valid forms of granting proxies under the General Corporation Law of the State of Delaware.

     If your shares of common stock are held in an account at a brokerage firm, bank, broker-dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and you should have received these proxy materials from that organization rather than us. The organization holding your shares is considered the stockholder of record for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct the organization holding your shares on how to vote the shares held in your account using the voting instructions received from such organization. You may vote in person at the annual meeting only if you obtain a legal proxy from the broker, trustee or nominee that holds your shares giving you the right to vote the shares at the annual meeting.

Solicitation of Proxies and Discretionary Voting

     We will bear the cost of the solicitation of proxies and will reimburse the reasonable expenses of brokerage firms, banks, broker-dealers or other similar organizations incurred in forwarding material to beneficial owners of common stock. In addition to mailing the proxy materials, proxies for use at the annual meeting may be solicited by our directors, officers and employees, none of whom will receive

additional compensation for such solicitation activities, in person or by telephone. We have retained D.F. King & Co., Inc., a firm experienced in the solicitation of proxies on behalf of public companies, to assist in the proxy solicitation process at a fee of approximately $10,000. We have also agreed to reimburse D.F. King & Co., Inc. for certain costs and expenses and to indemnify it for any claims or liabilities it may incur as a result of the proxy solicitation.

     Whether or not you are able to attend the annual meeting, you are urged to complete and return your proxy, which will be voted as you direct on your proxy when properly completed. In the event no directions are specified, such proxies will be voted “FOR”: (i) the election of seven directors, as described in this proxy statement; (ii) the approval of the amendment and restatement of our 2002 plan to, among other matters, increase the aggregate number of shares of common stock that may be issued under such plan by 1,900,000 shares; (iii) the ratification of the adoption of the rights agreement; (iv) the ratification of the appointment of Grant Thornton as our independent registered public accounting firm for the fiscal year ending December 31, 2009; and (v) the approval of the adjournment of the annual meeting, if necessary, to solicit additional proxies in the event that there are not sufficient votes at the time of such meeting to approve any of the foregoing proposals.

     Our board is not aware of any other matters that will come before the annual meeting or any postponement or adjournment of the annual meeting. If any other matters properly come before the meeting or any postponement or adjournment of the meeting, the persons designated as proxies intend to vote in accordance with their best judgment on such matters.

     The proxy confers discretionary authority to vote with respect to any and all of the following matters that may come before the annual meeting: (i) matters to be presented at the annual meeting of which we did not have notice on or prior to March 18, 2009; (ii) the election of any person to any office for which a bona fide nominee named in this proxy statement is unable to serve or for good cause will not serve; (iii) any proposal omitted from this proxy statement and form of proxy pursuant to Rules 14a-8 or 14a-9 under the Securities Exchange Act of 1934, as amended, referred to as the “Exchange Act”; and (iv) matters incident to the conduct of the annual meeting.

Revocability of Proxy

     You may revoke your proxy at any time before it is voted at the annual meeting. To revoke your proxy, submit a later-dated proxy electronically through the Internet or by telephone, or another signed proxy with a later date to Arthur A. Koch, Jr., our Senior Vice President, Finance, Chief Financial Officer and Corporate Secretary, or attend the annual meeting and vote in person.

     Attendance at the annual meeting will not in itself constitute a revocation of your proxy.

     Before the taking of the vote at the annual meeting, any written notice of revocation should be sent to Impax Laboratories, Inc., 30831 Huntwood Avenue, Hayward, California 94544, attention: Arthur A. Koch, Jr., or hand delivered to Mr. Koch.

     If you are a beneficial owner of shares of common stock held in street name, please review the voting instructions provided by the organization holding your shares or contact such organization regarding how to change your vote.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth information as of the record date (except as otherwise noted in the footnotes) regarding the beneficial ownership of our common stock by: (i) each person known by us to beneficially own more than five percent of our outstanding common stock; (ii) each director and nominee for director; (iii) each executive officer named in the Summary Compensation Table for the fiscal year ended December 31, 2008, excluding Dr. Hsiao; and (iv) all of our directors and executive officers as a group. As of the record date, 60,502,972 shares of our common stock were outstanding. Except as otherwise indicated, to our knowledge, the beneficial owners of shares of common stock listed below have sole voting and investment power with respect to such shares.

		Shares Beneficially Owned (1)
		Common Stock
		Amount and Nature
		of Beneficial				Percent of
Name and Address of Beneficial Owner (1)		Ownership				Class
Leslie Z. Benet, Ph.D.			30,600	(2)				*
Robert L. Burr			52,207	(3)				*
David S. Doll			77,859	(4)				*
Nigel Fleming, Ph.D.			39,000	(5)				*
Charles V. Hildenbrand			66,459	(6)				*
Larry Hsu, Ph.D.			2,910,810	(7)			4.8	%
Arthur A. Koch, Jr.			60,000	(8)				*
Michael Markbreiter			31,500	(9)				*
Michael Nestor			34,575	(10)				*
Oh Kim Sun			43,179	(11)				*
Peter R. Terreri			37,000	(12)				*
All directors and executive officers as a group (11 persons)			3,351,330	(13)			5.5	%
Pamela Hsiao			3,930,620	(14)			6.5	%
2004 Hsiao Family Trust			3,361,240	(14)			5.6	%
Jacob Gottlieb			5,518,033	(15)			9.1	%
Visium Asset Management, LP			5,518,033	(15)			9.1	%
Pequot Capital Management, Inc.			5,399,800	(16)			8.9	%
Wellington Management Company, LLP			7,946,361	(17)			13.1	%

PROPOSAL ONE — ELECTION OF DIRECTORS

     Our bylaws provide that the number of directors on the board will consist of not less than one or more than ten, with the exact number to be fixed by the board. The board has fixed the number of directors at seven.

     At the annual meeting, the stockholders will elect seven directors, each to serve for a term of one year and until his successor has been elected and qualified or until the director’s earlier death, resignation or removal. Unless directed otherwise, the persons named in the enclosed proxy intend to vote all proxies received by them “FOR” (i) the election as directors of the seven nominees listed below all of whom are presently our directors or (ii) if any of these nominees becomes unavailable or unwilling to serve as a member on the board for any reason, for a substitute nominee designated by the board.

     The board nominated Leslie Z. Benet, Ph.D., Robert L. Burr, Nigel Ten Fleming, Ph.D., Larry Hsu, Ph.D., Michael Markbreiter, Oh Kim Sun and Peter R. Terreri to serve as directors based upon the recommendation of our nominating committee. All nominees have consented to be named and have indicated their intent to serve if elected. The board has no reason to believe that any of the nominees will decline or will be unable to serve as a director.

     Dr. Charles Hsiao had been our chairman and director since December 1999 until his death in August 2008. Dr. Hsiao was a co-founder of our predecessor, Impax Pharmaceuticals, Inc., in 1994, and served as our Co-Chief Executive Officer from 1999 to 2003. On December 15, 2008, Mr. Burr was elected chairman of the board.

     The following table sets forth information, as of the record date, concerning our nominees for election to the board:

Director

Name

Age

Since

Positions Held

Committee Memberships

Leslie Z. Benet, Ph.D.

71

2001

Director

Compensation Committee and Nominating Committee

Robert L. Burr

58

2001

Chairman and Director

Audit Committee, Compensation Committee 1 and Nominating Committee

Nigel Ten Fleming, Ph.D.

54

1999

Director

Compensation Committee and Nominating Committee 1

Larry Hsu, Ph.D.

60

1999

President, Chief Executive Officer and Director

Michael Markbreiter

47

1997

Director

Audit Committee

Oh Kim Sun

60

1999

Director

Audit Committee

Peter R. Terreri

51

2003

Director

Audit Committee 1

     There is no family relationship between any of our directors, nominees for director or executive officers. None of our directors, nominees for director or executive officers is a party to any arrangement or understanding with any other person with respect to nominations of directors.

     Set forth below is the business experience of the members of the board for the past five years, unless indicated otherwise.

      Leslie Z. Benet, Ph.D . has been a Professor since 1969 of, and has also served as Chairman of, the Department of Biopharmaceutical Sciences, University of California, San Francisco. Dr. Benet has since 1995 been Chairman, President or Chief Executive Officer of AvMax Inc., a biopharmaceutical company. He received his A.B. (English), B.S. (Pharmacy), and M.S. from the University of Michigan, and his Ph.D. from the University of California. Dr. Benet has received six honorary doctorates: Uppsala University, Sweden (Pharm.D., 1987); Leiden University, The Netherlands (Ph.D., 1995); University of Illinois at Chicago (D.Sc., 1997); Philadelphia College of Pharmacy and Science (D.Sc., 1997); Long Island University (D.Sc., 1999); and University of Athens (Ph.D., 2005). Dr. Benet’s research interests, more than 470 publications, and 11 patents are in the areas of pharmacokinetics, biopharmaceutics, drug delivery, and pharmacodynamics. He is listed among the 250 most highly cited pharmacologists worldwide. In 1985, Dr. Benet served as President of the APhA Academy of Pharmaceutical Sciences. During 1986, Dr. Benet was a founder and first President of the American Association of Pharmaceutical Scientists (AAPS). In 1987, Dr. Benet was elected to membership in the Institute of Medicine (IOM) of the National Academy of Sciences. Dr. Benet has received the highest scientific awards of AAPS (1989 and 2000), Rho Chi (1990), American Association of Colleges of Pharmacy (1991), American Society for Clinical Pharmacology and Therapeutics (1995), American Pharmaceutical Association (2000), International Pharmaceutical Federation (2001) and in 2004 received the Pharmaceutical Sciences World Congress Research Achievement Award and the Controlled Release Society Career Achievement in Oral Drug Delivery Award. Dr. Benet formerly served as Chair of the FDA Expert Panel on Individual Bioequivalence and the FDA Center for Biologics Peer Review Committee, and as a member of the FDA Science Board and the Generic Drugs Advisory Committee. Dr. Benet presently serves as a member of the IOM Forum on Drug Discovery, Development and Translation.

      Robert L. Burr is a partner of Fleming US Discovery Partners, L.P., a private equity sponsor affiliated with J.P. Morgan Chase & Co. Mr. Burr was employed by J.P. Morgan Chase & Co. and associated entities from 1995 to May 2008, at which time he resigned his position as Managing Partner of the Fleming US Discovery III Funds. From 1992 to 1995, Mr. Burr was head of Private Equity at the investment banking firm of Kidder, Peabody & Co., Inc. Prior to that time, Mr. Burr served as the Managing General Partner of Morgan Stanley Ventures and General Partner of Morgan Stanley Venture Capital Fund I, L.P. and was a corporate lending officer with Citibank, N.A. Mr. Burr received an MBA from Columbia University and a BA from Stanford University.

      Nigel Ten Fleming, Ph.D. is Chairman of Minerva Healthcare, an emerging specialty pharmaceutical company and, in 2008, he became Chairman and Chief Executive Officer of G2B Pharma. He previously founded Athena Diagnostics, a neurological diagnostics reference laboratory, serving variously as Chairman, CEO and Vice President of Business Development prior to the company’s 1995 sale to Athena Neurosciences /Elan Pharmaceuticals. Dr. Fleming has also served on the boards of directors of Examplar, a subsidiary of Transgenic Sciences Inc. that developed the first transgenic Alzheimer’s mouse model, and serves on the board of Genmedica Therapeutics, an oral insulin company based in Barcelona. He has also consulted for, and served in various leadership roles at a number of early-stage biotechnology companies, including Gamera Biosciences, Neurocal, Nephros’, TheraMed Partners and Plant Cell Technologies. Dr. Fleming obtained his Ph.D. in Clinical Biochemistry from the University of Cambridge in England and was a lecturer at Harvard Medical School for a number of years.

      Larry Hsu, Ph.D. has been our President and Chief Executive Officer since October 1, 2006. Prior to holding these positions, Dr. Hsu served as President and Chief Operating Officer beginning in 1999. Dr. Hsu co-founded Impax Pharmaceuticals, Inc. in 1994 and served as its President, Chief Operating Officer and a member of the board from its inception until its merger with us. From 1980 to 1995, Dr. Hsu worked at Abbott Laboratories, where, during his last four years, he served as Director of Product Development in charge of formulation development, process engineering, clinical lot manufacturing and production technical support of all dosage forms, managing a staff of approximately 250 people. Dr. Hsu obtained his Ph.D. in pharmaceutics from the University of Michigan.

      Michael Markbreiter has been a portfolio manager for Sofaer Capital, a global hedge fund, since December 2000. From August 1995 to December 1998, Mr. Markbreiter was a portfolio manager for private equity investments for Kingdon Capital Management Corp., a New York hedge fund. In April 1994 he co-founded Ram Investment Corp., a venture capital company. From March 1993 to January 1994, Mr. Markbreiter was an analyst at Alliance Capital Management Corp. From July 1983 to September 1989, Mr. Markbreiter was an Executive Editor for Arts of Asia magazine. Mr. Markbreiter graduated from Cambridge University with a degree in Engineering.

      Oh Kim Sun has been employed by the Chemical Company of Malaysia Berhad (CCM), a Malaysian corporation whose stock is listed on the Bursa Malaysia Berhad, since 1983 and served as Executive Director from 1983 through October 2003. Currently, Mr. Oh is a member of the board of directors of Nikko Electronics Berhad, Pharmaniaga Berhad, UEM Land Holdings Berhad and Faber Group Berhad, all of which are listed on the Bursa Malaysia Berhad. Mr. Oh is also a director of various other companies in Kuala Lumpur. Mr. Oh is also a member of The Malaysian Institute of Certified Public Accountants.

      Peter R. Terreri has over 20 years of experience primarily in generic pharmaceuticals with a specialized expertise in finance. Mr. Terreri is President, Chief Executive Officer and director of CGM, Inc., a manufacturing company that he owns and operates. He previously served as Senior Vice President and Chief Financial Officer of Teva Pharmaceuticals USA from 1985 through 2000, where he actively participated in the growth of the company from a $20 million local generic pharmaceutical company into a global leader in generic pharmaceuticals. As an active member of senior management, he was involved in all facets of the decision-making process at Teva Pharmaceuticals USA, including structuring and negotiating company and product acquisitions, participating in multiple public financings and securing several licensing deals and a substantial credit line. In addition to his role as Chief Financial Officer, Mr. Terreri contributed to many areas related to the company’s success outside of finance, including product development selection, facility utilization, business development, strategic planning, and implementing integration plans for the company’s acquisitions. He also supervised areas such as operations, sales and marketing, and information technology during his tenure.

Board and Committee Matters

Independence

     The board has determined that the following directors, constituting a majority of the members of the board, are independent under the independence standards contained in the listing requirements of The NASDAQ Stock Market LLC, referred to as “NASDAQ”: Leslie Z. Benet, Ph.D., Robert L. Burr, Nigel Ten Fleming, Ph.D., Michael Markbreiter, Oh Kim Sun and Peter R. Terreri.

Meetings of the Board and Committees

     In 2008, there were four regular and three special board meetings. The board has three standing committees: the audit committee, the compensation committee and the nominating committee. Our audit committee held 6 meetings, our compensation committee held 5 meetings and our nominating committee did not hold meetings in 2008. During 2008, each of our directors attended at least 75% of the aggregate of (i) all of the meetings of the board and (ii) all of the meetings of all committees of the board on which such director served.

Committees of the Board

      Audit Committee . The board has appointed a standing audit committee consisting of Peter R. Terreri, as chairman, and Robert L. Burr, Michael Markbreiter and Oh Kim Sun. The board has determined that each member of the audit committee is independent, as defined in the applicable NASDAQ listing standards. In addition, the board has determined that Mr. Terreri qualifies as an “audit committee financial expert” as defined under Item 407 of Regulation S-K promulgated by the SEC.

     The audit committee is governed by a written charter approved by the board, which is posted on our Web site (www.impaxlabs.com) and accessible via the “Investor Relations” page. The principal purpose of the audit committee is to oversee our accounting and financial reporting processes and the audit of our financial statements. The audit committee is directly responsible for the appointment, compensation, retention and oversight of the firm selected to be engaged as our independent registered public accounting firm, and pre-approves the engagement of the independent registered public accounting firm for all non-audit activities permitted under the Sarbanes-Oxley Act of 2002. In addition, the audit committee establishes procedures for the receipt, retention and treatment of complaints we receive regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters.

      Compensation Committee . The board has appointed a standing compensation committee consisting of Robert L. Burr, as chairman, and Leslie Z. Benet, Ph.D. and Nigel Ten Fleming, Ph.D. The board has determined that each member of the compensation committee is independent, as defined in the applicable NASDAQ listing standards.

     The board has adopted a written compensation committee charter, which is posted on our Web site (www.impaxlabs.com) and accessible via the “Investor Relations” page. The principal duties of the compensation committee are to formulate, evaluate and recommend the compensation of our executive officers to the board and the oversight of all compensation programs involving the issuance of our stock and other equity securities. Our Chief Executive Officer makes recommendations concerning executive compensation, other than the compensation of the Chief Executive Officer, to the compensation committee. The committee uses the consulting services of Radford Surveys + Consulting, a business unit of AON, referred to as “Radford,” in evaluating executive compensation. The compensation committee does not address director compensation, which is set by the board.

      Nominating Committee . The board has appointed a standing nominating committee currently consisting of Nigel Ten Fleming, Ph.D., as chairman, and Leslie Z. Benet, Ph.D. and Robert L. Burr. The board has determined that each member of the nominating committee is independent, as defined in the applicable NASDAQ listing standards.

     The nominating committee is governed by a written charter approved by the board, which is posted on our Web site (www.impaxlabs.com) and accessible via the “Investor Relations” page. The

principal purposes of the nominating committee are to develop and recommend to the board certain corporate governance policies, establish criteria for selecting new directors and identify, screen and recruit new directors. The nominating committee is also responsible for selecting and recommending individuals to serve as members of the board and recommending directors for committee membership to the board.

     The information on the Web site listed above and elsewhere in this proxy statement is not, and should not be, considered part of this proxy statement and is not incorporated by reference in this document. The Web site is, and is intended only to be, an inactive textual reference.

Qualifications of Director Nominees

     The nominating committee has not established specific, minimum age, education, years of business experience or specific types of skills for potential director nominees, but in general, expects that qualified nominees will possess a proven record of business acumen, success and leadership, including experience or expertise in one or more of the following areas: business, financial or accounting matters generally, the specific industry and markets in which we operate, technical matters generally and the specific technologies we use and develop. In addition, potential director nominees will be evaluated by reference to requirements relating to the board and committee composition under the law and applicable NASDAQ listing standards.

Director Nominee Selection Process

     In the case of an incumbent director whose term of office expires, the nominating committee reviews such director’s service during the past term, including the number of board and committee meetings attended, as applicable, quality of participation and whether the candidate continues to meet the general qualifications for a director outlined above, including the director’s independence, as well as any special qualifications required for membership on any committees on which such director serves.

     In the case of a new director candidate, the selection process for director candidates includes the following steps:

	•		identification of director candidates by the nominating committee based upon suggestions from current directors and executives and recommendations received from stockholders, and possible engagement of a director search firm;
	•		interviews of candidates by the nominating committee;
	•		reports to the board by the nominating committee on the selection process;
	•		recommendations by the nominating committee; and
	•		formal nominations by the board for inclusion in the slate of directors at the annual meeting.

Stockholder Nominee Recommendation Policy

     The nominating committee will consider recommendations received from stockholders of potential director nominees in a manner consistent with the nominating committee’s charter and its

consideration of potential director nominees generally. The ultimate decision of whether to nominate a potential director nominee remains solely within the discretion of the board.

     Any stockholder recommendation of a potential director nominee proposed for consideration by the nominating committee should include the potential director nominee’s name and qualifications for board membership and should be addressed to:

Corporate Secretary
Impax Laboratories, Inc.
30831 Huntwood Avenue
Hayward, California 94544

     All stockholder recommendations of potential director nominees which are intended to be considered by the nominating committee in any year must be received at least 120 days prior to the date on which we first mailed our proxy material for the prior year’s annual meeting of stockholders in order, upon a determination by the nominating committee to recommend such potential director nominee, for such nominee to be included in the proxy statement and the form of proxy relating to the annual meeting of stockholders. The deadline for submitting recommendations of potential director nominees for the 2010 annual meeting of stockholders is December 9, 2009.

Communication with the Board

     Stockholders may communicate with the board or individual members of the board, including the respective chairs of the board’s nominating committee, compensation committee and audit committee, by sending correspondence to the following address: Corporate Secretary, Impax Laboratories, Inc., 30831 Huntwood Avenue, Hayward, California 94544. We will periodically forward all correspondence received to the board or to the individual member of the board to whom the correspondence is addressed.

Attendance at Annual Meeting of Stockholders

     The board has adopted a policy that all of our directors should attend the annual meeting of stockholders, absent exceptional cause. In 2004, the last year in which we held an annual meeting of stockholders, all of the then ten directors attended the annual meeting of stockholders.

Director Compensation for Year Ended December 31, 2008

     The following table sets forth information regarding the compensation of our non-employee directors during the year ended December 31, 2008.

		Fees Earned or
		Paid in Cash				Total
Name		($)(1)				($)(2)
Leslie Z. Benet, Ph.D.			99,000				99,000
Robert L. Burr			136,000				136,000
Nigel Ten Fleming, Ph.D.			107,000				107,000
Michael Markbreiter			102,000				102,000
Oh Kim Sun			102,000				102,000
Peter R. Terreri			142,000				142,000

Narrative Disclosure to Director Compensation Table

     Members of our board of directors who are our employees do not receive any compensation for their services as our directors. In the year ended December 31, 2008, each of our non-employee directors received an annual retainer of $25,000, payable in quarterly installments, and a $2,000 fee for each regularly scheduled board meeting that such director attended. On December 30, 2008, each of Dr. Benet, Mr. Burr, Dr. Fleming, Mr. Markbreiter, Mr. Sun and Mr. Terreri received a special director fee in the amount of $66,000, $103,000, $74,000, $69,000, $69,000 and $99,000, respectively. We paid these special director fees in recognition of the directors’ increased level of board services during the period when we were delinquent in filing our periodic reports with the SEC.

     During the year ended December 31, 2008, non-employee directors were reimbursed for out-of-pocket expenses incurred in attending board and committee meetings. In addition to the foregoing, we paid a retainer of $10,000, payable in quarterly installments, to Mr. Terreri, Chairman of the audit committee, in the year ended December 31, 2008. No equity awards were granted to our directors during the year ended December 31, 2008.

      THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION AS DIRECTORS OF THE SEVEN NOMINEES NAMED IN THE PROXY STATEMENT.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

     The following discussion provides an analysis of our compensation program for the executive officers named in the Summary Compensation Table beginning on page 30 and discusses the material factors involved in our decisions regarding the compensation of the following named executive officers:

	•		Larry Hsu, Ph.D, our President and Chief Executive Officer;
	•		Arthur A. Koch, Jr., Senior Vice President, Finance and Chief Financial Officer;
	•		Charles V. Hildenbrand, our Senior Vice President, Operations;
	•		Michael J. Nestor, President of Impax Pharmaceuticals, our branded-products division;
	•		Charles Hsiao, Ph.D., who was our Chairman until his death in August 2008; and
	•		David S. Doll, who was our Executive Vice President, Commercial Operations, until his resignation in August 2008.

     This discussion does not include the compensation of Christopher Mengler, R.Ph., who was appointed as President of Global Pharmaceuticals, our generic-products division, on January 5, 2009. The following discussion cross-references those specific tabular and narrative disclosures that appear following this subsection where appropriate. You should read this Compensation Discussion and Analysis in conjunction with such tabular and narrative disclosures.

Compensation Philosophy and Objectives

     At its core, our executive compensation program recognizes that our success is dependent upon our ability to attract, motivate and retain the highly talented individuals we need to achieve our business results. The program reflects the following key principles:

	•		To attract, motivate and retain the best talent we can obtain, our compensation should be competitive . We strongly believe that our future success rests with our people, including our executive officers. To be successful, we must be able to attract, motivate and retain quality executive officers. As compensation is a key tool to achieve this objective, one facet of our compensation program is to provide our named executive officers pay amounts and components that are competitive with those of other companies in our industry.
	•		Our compensation program should encourage and reward positive performance. Our executive compensation program is designed to promote and reward positive performance. In doing so, we consider both the overall performance of our business as well as the individual performance of each named executive officer. Positive performance on the part of our company and management will permit our named executive officers to be eligible to receive incentive compensation. On the other hand, when our business is facing financial or other challenges or an individual executive does not meet stated objectives, this incentive compensation may be appropriately reduced or eliminated.
	•		We seek to align the interests of our named executive officers and stockholders . We believe that equity compensation is an excellent way to encourage our executive officers to act in the best interests of our stockholders. Historically, we have provided our named executive officers with equity awards (primarily in the form of stock options) as part of

			their overall compensation to encourage equity ownership and to align their interests with those of our stockholders. However, except for the grant of 30,000 shares of restricted stock and an option to purchase 75,000 shares of our common stock to Michael Nestor in connection with his hiring as President of Impax Pharmaceuticals, we did not use this component as to any of our named executive officers in 2006 — 2008 because our compensation committee determined to defer equity awards to our named executive officers during the period when we were delinquent in filing our periodic reports with the SEC.
	•		Compensation should encourage teamwork and executive cohesion . While individual performance is carefully reviewed and considered, we have also maintained a philosophy of similar compensation for officers who are at similar executive levels. We believe that following such a plan of pay equity fosters teamwork and cohesion and discourages internal comparison of compensation packages among executives.
	•		Our compensation program should balance our short- and long-term financial and operational goals . We generally strive to achieve a balance between achievement of both short- and long-term goals through the use of both salary and annual cash incentives and equity-based incentives. Our management incentive program primarily rewards short-term performance by paying out base salary and annual cash incentive awards based on performance over a period of approximately one year. Equity-based awards are generally designed to reward long-term financial performance.

Our Compensation Decisionmaking Process

      Role of Chief Executive Officer and Compensation Committee

     In general, as to most items of compensation, the chief executive officer annually evaluates each named executive officer, other than himself, and recommends to the compensation committee each component of compensation for all of those named executive officers. Compensation that is generally not covered by the chief executive officer’s evaluation includes benefits and other compensation mandated or determined by reference to an existing employment or similar agreement or benefits and other programs generally available to all of our employees.

     As to the compensation of our chief executive officer, the compensation committee discusses and creates a proposal as to the amount of and any changes to his compensation. The committee also evaluates the chief executive officer’s proposals as to the compensation of our other named executive officers. The compensation committee then submits its recommendations regarding the compensation of all of our named executive officers to the board of directors for final approval. In addition, consistent with our compensation policies, our chief executive officer did not evaluate the 2008 compensation of our former chairman, Dr. Hsiao. Dr. Hsiao’s 2008 compensation was reviewed by our compensation committee, which submitted its recommendation to our board of directors for final approval.

     Generally, as part of its process of setting and approving the executive annual compensation, the compensation committee and the board, as applicable, review gains realized from prior compensation or compensation to be received upon a future termination of employment or a change in control. Severance and change-in-control compensation is intended to maximize stockholder value and assure continuity of leadership by allowing executives to perform their duties without regard to any concerns that they may have regarding their continued employment.

      Role of Compensation Consultants

     In 2008, as in 2007, we retained the consulting services of Radford to assist in the evaluation of our compensation program for our named executive officers. Radford reports directly to the compensation committee, and the compensation committee has the authority to retain and dismiss the compensation consultants.

      2008 Review of Executive Compensation

     In 2008, the compensation committee, with the assistance of Radford, conducted a comprehensive review of our executive compensation to ensure that we are paying our executive officers competitive levels of compensation that best reflect their individual responsibilities and contributions to our operations and provide incentives to achieve our business objectives.

     Radford’s review took into account the fact that, since 2005, the level of our executive compensation was closer to the 25 ^th than the 50 ^th percentile of Radford compensation survey data, described below in “—Benchmarking Executive Compensation.” Such level was maintained throughout the period we were unable to file our periodic reports with the SEC and our audits for 2004, 2005, 2006 and 2007 remained open. The board made this decision to avoid even the appearance of any conflict between management and stockholder objectives even though the level of compensation was becoming increasingly less competitive with the executive compensation of our peers.

     Following resolution of the issues described above, an in-depth examination of Radford’s survey led the compensation committee to conclude that the total compensation for our executive officers required adjustment to bring our compensation to a level competitive with that of other companies in our peer group and to make our compensation internally equitable for officers at similar levels of responsibility. Once the audits were completed and we reregistered our common stock with the SEC, and in recognition of our business and financial achievements, our compensation committee and the board, with the assistance of Radford:

	•		developed a new compensation philosoply that targets executive compensation at the 50 th percentile for salary, cash incentive awards and equity awards; and
	•		recognized extraordinary past performance of our executive officers in the context of executive compensation that has been below the market 50 th percentile. See “— Cash Incentive Awards — Special Cash Bonuses” for a discussion of special bonuses granted to our executive officers in 2008.

      Benchmarking Executive Compensation

     With the assistance of Radford, the compensation committee established the following peer group of life sciences companies:

	•		Abraxis Bioscience, Inc.
	•		Alpharma Inc.
	•		Barr Pharmaceuticals, Inc.
	•		Chattem, Inc.
	•		Caraco Pharmaceutical Laboratories, Ltd.
	•		Endo Pharmaceuticals Holdings, Inc.
	•		K-V Pharmaceutical Company
	•		Lannett Company, Inc.
	•		The Medicines Company
	•		Medicis Pharmaceutical Corporation
	•		Obagi Medical Products, Inc.
	•		Par Pharmaceutical Companies, Inc.

	•		Hi-Tech Pharmacal Co., Inc.
	•		Salix Pharmaceuticals, Ltd.

     Such companies were selected based on: (i) similarity of business model to our business model; (ii) comparability to our company based on size, as measured by financial characteristics and number of employees; (iii) stage of product development; and (iv) financial performance.

     Radford provided us with information regarding compensation practices, including both cash and equity compensation, of companies comprising our peer group and published survey data using the 2008 Radford Global Life Sciences Executive Total Direct Compensation Survey. We believe that such information constituted appropriate guidelines for our compensation committee to compare proposed pay levels for our named executive officers with those of other companies in the life sciences industry. The purpose of using these data was to assist the decision makers in assessing whether the proposed executive compensation was competitive. The decision makers considered these data only as a guidepost to their evaluation of proposed compensation amounts, and there was no mandate that any actual compensation paid must fall within any set range. Our compensation committee and the board of directors believe that using the Radford data in this manner is essential to establishing an appropriate and competitive compensation structure.

     Our compensation committee and the board review this process each year and in future years may determine to measure executive compensation by reference to data of companies in a different percentile range if our performance criteria or results, as viewed by reference to our yearly budget, change significantly, or they may choose to implement a different process altogether. The compensation committee will review the composition of the peer group annually to ensure that companies comprising the peer group are relevant for comparative purposes.

Components of Our Executive Compensation Program

      Overview of Elements of Compensation

     Total compensation for our named executive officers is comprised of the following elements:

	•		base salary;
	•		cash incentive awards;
	•		options and other equity-based awards (although we did not grant any of these awards to our named executive officers in 2008 other than to Mr. Nestor);
	•		non-qualified deferred compensation plan contributions;
	•		401(k) retirement plan contributions;
	•		post-employment and change-in-control benefits, including severance protection; and
	•		other benefits and perquisites.

     With respect to each of these elements, we provide the following discussion and analysis: (i) a description of the element; (ii) the objectives of each element; (iii) the specific performance that each element is designed to reward, if any; (iv) why we choose to pay each element; (v) how we determine the amount of each element; and (vi) how each element and our decisions regarding that element fit into our overall compensation objectives and affect decisions regarding those elements.

      Base Salary

     Base salary is paid to all employees, including our named executive officers, to provide them with a degree of financial certainty and a source of fixed compensation to meet their day-to-day living and other needs. We believe that our base salaries should be set competitively with other companies in our peer group and in the life sciences industry group in general so that they may serve to attract and retain talented executives.

     We generally set an initial base salary range for a particular executive level (for example, all officers with the title of Senior Vice President or President of a division) and then apply that range to all executives at that level. In establishing these base salary ranges, we consider:

	•		the experience, education and skills required and value of the position to us and our operations;
	•		the particular needs of our company for an executive at the level being considered;
	•		our desire to promote a cohesive management team among executives of that level by establishing internal pay equity; and
	•		proposed salaries for executives in similar positions in other companies in our peer group, as reflected in the Radford compensation survey data, applying the procedure described above in “ — Our Compensation Decisionmaking Process.”

     Once the base salary range is established for a particular executive level, we then determine the amount of salary that a specific executive officer will receive. For new hires or promotions to a particular executive level, we consider:

	•		the individual experience, education and skills of the particular executive;
	•		for promotion candidates, the executive’s prior performance and length of service with us and the salaries of any other executives at that level; and
	•		other special circumstances applicable to the particular executive.

     We believe that generally the base salary levels we set for our named executive officers in 2008, except for Mr. Nestor, were less, and in some cases significantly less, than competitive compensation for an executive who:

	•		is fully experienced and educated as required by the position;
	•		is a strong performer and strong leader who makes solid contributions; and
	•		possesses a full skill set for his or her position and applies those skills successfully.

     Based upon information available when Mr. Nestor was hired in March 2008, the salary we agreed to pay him fell between the 50 ^th and 55 ^th percentiles of the Radford data and exceeded base salaries available to our executive officers at that time. The compensation committee believed that this level of compensation was justified in Mr. Nestor’s case, as executives with Mr. Nestor’s experience are in relatively high demand. The committee also believed that providing Mr. Nestor with a higher relative level of salary was warranted because his expected performance in expanding the operations of our branded-products division would significantly enhance our financial performance and results of operations and, in turn, lead to increases in stockholder value.

     Increases in base salary are used to reward executives for their positive performance in the preceding year and to ensure that their salaries remain competitive.

     For 2008, we did not increase Dr. Hsiao’s or Dr. Hsu’s base salary. We believe that this decision appropriately promoted the alignment between the interests of our executive officers and stockholders while we sought to complete the audits and regain compliance with our public reporting requirements. Increases in Mr. Doll’s base salary through August 1, 2008 were fixed by the terms of his employment agreement with us. As for our other named executive officers, base salary adjustments are evaluated and proposed by the chief executive officer, whose proposals are reviewed by the compensation committee. At the beginning of each year, a set of objectives is prepared for, and discussed with, each such named executive officer. These objectives are tailored to each individual executive and are based upon his or her job responsibilities and on certain of our results of business and financial performance that reflect directly upon the executive’s duties. These objectives might include, for example:

	•		achieving objective operating or financial metrics associated with the executive’s role, such as sales, product development milestones and activity levels, operating efficiency and product reliability;
	•		developing and implementing particular policies, procedures and systems necessary for the smooth and proper operation or function of the particular business unit; and
	•		hiring and retaining appropriate personnel to support specific business units.

     For 2008, we established these objectives to reflect our compensation philosophy of using pay to encourage and reward our named executive officers’ positive performance, as the achievement of the goals directly impacts whether base salaries are increased and the amount of any such increase. Some of the objectives established in 2008 required the executive to have met specific operating metrics, such as achieving increases in operating efficiency or submitting a stated number of applications to the FDA. These objectives were consistent with our philosophy of aligning the interests of our executives with those of our stockholders, because we believe the achievement of these goals had a direct or indirect impact on our results of operations, financial performance or profitability.

     The criteria we established to determine the increases in base salary of our named executive officers are the same as those we use to determine their respective annual cash incentive awards. See “— Cash Incentive Awards” below for a description of the types of individual and corporate performance goals, the achievement of which we evaluate to determine the named executive officer’s salary increase.

     In addition to the information provided by these evaluations, in an effort to maintain pay equity, the chief executive officer generally developed 2008 base salary increases for other named executive officers consistently among executives serving in similar capacities and with similar levels of responsibility. The amount of a named executive officer’s base salary may also serve as a reference point for determining the amount of his other compensation elements. For example, in 2008, the potential maximum annual cash incentive award for each executive was derived from a percentage of the executive’s base salary.

     For 2008, we made modest increases in Mr. Koch’s and Mr. Hildenbrand’s base salary to appropriately promote the alignment between the interests of our executive officers and stockholders while we sought to regain compliance with our public reporting requirements. Salary increases rewarded them for their achievement in substantial part of stated performance goals during the year. Specific performance goal information for each of these named executive officers is provided below in “— Cash Incentive Awards.”

      Cash Incentive Awards

           Annual Cash Incentive Awards

     Through annual cash incentive awards, we provide our named executive officers with an increased cash compensation opportunity and reward them for attaining short-term, rather than long-term, individual and corporate goals. We believe that a meaningful amount of executive compensation should be variable and contingent on individual and corporate performance. Establishing executive compensation that is rewarded upon the achievement of these performance-based criteria, discussed in more detail below, supports our goal of providing incentives to our executives who dedicate their full efforts toward achieving our performance objectives, which in turn makes our business successful and contributes to increases in stockholder value in the short-term. Generally, our named executive officers who have been in their position during the year are eligible to receive these cash incentive awards. While our 1999 employment agreements with Drs. Hsiao and Hsu provide that their annual cash incentive payments will be equal, at the time of Dr. Hsiao’s appointment as non-executive Chairman in 2004 his agreement was orally modified to provide that only his annual cash incentive target would be the same as Dr. Hsu’s, with any actual award being based upon his and Dr. Hsu’s respective individual performance. As a result of Dr. Hsiao’s changing role from an executive to a non-executive position, the compensation committee determined to forego any cash incentive award to Dr. Hsiao for 2006, 2007 and 2008.

     Annual cash incentive awards are generally calculated based upon two primary variables: a percentage of base salary and performance goals that must be achieved to earn the award. In an effort to maintain pay parity, executives at the same job level and with similar degrees of responsibility will generally be assigned the same percentage of base salary.

     With the exception of Mr. Doll’s annual cash incentive award percentage, which was set at a target of 75% of his annual base salary in his employment agreement, the compensation committee evaluates and establishes base salary percentages for our named executive officers as part of the yearly compensation process. For 2008, the annual award target percentage for each of our named executive officers (other than Dr. Hsiao) was set at 75% of base salary, consistent with and in furtherance of the compensation objectives and philosophies described above. Once set, the compensation committee has the discretion to pay at above or below these percentage targets depending on our overall financial and operational performance and individual performance. The majority of actual cash incentive awards granted by the compensation committee for 2008 performance of our named executive officers were below the established 75% target.

     To determine whether or how much cash incentive compensation is to be received, each named executive officer is also evaluated against specified performance goals that are designed to ensure that payment of annual incentive compensation is tied to measurable positive performance and increases in stockholder value.

     During the first quarter of 2008, the board of directors and the compensation committee established individual goals for the chief executive officer. With respect to each other named executive officer, during the first quarter of 2008 the chief executive officer developed each executive specific individual performance goals and a set of corporate or company-wide goals. Individual goals were customized for the applicable executive and reflected the responsibilities and duties that we believe the executive should fulfill in connection with his particular position. Corporate goals reflected company performance as a whole and included criteria based on our achievement of particular performance targets, such as revenue and net income. The establishment of individual and corporate goals in 2008 was tied to and consistent with our compensation philosophy, as described above in “— Base Salary.”

     With the exception of the chief executive officer, in 2008, individual goals comprised two-thirds of the total possible cash incentive compensation. Our chief executive officer’s cash incentive award is generally determined based entirely upon individual goals, as our compensation committee believes it is important to have our chief executive officer’s cash compensation be determined by reference to the special contributions this officer can make to our overall growth and development. In 2008, we preferred to emphasize individual goals because we believed it was important to provide short-term, cash rewards to our named executive officers for performance that meets and exceeds what is expected of them. Used this way, our cash compensation program in 2008 rewarded the demonstration of the types of performance and presence of executive skill sets that in our experience are directly attributable to our growth and an increase in value to our stockholders.

     The individual performance goals used to determine cash incentive compensation in 2008 for the named executive officers who participated in the cash incentive program were as follows:

Executive Officer				General Description of Performance Goals
Larry Hsu		•		Develop a long-range plan for generic business, achieve targeted ANDA filings and product or technology in-licensing and hire division president;
		•		Develop a long-range plan for brand business, achieve targeted NDA filing and product development and hire division president; and
		•		Achieve acceptable litigation settlements, customer-service improvement targets, and successful regulatory inspections, regain current reporting status, and meet milestones for new Taiwan facility.
Arthur A. Koch, Jr.		•		Regain current reporting status, achieve budgeted expense targets and hire investment relations director;
		•		Enhance information technology capabilities; and
		•		Provide timely budget variation reports at operating department level.
Charles Hildenbrand		•		Achieve timely customer shipment and product backorder targets;
		•		Achieve specified product quality targets;
		•		Pass all regulatory and customer inspections; and
		•		Achieve specified target of manufacturing costs as percentage of net sales.
Michael Nestor		•		Achieve target NDA submission and finalize Phase III clinical protocol;
		•		Achieve development milestones for existing product under development;
		•		Initiate feasibility studies for new products;
		•		Finalize additional co-promotion agreement and hire vice president for business development; and
		•		Achieve specific sales and marketing goals.

     Except with respect to Dr. Hsiao (who did not receive any cash incentive compensation in 2008) and the chief executive officer, in 2008, corporate performance goals represented one-third of the total weight in determining the named executive officer’s annual cash incentive awards, which we believe was appropriate to reflect our philosophy that executive performance must benefit our company in ways that can be objectively measured and quantified.

     For 2008, our corporate performance goals were comprised of the following: (i) an internal revenue target based on revenues adjusted for certain deferrals under Staff Accounting Bulletin No. 104 and (ii) an internal profit target based on the metric calculated by deducting our expenses determined in accordance with U.S. Generally Accepted Accounting Principles, referred to as “GAAP,” from the internal revenues described in (i) above. Because we defer a substantial portion of the revenue realized under our alliance agreements, we do not believe our results determined in accordance with GAAP provide as accurate a measure of our executives’ annual contribution to corporate performance as non-GAAP financial measures that reflect the flows of the products subject to these agreements to drug wholesalers and other ultimate customers as reported to us by our marketing partners.

     The 2008 corporate performance goals were recommended by our chief executive officer and set by the compensation committee based on their assessment of current and anticipated market and other conditions affecting our business and the goals. In the view of the compensation committee, payout on these performance goals in 2008 required substantial achievement by each named executive officer. Because our 2008 revenue-based and profit-based performance goals were ultimately achieved at these targets, all named executive officers received a cash incentive award payout based upon the achievement of such performance. The use of identical performance goals tied to substantive increases in the revenue- and profit-based criteria for all of our named executive officers supports our stated compensation philosophies of rewarding named executive officers for positive performance, aligning the interests of our executives with those of our stockholders and maintaining executive cohesion and teamwork through the implementation of similar pay structures for our executives.

     All performance goals are disclosed to and discussed with each executive at the beginning of the year. An executive must be actively employed by us on the payment date to receive an annual cash incentive award. Each set of performance goals counts for a portion of the total potential bonus that may be received, and items constituting individual performance goals are individually weighted. The portion of the bonus based on overall corporate performance is earned in full if the goals are met. Payouts of cash incentive awards are determined in part by the compensation committee’s or chief executive officer’s determination as to whether such goals were achieved in whole or in part. See “— Summary Compensation Table” and “— Grants of Plan-Based Awards During Year Ended December 31, 2008” for the amounts related to actual cash incentive awards paid out by us and the target annual cash incentive awards for 2008 performance.

           Special Cash Bonuses

     On December 30, 2008, our board of directors approved the recommendation of the compensation committee for the payment of special cash bonuses to Dr. Hsu, Mr. Koch and Mr. Hildenbrand in recognition of their significant contribution to the achievement of a number of critical objectives and to partially address the gap between the compensation available to our executives during 2008 and earlier and the compensation of executives at the companies comprising our peer group. The principal achievements underlying the special cash bonuses were:

	•		Successful launch of generic Ditropan in 2006;
	•		Successful launch of Bupropion 300mg ER in 2006;
	•		Successful renegotiation of the DAVA agreement in 2007;
	•		Successful negotiation of settlement of OxyContin litigation in 2007;
	•		Successful response to FDA regarding customer concerns of bioequivalence of the generic Wellbutrin 300mg XL product;
	•		Obtaining determination of SEC not to object to proposed new method of revenue recognition;
	•		Successful recruitment of the President and Chief Scientific Officer to lead Impax Pharmaceuticals Division, our brand-products division, and increase of R&D scientist complement to 45;
	•		Achievement of record sales, gross profit and net income in 2007 of $274 million, $166 million and $126 million, respectively;
	•		Successful negotiation to repurchase and retire approximately $63 million of convertible debt at a discount in 2008;
	•		Completion of 2004 through 2007 audits;
	•		Filing of registration statement on Form 10 in 2008;
	•		Successful negotiation of $25 million antitrust settlement in 2008;
	•		Successful negotiation of patent infringement litigation settlement and R&D development agreement resulting in gross proceeds of between $40 and $63 million depending on milestones achieved;
	•		Progress on the construction of a second manufacturing facility in Taiwan; and
	•		Successful recruitment of the President of Global Pharmaceuticals Division, our generic-products division.

     The Summary Compensation Table beginning on page 30 provides the amount of each respective officer’s special cash bonus.

     The special cash bonuses represented discretionary bonuses, which supplemented our annual cash incentive awards and intended to reward extraordinary performance of these executive officers in 2006, 2007 and 2008. These special cash bonuses reflect our compensation objective of providing competitive compensation to attract, motivate and retain top executive talent and ensure that executive compensation reflects positive performance that can be tied to measurable increases in stockholder value.

      Equity Awards

     We maintain the 2002 Plan for the purpose of granting stock options and other equity-based awards, such as stock appreciation rights (commonly known as SARs) and stock bonus awards (also known as restricted stock awards), to our employees, including our named executive officers. We have historically granted to our named executive officers only stock options, including incentive stock options and non-qualified stock options, under the 2002 plan. Except for the grant of 30,000 shares of restricted stock and an option to purchase 75,000 shares of our common stock to Michael Nestor in connection with his hiring as President of Impax Pharmaceuticals, our branded products division, we did not grant equity awards to any of our named executive officers during 2008. In 2008, our compensation committee determined to defer the grant of equity awards to our named executive officers (except for Mr. Nestor in connection with his hiring) while we were in the process of regaining compliance with our public reporting requirements. Our compensation committee will consider making awards of stock options or other equity incentive awards to our named executive officers in 2009.

     Option awards produce value to our named executive officers only if the price of our stock appreciates, and then only to the extent of the excess of our stock price over the exercise price of the option. Our stock options are granted with an exercise price equal to the fair market value on the date of grant to avoid providing any immediate benefit to the named executive officer upon grant. Option awards also link the interests of our executives to our stockholders in that the exercise of an option would result in the executive being issued shares of our common stock. Because they generally vest incrementally over time, options create an incentive for named executive officers to continue their employment with us for extended periods after the initial grant.

     We have established procedures for granting equity awards to all of our eligible employees, including our named executive officers. Each year we establish a stock option or stock bonus award amount, referred to as the “equity compensation award,” for each level of responsibility within our organization, subject to approval by the compensation committee. In arriving at the option component of the equity compensation award, we use a number of factors, including the grant date fair value of the option as determined by SFAS No. 123R and the percentage of total shares outstanding that each option would represent if exercised in full. Grants are made in the following three ways:

	•		New hires and promotions . During the first week of the third month of each calendar quarter we grant an equity compensation award to any employee who was hired or promoted during the preceding quarter (the grant to promoted employees being made only to the extent necessary to make their equity compensation award comparable to those made to others at the new level of responsibility).
	•		Annual grants . During the second two weeks of each October we make an annual equity compensation grant to each eligible employee.

•

Special grants . During the final week of each June and December, we make special awards for exemplary individual performance to non-executive employees selected by the chief executive officer from a pool of candidates recommended by senior management.

     The board of directors or compensation committee, however, retains discretion, in appropriate circumstances, to provide a different amount of equity awards for both the new hire/promotion and the annual grants. We might, for example, increase the number of options above the specified amount if needed to retain an executive who would, upon leaving his current position, be required to forfeit a substantial unvested option or restricted stock position. We have not, and in the future do not intend to, time the award of any equity-based compensation to coincide with the release of favorable or unfavorable information about us.

     Our equity awards are issued as long-term compensation that generally vest over a period of four years. This is consistent with our philosophy of linking the financial interests of our named executive officers to that of stockholders. The long-term compensation balances the short-term compensation paid in the form of base salary, annual incentive awards and special cash bonuses.

     For all of our equity awards, we establish the amount to be awarded to each of our named executive officers based upon the level of each position. As part of our goal of maintaining pay parity wherever possible, we tend to grant the same or similar amounts of options to executives with similar titles and levels of responsibility. Grants of awards to our executive officers under the 2002 plan are recommended by the compensation committee for the board approval. For all named executive officers, except our chief executive officer and Dr. Hsiao, option amounts and terms are generally proposed by our chief executive officer, subject to ultimate approval by the board of directors upon the compensation committee’ recommendation. Option grants to our chief executive officer and Dr. Hsiao are determined solely by the board of directors upon the recommendation of the compensation committee.

     Pursuant to our March 2008 employment agreement with Mr. Nestor, we granted him shares of restricted stock and an option to purchase shares of our common stock. We agreed to issue these awards even though we had generally suspended the granting of equity awards to our executive officers, as discussed above. We decided to take a different approach to equity awards under Mr. Nestor’s agreement because we believed that Mr. Nestor would be a valuable asset to our company, and we recognized that there was significant competition in our industry for employees with Mr. Nestor’s experience.

     We believe our decision to grant these options and restricted stock awards to Mr. Nestor was consistent with many aspects of our overall compensation philosophy, including:

	•		Aligning Mr. Nestor’s interests with those of our stockholders and rewarding him for positive performance — we chose equity-based compensation to provide Mr. Nestor with an economic benefit that increased in value only if our share price increased, thus aligning his interests with those of our stockholders. Also, because we believed that Mr. Nestor’s contributions would have a direct positive impact on our operating and financial success, it was our view that increases in value of these equity-based awards stemming from our financial performance would reward him for efforts that generated direct or indirect increases in stockholder value.
	•		Retaining and motivating Mr. Nestor’s employment with us — we chose to grant equity awards with long-term vesting periods in an effort to retain the employment of this executive over an extended period of time. We also believed that the grant of equity awards that increased in value over time as our operating performance continued to

improve would serve to encourage him to maintain positive performance with us in future years.

      4 01(k) Plan and Non-Qualified Deferred Compensation Plan Contributions

     Retirement plans, in general, are designed to provide executives with financial security after their employment has terminated and, through the incremental vesting of our matching contributions to such plans over time, provide a retentive element to the overall pay package. Our named executive officers are eligible to participate in the Impax 401(k) Profit Sharing Plan, which allows them to contribute a portion of their base salary and bonus to support their financial needs upon retirement. We also contribute to each participant’s account an amount equal to 50% of the amount contributed by the named executive officer, with our contribution not to exceed 3% of the participant’s annual total compensation. Our matching contributions to the 401(k) plan vest depending on the number of years the named executive officer has worked at our company, with all matching contributions vesting after the third year of service. Amounts contributed to the 401(k) plan are invested in one or more investment fund options. Participants generally do not pay U.S. federal income tax on contributions to or earnings in the 401(k) plan until the participant makes withdrawals from his or her plan account.

     Our named executive officers also are eligible to participate in the Impax Laboratories, Inc. Executive Non-Qualified Deferred Compensation Plan, restated effective January 1, 2005. See “— Non-Qualified Deferred Compensation During Year Ended December 31, 2008” and “— Narrative Disclosure to Non-Qualified Deferred Compensation Table.” We make a matching contribution for each participant equal to 50% of the participant’s contribution, not to exceed 5% of the participant’s base pay and cash incentive award per year. A participant’s account is notionally invested in one or more investment funds and the value of the account is determined with respect such investment allocations. We retain the discretion to reduce the level of matching contributions or eliminate them altogether, but we have not chosen to do so.

     These benefits are offered to provide financial security for our executives, and are consistent with our goal of attracting and retaining our executives. Because we do not provide either a qualified or a non-qualified defined benefit pension plan (often referred to as a SERP), we believe that the overall retirement plan benefits for our named executive officers are modest as compared to other public companies of our size. We also believe these contributions represent standard benefits that executive-level employees of public companies commonly receive. For these reasons, we do not take these matching contributions into consideration when setting other aspects of compensation for our executive officers.

      2008 Agreements with Executive Officers

     In connection with establishing Impax Pharmaceuticals, our branded-products division, we intended to hire an executive who would lead the business development and expand the operations of the division. In February 2008, we discussed with Mr. Nestor his potential employment at our company as President of Impax Pharmaceuticals, with Dr. Hsu leading these discussions for us. In March 2008, after discussions between the parties had been successfully concluded, we entered into an employment agreement with Mr. Nestor. See “— Narrative Disclosure to Summary Compensation and Grants of Plan-Based Awards Tables” for a summary of certain material terms of Mr. Nestor’s employment agreement.

     In July 2008, David Doll informed us of his intent to resign from his position as our Executive Vice President, Commercial Operations. In connection with Mr. Doll’s resignation, we discussed with him the terms of his separation agreement and mutual release from all claims, with Mr. Koch leading these discussions for us. On July 30, 2008, after discussions between the parties had been successfully concluded, we entered into a separation agreement and general release with Mr. Doll, under which he

resigned his position effective August 1, 2008 and his employment agreement was terminated. Mr. Doll’s rights with respect to equity awards under the employment agreement, as well as his rights under fully vested options to purchase 172,500 shares of common stock separately held by Mr. Doll, were terminated in connection with his resignation. Pursuant to the terms of Mr. Doll’s employment agreement and in full and complete settlement of all claims that Mr. Doll had or might have against our company, we agreed to pay Mr. Doll separation benefits consisting of a severance payment of $620,000 and 94,705 shares of our common stock.

      Post-Employment and Change-in-Control Benefits

     Severance payments provided by us include a cash payment that is generally based upon the salary and annual incentive payment history of the named executive officer at issue. Severance benefits may also include the accelerated vesting of our matching contributions under the non-qualified deferred compensation plan, the accelerated vesting of stock options and stock bonus awards, and the extension of the exercisability of an award.

     Generally speaking, we provide severance to our executives to give them financial security in the event they suffer an involuntary termination other than for cause. We believe that the risk or possibility of an involuntary termination or change in control creates uncertainty for named executive officers regarding their continued employment with us. These scenarios may include, among other things, a termination of employment or a change in an executive’s job location, position or duties, whether on an individual basis or due to an overall reduction in or change to our workforce, or a change in other members of senior management resulting from a change in control event. As a result, our severance benefits are linked to our compensation philosophy of encouraging the long-term retention of our executives.

     Severance benefits for a change in control, as specified in the December 1999 employment agreement with Dr. Hsu, are paid pursuant to a “single trigger”; that is, they are earned regardless of whether the executive has been terminated or demoted or has otherwise experienced any diminution in compensation or duties. We believe that a single trigger gives our executives a modest level of financial security in the event that we experience a change in control, regardless of whether the executive has suffered or will suffer any specific adverse employment circumstance.

     We believe that all of our severance and termination-related benefits are typical of those received by other executives in our industry in both structure and amount. See “— Potential Payments upon Termination or Change in Control” for a summary of these severance and change in control provisions, the amount of potential payments that our named executive officers might receive and the method by which these benefit levels were determined.

      Other Benefits and Perquisites

     Our named executive officers participate in a wide array of benefit plans that are available to all of our salaried employees generally, including an employee stock purchase plan as well as medical, dental, vision, life and short-term and long-term disability insurance plans. We generally do not offer our named executive officers any material compensation in the form of perquisites. Although we reimbursed our named executive officers for their respective life insurance and long-term disability insurance premium payments, on a tax gross up basis, in order to provide financial security for our executives, we do not intend to continue to offer such reimbursements on a tax gross up basis in the future.

We did, however, reimburse Mr. Nestor, on a tax gross-up basis, for relocation expenses and temporary housing expenses incurred in connection with his move from North Carolina to California. The reimbursement of such expenses was consistent with our philosophy of seeking to attract, motivate and retain Mr. Nestor as President of Impax Pharmaceuticals in light of significant competition in our industry for employees with Mr. Nestor’s level of experience and our belief that Mr. Nestor’s successful performance would contribute directly to our stockholder value.

Tax and Accounting Treatment of Compensation

      Section 162(m)

     Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, currently limits the deductibility for U.S. federal income tax purposes of certain compensation paid in any year by a publicly held corporation to an individual who, as of the end of the taxable year, is its chief executive officer and any other employee whose compensation is required to be reported to stockholders by reason of being among the three most highly compensated officers. As a result of Section 162(m), we cannot deduct for U.S. federal income tax purposes any compensation paid to any of these employees in an amount over $1 million unless the compensation is “performance-based compensation” as defined under Section 162(m) of the Code.

     Amounts we pay as base salary and cash incentive compensation, including special cash bonuses granted in 2008, do not qualify for the “performance-based compensation” exception. We intend that options issued under our 2002 plan will not be subject to the $1 million limitation in reliance upon this exception, but compliance with the performance-based compensation exception is subject to a number of very technical requirements. Further, several types of awards issued under our 2002 plan, including restricted stock, will not meet the requirements of the performance-based exception. There can be no assurance that we will be able to comply or that we will intend to comply with all of these requirements in the future.

      Section 280G

     Under Section 280G of the Code, a 20% excise tax is imposed upon named executive officers and other executive officers or employees who receive an “excess parachute payment” upon a change in control. An excess parachute payment is deemed to be received to the extent that such a change-in-control payment exceeds an amount approximating three times the employee’s average annual compensation, determined by a five-year average. A company also loses its tax deduction for any excess parachute payments made.

     We attempt to structure our severance packages so that they do not trigger an excess parachute payment (or a corresponding loss of our tax deduction), but there is no guarantee that the severance arrangements we have entered into will not require such a payment if and when they are triggered. Our employment agreements typically do not require us to reimburse an executive officer for the amount of any excise tax owed as a result of an excess parachute payment.

      Section 409A

     Section 409A of the Code provides for the payment of additional taxes by our directors, officers and employees with respect to various deferred compensation arrangements we maintain, including:

	•		employment and severance agreements between us and our officers;
	•		our non-qualified deferred compensation plan; and
	•		other compensation arrangements we enter into with our directors, officers and employees.

     Generally, however, Section 409A of the Code does not apply to incentive stock options and nonqualified stock options that are granted at fair market value if no deferral is provided beyond exercise. Section 409A also does not apply to our stock bonus awards. In the event that a deferred compensation arrangement fails to comply with Section 409A in form or operation, an officer, director or employee may become subject to:

	•		the imposition of U.S. federal income tax, and potentially state and local income tax, on all amounts deferred in the tax year in which the amounts are deferred (or, if later, in the tax year when the receipt of the benefits is no longer subject to a substantial risk of forfeiture);
	•		a penalty tax of 20% of the includable amount (in addition to the regular income tax at ordinary income rates); and
	•		interest at the underpayment rate plus 1 percent from the time the amount was first deferred (or, if later, the tax year when the benefits are no longer subject to a substantial risk of forfeiture) until the time the amount is included in income.

      SFAS No. 123R

     Accounting rules and pronouncements govern how we value option and stock bonus awards that we make and when those awards are to be recognized as compensation expense on our consolidated financial statements. Under SFAS No. 123R, we calculate the full grant date fair value of awards using a variety of assumptions. This calculation is performed for accounting purposes, as an executive officer might never realize any value from the award. This may happen, for example, when the value of a share of stock on which the executive holds an option falls below the exercise price of the option and remains below the exercise price, rendering the option worthless to the executive. SFAS No. 123R also requires that companies recognize the compensation cost of a stock option or stock bonus award proportionately over the period that an employee is required to render service in exchange for a share-based payment.

     In the Summary Compensation Table on page 30, the dollar amounts shown in the “Option Awards” column represent the compensation expense recognized by us in 2008 for awards made prior to 2007. These amounts do not necessarily represent the value received by an executive officer during 2008. To date, the SFAS No. 123R expense has not been a significant factor in setting or changing our equity compensation grant practices.

Summary Compensation Table

     The following table sets forth information relating to all compensation awarded to, earned by or paid to the following individuals for all services rendered in all capacities to us and our subsidiaries during each of the years ended December 31, 2008, 2007 and 2006, respectively:

	•		all individuals who served as our principal executive officer during the year ended December 31, 2008;
	•		our principal financial officer;
	•		our two most highly compensated executive officers whose total compensation for the year ended December 31, 2008 exceeded $100,000; and
	•		our former Executive Vice President, Commercial Operations.

																						Non-Equity
														Stock				Option				Incentive Plan				All Other
Name and						Salary				Bonus				Awards				Awards				Compensation				Compensation				Total
Principal Position		Year				($)				($)				($)(1)				($)(1)				($)(2)				($)(3)				($)
Larry Hsu, Ph.D.			2008				375,000				956,860				—				—				276,281				101,953	(4)			1,710,094
President and Chief Executive Officer (principal executive officer)			2007				375,000				—				—				6,976				243,750				63,292	(4)			689,018
			2006				394,231				—				—				49,014				253,125				54,128	(4)			750,498
Arthur A. Koch, Jr.			2008				250,000				421,909				—				—				186,688				60,741	(5)			919,338
Senior Vice President, Finance and Chief Financial Officer (principal financial officer)			2007				243,472				—				—				—				167,500				34,713	(5)			445,685
			2006				230,937				—				—				—				143,902				27,250	(5)			402,089
Charles V. Hildenbrand			2008				220,662				331,200				—				—				138,300				46,147	(6)			736,309
Senior Vice President,-Operations			2007				219,801				—				—				—				143,430				31,483	(6)			394,714
			2006				204,148				—				—				—				124,189				25,943	(6)			354,280
Michael J. Nestor (7)			2008				302,404				—				37,319				60,058				218,902				107,289	(8)			725,972
President, IMPAX Pharmaceuticals division (commencing March 31, 2008)
Charles Hsiao, Ph.D. (9)			2008				250,962				—				—				—				—				19,324	(10)			270,286
Former Chairman (through August 14, 2008) (former principal executive officer)			2007				375,000				—				—				6,976				—				37,662	(10)			419,638
			2006				394,231				—				—				49,014				—				56,325	(10)			499,570
David S. Doll (11)			2008				242,827				—				—				—				—				1,593,386	(12)(13)			1,836,213
Former Executive Vice President, Commercial Operations (through August 1, 2008)			2007				324,250				—				—				2,790				216,745				38,544	(13)			582,239
			2006				288,315				—				—				18,053				197,650				28,595	(13)			532,613

Grants of Plan-Based Awards During Year Ended December 31, 2008

     The following table sets forth information regarding grants of plan-based awards to our named executive officers during the year ended December 31, 2008. Except for the grants of an option and restricted stock to Mr. Nestor, we did not grant any equity awards to our named executive officers under the 2002 plan during 2008.

						Estimated Possible Payouts
						Under Non-Equity Incentive
						Plan Awards																All Other
																		All Other				Option								Grant
																		Stock				Awards:				Exercise				Date Fair
																		Awards:				Number of				or Base				Value of
																		Number of				Securities				Price of				Stock and
																		Shares of				Underlying				Option				Option
						Threshold				Target				Maximum				Stock or				Options				Awards				Awards
Name		Grant Date				($)(1)				($)(2)				($)(1)				Units(#)(3)				(#)(3)				($/Sh)(3)				($)(4)
Larry Hsu, Ph.D.			—				—				281,250				—				—				—				—				—
Arthur A. Koch, Jr.			—				—				187,500				—				—				—				—				—
Charles V. Hildenbrand			—				—				165,497				—				—				—				—				—
Michael J. Nestor			—				—				226,803				—				—				—				—				—
		June 6, 2008					—				—				—				30,000				—				—				255,900
		June 6, 2008					—				—				—				—				75,000				8.53				411,810
Charles Hsiao, Ph.D.			—				—				—				—				—				—				—				—
David S. Doll			—				—				292,500				—				—				—				—				—

Narrative Disclosure to Summary Compensation and Grants of Plan-Based Awards Tables

Agreements with Our Named Executive Officers

     During 2008 we had employment agreements with Drs. Hsiao and Hsu, and agreements with Messrs. Hildenbrand, Koch, Nestor and Doll. Mr. Nestor was appointed President of Impax Pharmaceuticals, our branded-products division, effective March 31, 2008. Dr. Hsiao, formerly our Chairman, died in August 2008 and Mr. Doll, formerly our Executive Vice President, Commercial Operations, resigned in August 2008. In connection with Mr. Doll’s resignation, we entered into a separation agreement with him.

      Agreements with Drs. Larry Hsu and Charles Hsiao

     At the closing of the merger of Global Pharmaceutical Corporation and Impax Pharmaceuticals, Inc., effective December 14, 1999, we entered into employment agreements with Dr. Hsiao and Dr. Hsu. In January 2004, we orally modified Dr. Hsiao’s employment agreement in connection with his changing role from an executive to a non-executive position. The oral modification provided that Drs. Hsiao’s and Hsu’s annual cash incentive award would no longer be equal. Although Drs. Hsiao’s and Hsu’s annual cash incentive target would remain the same, any actual award would be based upon Drs. Hsiao’s and Hsu’s respective individual performance.

     Each of the employment agreements contains substantially similar terms. The employment agreements contain initial three-year terms that automatically renew for successive one-year periods unless terminated by either party at least six months prior to the expiration of the initial term or any renewal term.

     Pursuant to the employment agreements, base salary for each executive was initially set at $175,000 per year, subject to discretionary increases in accordance with our normal procedures and policies. We also agreed to provide Drs. Hsiao and Hsu with additional compensation, including:

	•		a bonus, based on criteria established by our board of directors;
	•		full health, dental, vision and disability insurance, as well as life insurance and any other benefits customarily offered to our senior executive officers;
	•		four weeks of paid vacation time annually; and
	•		the reimbursement of all out-of-pocket expenses related to job performance.

     The employment agreements contain customary non-competition, non-interference, non-disclosure and assignment of inventions provisions.

     The employment agreements also contain provisions that provide for payments upon termination or a change in control. See “— Potential Payments upon Termination or Change in Control” for a discussion of the potential payments to Dr. Hsu upon termination or a change in control.

      Agreements with Charles Hildenbrand, Arthur A. Koch, Jr., Michael J. Nestor and David S. Doll

     We entered into agreements with Messrs. Hildenbrand, Koch and Nestor on August 31, 2004, February 10, 2005 and March 6, 2008, respectively. The agreements provide for at will employment and contain substantially similar terms summarized below. Pursuant to the agreements, annual base salary for Messrs. Hildenbrand, Koch and Nestor was initially set at $190,000, $220,000 and $425,000, respectively. In addition, Messrs. Hildenbrand, Koch and Nestor received an option to purchase 50,000, 50,000 and 75,000 shares of common stock, respectively. Mr. Nestor also received 30,000 shares of restricted common stock. Mr. Nestor’s stock option and restricted common stock vest in four equal annual installments beginning on the first anniversary of the date of grant. Messrs. Hildenbrand, Koch and Nestor are eligible to participate in our executive bonus program, employee stock purchase plan, non-qualified deferred compensation plan and any other benefit customarily offered to our executive officers. The agreements with Messrs. Hildenbrand and Nestor provided for relocation payments of $70,000 and $75,000, respectively. Mr. Nestor’s relocation payment was grossed up towards any relocation expenses incurred and we agreed to provide Mr. Nestor with temporary housing at a mutually agreeable location until his relocation was complete. Mr. Hildenbrand also received a $20,000 sign-on bonus.

     Our September 2006 employment agreement with Mr. Doll, formerly our Executive Vice President, Commercial Operations, set Mr. Doll’s initial annual base salary at $295,000 and provided for increases to $335,000 beginning February 1, 2007 and $395,000 beginning February 1, 2008. The maximum amount of Mr. Doll’s cash incentive award was set at 75% of his base salary. We entered into a separation agreement with Mr. Doll, dated July 30, 2008, under which he resigned his position effective August 1, 2008 and the employment agreement was terminated. See “— Potential Payments upon Termination or Change in Control” for a description of the terms of the separation agreement with Mr. Doll. Following Mr. Doll’s termination, we entered into a one-year consulting agreement with him effective September 4, 2008, under which, Mr. Doll agreed to provide us with certain litigation-related services upon our request.

Outstanding Equity Awards at December 31, 2008

     The following table sets forth the information regarding the outstanding option and stock awards for our named executive officers at December 31, 2008.

Stock Awards

Option Awards

Market

Number of

Number of

Number

Value of

Securities

Securities

of Shares

Shares of

Underlying

Underlying

of Stock

Stock

Unexercised

Unexercised

Option

That

That

Options

Options

Exercise

Option

Have Not

Have Not

(#)

(#)

Price

Expiration

Vested

Vested

Name

Grant Date

Exercisable(1)

Unexercisable(1)

($)

Date

(#)(1)

(#)

Larry Hsu, Ph.D.

12/22/2000

50,000

—

5.00

12/22/2010

—

—

03/08/2002

100,000

—

6.72

03/08/2012

—

—

03/10/2003

75,000

—

3.04

03/10/2013

—

—

																						Stock Awards
						Option Awards																				Market
						Number of				Number of												Number				Value of
						Securities				Securities												of Shares				Shares of
						Underlying				Underlying												of Stock				Stock
						Unexercised				Unexercised				Option								That				That
						Options				Options				Exercise				Option				Have Not				Have Not
						(#)				(#)				Price				Expiration				Vested				Vested
Name		Grant Date				Exercisable(1)				Unexercisable(1)				($)				Date				(#)(1)				(#)
Arthur A. Koch, Jr.			02/22/2005				50,000				—				17.13				02/22/2015				—				—
Charles V. Hildenbrand			08/30/2004				50,000				—				14.55				08/30/2014				—				—
			09/21/2005				11,459				—				9.85				09/21/2015				—				—
Michael J. Nestor			06/06/2008				—				75,000				8.53				06/06/2018				30,000				—	(2)
Charles Hsiao, Ph.D.			12/22/2000				60,800				—				5.00				12/22/2010				—				—
			03/08/2002				100,000				—				6.72				03/08/2012				—				—
			03/10/2003				75,000				—				3.04				03/10/2013				—				—
David S. Doll			—				—				—				—				—				—				—

Non-Qualified Deferred Compensation During Year Ended December 31, 2008

     The following table sets forth the benefits received by our named executive officers under our non-qualified deferred compensation plan during the year ended December 31, 2008 as well as the aggregate non-qualified deferred compensation balances at December 31, 2008:

																		Aggregate
		Executive				Registrant				Aggregate				Aggregate				Balance at
		Contributions				Contributions				Earnings in				Withdrawals/				December 31,
		in 2008				in 2008				2008				Distributions				2008
Name		($)(1)				($)(2)				($)				($)				($)(3)
Larry Hsu, Ph.D.			157,561				78,780				(59,187	)			—				497,706
Arthur A. Koch, Jr.			83,941				41,970				(70,970	)			—				129,794
Charles V. Hildenbrand			41,718				20,859				(28,414	)			—				46,617
Michael J. Nestor			—				—				—				—				—
Charles Hsiao, Ph.D.			25,096				12,548				(56,632	)			(451,095	)			—
David S. Doll			107,957				53,979				18,214				—				509,885

										Non-Equity
										Incentive
										Contributions
		2008 Salary				2008 Bonus				for 2007				Severance
		Contributions				Contributions				Performance				Payment
Name		($)				($)				($)				Contributions
Larry Hsu, Ph.D.			37,500				95,686				24,375				—
Arthur A. Koch, Jr.			25,000				42,191				16,750				—
Charles V. Hildenbrand			13,240				19,872				8,606				—
Michael J. Nestor			—				—				—				—
Charles Hsiao, Ph.D.			25,096				—				—				—
David S. Doll			22,003				—				21,675				64,279

Narrative Disclosure to Non-Qualified Deferred Compensation Table

     Our non-qualified deferred compensation plan permits highly-compensated individuals to receive a similar level of benefits (in terms of the overall percentage of their income eligible for tax deferral and employer matching contributions) as are available to employees with lower levels of income. Participants in this plan may defer up to 10% of the participant’s base salary and cash incentive award payable in a given year. Participants may also credit their plan accounts with any excess deferrals that are to be returned to the participant from our 401(k) plan due to the application of the tax code’s participation and discrimination standards. We make a matching contribution for each participant equal to 50% of the participant’s contribution, not to exceed 5% of the participant’s base pay and cash incentive award. A participant’s account is notionally invested in one or more investment funds and the value of the account is determined with respect to such investment allocations. We have the ability to reduce the level of matching contribution or eliminate it altogether, but we have not chosen to do so. Participants are fully vested in their contributions when made. Our matching contributions vest depending on the number of years of service, with participants being fully vested after five years of service. No contributions are forfeited as a result of a separation due to death, disability, termination of the plan or a change in control.

     Benefits attributable to a participant may be valued as if they were invested in one or more investment funds (as set forth in the non-qualified deferred compensation plan), as directed by participants in writing. Participants may change their selection of investment funds from time to time in writing in accordance with the procedure established by the plan administrator. Changes will take effect as soon as administratively practicable. If a participant does not select an investment fund, the participant will be deemed to have selected the Alliance Money Market fund.

     If a participant terminates his or her employment, or an eligible consultant ceases to render service to us, for any reason, including death, we will pay the participant an amount equal to the value of the vested balance credited to the participant’s plan account. If the participant has died, the balance of that account will be paid to one or more beneficiaries designated by the participant. See “— Potential Payments upon Termination or Change in Control” for a description of the form of payouts, withdrawals and other distributions under our non-qualified deferred compensation plan.

Description of Equity Compensation Plans

     The following description of the material terms of the 2002 plan, Impax Laboratories, Inc. 2001 Non-Qualified Employee Stock Purchase Plan, referred to as the “2001 plan,” and Impax Laboratories,

Inc. 1999 Equity Incentive Plan, referred to as the “1999 plan,” is intended as a summary only and is qualified in its entirety by reference to the complete text of such plans. We have submitted the amendment and restatement of our 2002 plan for your approval at this annual meeting. See Proposal Two below for a description of the 2002 plan and the proposal to approve the amendment and restatement of the 2002 plan.

2002 Plan

     The 2002 plan authorizes the grant of incentive stock options, referred to as “ISOs,” nonstatutory stock options, SARs and stock bonus awards, to our officers, employees, directors and consultants, or those of our affiliates. We may also, from time to time, assume outstanding awards granted by another company by either granting an award under the 2002 plan in replacement of the award we assumed or by treating the assumed award as if it had been granted under the 2002 plan.

     Except for awards granted to our non-employee directors and the power to amend or terminate the plan, our board of directors may delegate its authority under the 2002 plan to a committee. This committee must consist of at least two directors who are “non-employee directors” under Exchange Act Rule 16b-3 and “outside directors” under Section 162(m) of the Code. However, if the committee does not meet either of these requirements, the validity of awards granted or actions taken under the 2002 plan will not be affected. The board of directors may also delegate nondiscretionary administrative duties to one or more of our employees. We have chosen to exercise this delegation of authority to the fullest extent permitted by the plan. Subject to the terms of the 2002 plan, the board of directors and, except for awards granted to our non-employee directors, the committee, can grant awards under the 2002 plan and determine the recipients and terms of those awards. They also can interpret the provisions of the 2002 plan and related award agreements, and generally otherwise administer the 2002 plan.

2001 Plan

     In February 2001, in order to encourage employee ownership of our common stock, the board approved the 2001 plan, under which we can issue 500,000 shares of common stock, subject to certain adjustments as set forth in such plan. The 2001 plan provides an opportunity for employees to purchase common stock at a 15% discount to the market price through payroll deductions or lump sum cash investments of up to $25,000 in any one calendar year. The 2001 plan is administered by the compensation committee, which has the authority to interpret, amend and make any determinations necessary to administer the 2001 plan.

1999 Plan

     Our stockholders adopted the 1999 plan in connection with the merger of Global Pharmaceutical Corporation with Impax Pharmaceuticals, Inc. effective December 14, 1999. In October 2000, our stockholders approved an increase in the number of shares of common stock authorized for issuance under the plan from 2,400,000 to 5,000,000. Except for the differences noted below in the summary of the 1999 plan, the material terms of the 1999 plan are substantially similar to those of the 2002 plan. See Proposal Two below for a description of the 2002 plan.

     Under the 1999 plan, we may issue up to 5,000,000 shares of our common stock. Our board of directors may adjust this maximum number without stockholder approval to give effect to any stock split, stock dividend, combination, recapitalization, or similar transaction with respect to our common stock. Shares subject to awards under the 1999 plan that are cancelled, expired, terminated, forfeited or withheld to satisfy the applicable purchase price or tax withholding obligations are again available for issuance

under the 1999 plan. Under the 1999 plan, and subject to adjustments to reflect stock dividends and other changes in our common stock, the maximum number of shares of common stock with respect to which stock options or SARs may be granted during any calendar year to any employee may not exceed 300,000 shares. While the 1999 plan provides for the annual grant of options to purchase 2,000 shares of common stock to each of our non-employee directors, we did not grant options to our non-employee directors during 2005, 2006, 2007 or 2008 (nor did we grant options to our non-employee directors during those years under our 2002 plan, under which we had until 2005 granted each of them options to purchase 5,500 shares annually). Non-employee directors become eligible for such options after one year of service in that capacity. The options authorized are exercisable for 10 years, have an exercise price equal to the fair market value of the common stock on the date of grant, and generally vest in three equal increments over the three years following the grant. Upon termination of service, unvested options expire and vested options may be exercised for 90 days thereafter, except when termination is the result of death or disability, in which case the vested options may be exercised within one year.

Potential Payments upon Termination or Change in Control

     Upon termination of his employment or upon a change in control, each of our named executive officers may be entitled to receive from us payments and benefits under the following agreements and plans:

	•		our employment agreement with Dr. Hsu;
	•		our 1999 plan and 2002 plan; and
	•		our non-qualified deferred compensation plan.

Employment Agreements

     The employment agreement with Dr. Hsu specifies our obligations to Dr. Hsu upon termination of his employment under various circumstances. The employment agreement may be terminated by either party on 30 days written notice, and by us at any time, for “cause.”

     Under the terms of the employment agreement, “cause” means:

	•		a material breach of a provision relating to proprietary information, assignment of inventions, non-interference, non-disclosure and non-competition;
	•		a material breach of any other provision not remedied within 30 days of such breach;
	•		any act of fraud or embezzlement against us; or
	•		any indictment for a felony or other crime that would cause injury to our reputation.

     Under the terms of the employment agreement, “good reason” means:

	•		the assignment of duties or reduction in duties inconsistent with Dr. Hsu’s employment position;
	•		the material reduction in salary or benefits not agreed to by Dr. Hsu;

	•		a relocation requiring Dr. Hsu to commute more than 50 miles; or
	•		a “change in control.”

     Under the terms of the employment agreement, a “change in control” is defined as:

	•		the acquisition by any person or entity of ownership or control of more than 50% of our voting power;
	•		a sale or disposition of assets totaling more than 50% of our value;
	•		a merger or reorganization in which our stockholders, immediately prior to the merger, do not own a least 51% of our voting power after the merger;
	•		any transaction where our stockholders, immediately prior to the transaction, do not own at least 51% of our voting power after the transaction; or
	•		any other transaction that our board of directors determines would materially alter our structure, ownership or control.

     The table below sets forth the benefits that Dr. Hsu would be entitled to receive under his employment agreement should his employment terminate under the following specified circumstances:

Termination
Circumstance				Employment Agreement Benefit
Death or disability		•		Lump sum cash payment by us of accrued and unpaid salary and benefits through date of termination, including accrued but unused vacation time
		•		Payment by us, in accordance with our payment policy, of the lesser of: (i) an amount in cash equal to the executive’s salary and benefits for six months after the date of death or disability; or (ii) the entire amount in cash of remaining salary due and payable, from the date of death or disability to the scheduled expiration of the employment agreement
		•		Payment of a portion of any quarterly or annual bonus otherwise payable to the executive, prorated to reflect any early termination of the employment agreement relative to the performance period of the bonus
		•		Maintenance of the executive’s health, dental, vision and disability insurance at our cost for 18 months after the date of disability or until the executive accepts other employment that provides health insurance
		•		In the case of death, payment by the life insurance carrier of a death benefit of $1,000,000 to the executive’s beneficiary under a policy selected by the executive
		•		In the case of disability, payment by the disability insurance carrier of up to $250,000 in salary replacement benefits
Termination by us for cause or by the executive without good reason		•		Wages and benefits accrued to date or as provided by applicable law

Termination
Circumstance				Employment Agreement Benefit
Termination by us without cause or by the executive for good reason		•		Lump sum cash payment by us of accrued and unpaid base salary and benefits through date of termination, including accrued but unused vacation time
		•		Payment by us, in accordance with our payment policy, of the lesser of: (i) an amount in cash equal to the executive’s salary and benefits for six months after the date of termination; or (ii) the entire amount in cash of remaining salary due and payable, from the date of termination to the scheduled expiration of the employment agreement
		•		Maintenance of the executive’s health, dental, vision and disability insurance at our cost for 18 months after the date of termination or until the executive accepts other employment that provides health insurance

     In general, “disability” means any physical or mental illness that renders the executive incapable of substantially performing his duties under the agreement for a period of three consecutive months or six months in any twelve month period, as determined by a physician or psychiatrist, as applicable, selected by us.

     The table below includes a description and the amount of estimated payments and benefits that would be provided by us (or our successor) to Dr. Hsu under his employment agreement, assuming that a termination circumstance occurred as of December 31, 2008:

				Estimated Amount of
Potential Termination		Termination		Termination Payment/Benefit to
Payment or Benefit		Circumstance		Larry Hsu, Ph.D.($)
Payment of all accrued and unpaid salary through the termination date (1)		All			7,212
Payment of all accrued and unpaid benefits (including accrued but unused vacation time) through the termination date (2)		All			28,848
Cash payment (3)		Death, disability, termination by us without cause or termination by the executive for good reason			187,500
Continued participation in our health, dental, vision and disability insurance (4)		Disability, termination by us without cause or termination by the executive for good reason			2,164
Prorated portion of any quarterly or annual bonus otherwise payable (5)		Death or disability			276,281
Proceeds from required life insurance policy		Death			1,000,000
Payment of salary replacement benefits from required disability insurance policy		Disability			250,000

     We entered into a separation agreement with Mr. Doll, dated July 30, 2008, under which he resigned his position effective August 1, 2008, the September 1, 2006 employment agreement was terminated and Mr. Doll’s rights with respect to the options to purchase 60,000 shares of our common stock and stock bonus awards of 60,000 shares of common stock under the employment agreement, as well as his rights under fully vested options to purchase 172,500 shares of common stock separately held by Mr. Doll, were terminated. Under the separation agreement we paid Mr. Doll separation benefits consisting of a severance payment of $620,000 and 94,705 shares of our common stock. The agreement also subjects Mr. Doll to non-disclosure and non-disparagement provisions and prohibits him from soliciting our employees to leave their employment with us for a period of 36 months from the effective date of his resignation. We and Mr. Doll also executed mutual releases of any claim each might have against the other arising out of Mr. Doll’s employment.

     In August 2008, Dr. Hsiao, formerly our Chairman and a director since December 1999, died. Upon his death, pursuant to his employment agreement, we paid for all accrued and unpaid salary through his employment termination date.

Stock Incentive Plans and Award Agreements

     The table below sets forth the benefits that each executive holding awards granted under our 1999 and 2002 plans would be entitled to receive should his employment terminate under the following specified circumstances. These rights and benefits may be amended or modified as otherwise determined by our board of directors at the time that a grant or award is made or, if the executive’s rights are not reduced, thereafter:

Termination Circumstance				Stock Incentive Plan Benefit
Death or disability		•		The vested portion of any stock option as of the date of death or disability may be exercised within one year from the date of death or disability, but in no event after the stated expiration of the option.
Termination other than death, disability or for cause (1)		•		The vested portion of any stock option as of the date of termination may be exercised within 30 days from the date of termination, but in no event after the stated expiration of the option.

     Under each of our 1999 and 2002 plans, if, in the event of a “change in control,” the surviving corporation refuses to assume or to substitute with similar awards the outstanding awards granted under these plans, then all such outstanding awards will become immediately exercisable. The award will terminate if it is not exercised at or prior to the event constituting the change in control.

     For these purposes, a “change in control” means:

	•		a sale of all or substantially all of our assets;
	•		a merger or consolidation in which we are not the surviving corporation; or
	•		a reverse merger in which we are the surviving corporation but the shares of our common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise.

     Pursuant to the terms of our standard stock bonus award agreement under the 2002 plan, the vesting of a restricted stock award granted to executives under the 2002 plan is accelerated in full as of the date of any of the following events: (i) an executive’s death or disability; (ii) a change within a 12-month period in the holders of more than 50% of our outstanding common stock (other than as provided under our 2002 plan); or (iii) any other event deemed to constitute a “change of control” by our board of directors (other than as provided under our 2002 plan).

     Mr. Michael Nestor was the only named executive officer that held unvested options and shares of restricted stock at December 31, 2008. Shares of our common stock were not listed or quoted on any public market on December 31, 2008 and we did not perform an independent valuation of the value of our common stock at December 31, 2008. Therefore, we cannot calculate the potential benefit of accelerating the vesting of the unvested portion of Mr. Nestor’s stock option and restricted stock award as well as the potential benefit of extending the exercise period of options held by our named executive officers at December 31, 2008. As a result, our named executive officers would not realize the value of any potential benefits that each executive might be entitled to receive from us (or our successor) under the 1999 and 2002 plans (and related award agreements) assuming the change in control or termination of employment occurred as of December 31, 2008.

      Non-Qualified Deferred Compensation Plan

     Under our non-qualified deferred compensation plan, in the event of the termination of an executive’s employment with us, our board of directors may determine to cause the benefits attributable to our matching contributions in the executive’s plan account to be fully vested. In addition, matching contribution benefits may not be forfeited in the event of the termination of the deferred compensation plan, the executive’s death or disability, or a change in control.

     Payment of benefits under the deferred compensation plan to our named executive officers will be made:

	•		upon disability, in monthly installments payable over a fixed period of five, ten or 15 years, as selected by the executive;
	•		upon retirement, not earlier than the sixth month following the named executive officer’s retirement;
	•		for any other reason, as follows: (i) unless the named executive officer selects otherwise, the vested balance of the executive’s account as of January 1, 2005, and any earnings attributable thereto, would be paid in a lump sum within 90 days of attaining age 65; and

(ii) the remaining balance of the executive’s account would be paid no earlier than the sixth month following the executive’s separation from service.

     In general, “disability” is defined as an illness or injury which completely prevents the executive from performing his or her occupation or which otherwise entitles the executive to receive long-term disability benefits under a plan or program for such benefits sponsored by us, and the participant is expected to be separated from service for a period of at least twelve months as a direct result of such illness or injury and has no reasonable prospect of returning to service with us, all as determined by the plan administrator. “Retirement” means any termination of employment, other than for death or disability, after attaining age 65, or attaining age 55 if the executive has been credited with five years of service under the deferred compensation plan.

     In general, a “change in control” means:

	•		a change in ownership in which a person, group or entity acquires more than 50% of the total fair market value or total voting power of our stock;
	•		a change in effective control in which:
	•		a person, group or entity acquires (in a 12-month period) ownership of stock with 35% or more of the total voting power of our stock; or
	•		a majority of our board of directors is replaced in a 12-month period by directors whose appointment or election was not endorsed by a majority of our board of directors before their appointment or election; or
	•		a change in ownership of a substantial portion of our assets in which a person group or entity acquires 40% or more of the gross fair market value of our assets.

     The table below provides an estimate of the value of the potential benefits attributable to the unvested portion of the matching contributions made by us pursuant to the deferred compensation plan that each executive might be entitled to receive upon the termination of the executive’s employment, assuming that termination occurred on December 31, 2008.

Arthur A. Koch, Jr.		Charles V. Hildenbrand
$17,389(1)		$3,122(1)

     In connection with Dr. Hsiao’s death in August 2008, $451,095 was withdrawn from his account under the non-qualified deferred compensation plan.

Compensation Committee Interlocks and Insider Participation

     Drs. Leslie Z. Benet and Nigel Ten Fleming and Mr. Robert L. Burr served as members of the compensation committee during the year ended December 31, 2008, Mr. Burr serving as chairman. None of them was a current or former officer or employee of, or engaged in certain related transactions with, as

required to be disclosed by SEC regulations. Additionally, there were no compensation committee “interlocks” during the year ended December 31, 2008, which generally means that none of our executive officers served as a director or member of the compensation committee of any other entity that had an executive officer serving as a member of our board or our compensation committee.

COMPENSATION COMMITTEE REPORT

     The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K promulgated by the SEC. Based on such review and discussions, the Compensation Committee recommended to the board of directors that the Compensation Discussion and Analysis be included in the Annual Report on Form 10-K of the Company for the year ended December 31, 2008 and this proxy statement.

     This Compensation Committee Report shall not be deemed incorporated by reference in any document previously or subsequently filed with the SEC that incorporates by reference all or any portion of this proxy statement, except to the extent that the Company specifically requests that the report be incorporated by reference.

THE COMPENSATION COMMITTEE

Robert L. Burr (Chairman)
Dr. Leslie Z. Benet
Dr. Nigel Ten Fleming

PROPOSAL TWO — APPROVAL OF
AMENDMENT AND RESTATEMENT OF 2002 EQUITY INCENTIVE PLAN

     You are being asked to approve the amendment and restatement of our 2002 plan, attached as Appendix A to this proxy statement, to:

	•		satisfy certain requirements of the Internal Revenue Code of 1986, as amended, referred to as the “Code,” related to incentive stock options, or ISOs; and
	•		increase the aggregate number of shares of our common stock that may be issued under such plan by 1,900,000 shares.

      As of the record date, there were options to purchase 6,473,863 and 1,975,063 shares of our common stock outstanding under the 2002 plan and 1999 plan, respectively. As of the record date and prior to the board approval of the increase in the number of shares available for issuance under the 2002 plan by 1,900,000 shares, we had 507,933 shares of common stock available for issuance of future equity awards under the 2002 plan. If you approve the amendment and restatement of the 2002 plan, we would have 2,407,933 shares of common stock available for issuance pursuant to future awards under the 2002 plan as well as 122,485 shares of common stock available for issuance under the 1999 plan.

     The 2002 plan was approved by our stockholders in May 2002. In August 2007, the board approved an amendment and restatement of the 2002 plan to:

	•		amend Section 3 to increase the aggregate number of shares of common stock that may be issued under the 2002 plan from 4,000,000 to 6,500,000;
	•		correct Section 3 to state that all shares of common stock that may be issued pursuant to the 2002 plan may be issued upon the exercise of ISOs;
	•		amend Section 3 to provide that the maximum number of shares of common stock with respect to which stock options or stock appreciation rights, referred to as “SARs,” may be granted during any calendar year to any director, officer, employee or consultant changed from the maximum of 300,000 shares to 50% of the total number of shares of common stock authorized for issuance under the 2002 plan;
	•		remove provisions throughout the 2002 plan providing that non-employee directors will receive automatic grants of non-statutory stock options;
	•		amend Section 5.2 to provide that the exercise price of a stock option will not be less than the par value of our common stock, provided the exercise price of any stock option (not just ISOs) will not be less than the fair market value of our common stock on the date the stock option is granted;
	•		amend Section 5.7 to add a provision requiring that any conditions under which the board deems that a non-statutory stock option is transferable must be consistent with the conditions that would permit the registration of the underlying shares of common stock on a Form S-8 registration statement or a successor form;
	•		remove from Section 5.8 the provision allowing the board to grant new stock options, in lieu of assuming outstanding stock options granted by another company, with an exercise price that is not equal to the fair market value of the underlying common stock on the date of grant;
	•		clarify that if a participant’s employment or service terminates due to his or her death or disability, then any stock option or SAR which is not then exercisable will terminate, and any stock option or SAR which is then exercisable will remain exercisable for one year from the date his or her employment or service terminates, but in no event after the expiration of the stated term;
	•		add a provision requiring stockholder approval of the 2002 plan prior to grants of bonus stock;

	•		amend the definition of “fair market value” to provide for the use of an over-the-counter market on which the common stock is quoted, and to change the date of determination of fair market value from the last market trading day prior to the date of determination, to the date of grant; and
	•		amend the definition of “non-employee director” to exclude individuals who (i) currently serve as an officer (as defined in Rule 16a-1(f) under the Exchange Act) of our company or a subsidiary of our company, or are otherwise currently employed by our company or a subsidiary of our company; (ii) receive compensation, either directly or indirectly, from our company or a subsidiary of our company, for services rendered as a consultant or in any capacity other than as a director, except for an amount that does not exceed the dollar amount for which disclosure would be required pursuant to Item 404(a) of Regulation S-K; and (iii) possess an interest in any other transaction for which disclosure would be required pursuant to Item 404(a) of Regulation S-K.

The amendment and restatement of the 2002 plan in August 2007 also included certain conforming changes throughout the document.

     The board subsequently adopted three additional amendments to the 2002 plan. In August 2008, the board amended Section 3 to further increase the aggregate number of shares of common stock that may be issued under the 2002 plan from 6,500,000 to 7,900,000. In February 2009, the board amended the 2002 plan to clarify that stockholder approval of increases in the number of shares of common stock authorized for issuance under the 2002 plan is required only during those periods in which our common stock is listed on NASDAQ or any other national securities exchange. In March 2009, the board amended and restated the 2002 plan to increase the aggregate number of shares of common stock that may be issued under the 2002 plan from 7,900,000 to 9,800,000.

Summary of 2002 Plan

     Set forth below is a summary of the material terms of the 2002 plan. This summary is not intended to be complete and is qualified in its entirety by the detailed provisions of the 2002 plan, which is attached as Appendix A to this proxy statement.

General Information

     The purpose of the 2002 plan is to attract, retain and motivate key personnel. The 2002 plan authorizes the grant of ISOs, non-statutory stock options, SARs and stock bonus awards. We may grant awards under the 2002 plan to our officers, employees, directors and consultants, or those of our subsidiaries. ISOs may be granted only to our employees, or those of our subsidiaries. As of the record date, we had 6 directors, 5 executive officers, 382 other employees and no consultants eligible to receive awards under the 2002 plan. The closing price per share of our common stock listed on NASDAQ was $5.60 as of March 23, 2009.

     We may, from time to time, assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either (i) granting an award under the 2002 plan in replacement of an award we assume; or (ii) treating the assumed award as if it had been granted under the 2002 plan.

     Shares of common stock subject to awards that are cancelled, expired, terminated, forfeited or withheld to satisfy the applicable purchase price or tax withholding obligations are again available for issuance under the 2002 plan.

     Subject to adjustments to reflect stock dividends and other changes in our common stock, the maximum number of shares of common stock with respect to which stock options or SARs may be granted during any calendar year to any director, officer, employee or consultant may not exceed 50% of the total number of shares of common stock authorized for issuance under the 2002 plan.

Administration

     Except for awards granted to our non-employee directors and the power to amend or terminate the plan, the board may delegate its authority under the 2002 plan to a committee of the board, referred to as the “committee.” The committee must consist of at least two directors who are “non-employee directors” under Exchange Act Rule 16b-3 and “outside directors” under Section 162(m) of the Code. However, if the committee does not meet either of these requirements, the validity of awards granted or actions taken under the 2002 plan will not be affected. The board may also delegate nondiscretionary administrative duties to one or more of our employees. We have chosen to exercise this delegation of authority to the fullest extent permitted by the plan.

     Subject to the terms of the 2002 plan, the board and, except for awards granted to our non-employee directors, the committee, can grant awards under the 2002 plan and determine the recipients and terms of those awards. They can accelerate or amend the terms of the 2002 plan or any award issued under the 2002 plan. They also can interpret the provisions of the 2002 plan and related award agreements, and generally otherwise administer the 2002 plan.

Stock Options

      Terms and Conditions of Stock Options . Under the 2002 plan, the board or the committee can grant stock options that are intended to qualify as ISOs. To be an ISO, the stock option must meet, and continue to meet, all of the requirements of the Code with respect to ISOs. ISOs may only be granted to our employees or to employees of our 50%-or-greater-owned subsidiaries. Also, under the Code, the fair market value (as of the date of grant) of the shares underlying ISOs exercisable by a single holder for the first time during any calendar year may not exceed $100,000. Any other stock options granted under the 2002 plan are non-statutory stock options.

     The exercise price of a stock option granted under the 2002 plan cannot be less than the par value of $0.01 of the common stock, provided that the exercise price must be at least equal to the fair market value of a share of our common stock on the date of grant. For a grant of an ISO to an employee who owns more than 10% of the total combined voting power of all classes of our stock or stock of any of our subsidiaries, the exercise price must be at least 110% of the fair market value of a share of our common stock on the date of grant.

     All stock options will expire no later than ten years after the date of grant, unless terminated earlier, except that an ISO granted to a 10% or greater stockholder will expire no later than five years after the date of grant.

      Vesting and Exercise of Stock Options . The board or the committee may establish conditions and restrictions on the vesting or exercise of a stock option, or on the issuance of common stock in connection with the exercise of a stock option. Once a holder of a vested and exercisable stock option has satisfied any applicable tax withholding requirements, the stock option may be exercised by sending us a notice specifying the number of shares to be purchased and payment of the exercise price for those shares. The holder must pay the exercise price in cash, unless we have agreed to accept another form of payment.

      Rights as a Stockholder . The holder of a stock option does not have any rights as a stockholder with respect to shares covered by a stock option until the shares are issued upon the exercise of the stock option.

      Transferability of Stock Options . Holders may not generally transfer or assign stock options granted under the 2002 plan, except for transfers by will or the laws of descent and distribution. Stock options cannot be levied against, attached or taken by similar process. Further, the option holder is the only person who can exercise the stock option during the holder’s lifetime. On or after the time of grant, the board or the committee may permit transfers of a non-statutory stock option in whole or in part and may determine the recipients, circumstances and conditions of the transfer. However, these conditions must be consistent with the limitations on the transferability of stock options imposed by a Form S-8 registration statement, or any successor form.

      Option Repurchases . The board may offer to repurchase any stock option from a holder on terms determined by the board.

Stock Appreciation Rights

     The board or the committee may award SARs. A SAR entitles the holder to receive, upon exercise of the award, an amount equal to the appreciation in the fair market value of our common stock between the date of grant and the date of exercise. We may agree to pay this appreciation in cash, our common stock or a combination of both.

     We may award SARs under the 2002 plan in conjunction with a stock option, creating a “tandem” SAR, or award a SAR that is independent of any stock option. We may award a tandem SAR that includes a non-statutory stock option at or after the time we grant the non-statutory stock option. If we wish to award a tandem SAR that includes an ISO, we can only do so at the time the ISO is granted.

     A holder of a tandem SAR can only exercise the SAR when the related stock option may be exercised. If a holder of a tandem SAR exercises the SAR, that exercise serves to cancel the related stock option to the extent the SAR is exercised. Likewise, if a holder of a tandem SAR exercises the related stock option, that exercise will cancel the same portion of the SAR. A holder may exercise a tandem SAR only when the fair market value of our common stock exceeds the exercise price of the related stock option. The board or the committee may impose additional service or vesting conditions, or any other rules or procedures, in connection with the exercise of a SAR.

     When a holder exercises a SAR, the holder will receive cash or shares of our common stock, as determined by our board, equal to the product of:

•

the number of shares covered by the exercise; and

•

the difference between: (i) the fair market value of a share of our common stock on the date of exercise; and (ii) the fair market value of a share of our common stock on the date of grant.

     A holder cannot transfer a SAR during the holder’s lifetime. Upon death of a holder, a SAR may be transferred to a beneficiary designated by the holder. If no designated beneficiary exists, the SAR may be transferred under the holder’s will or by the laws of descent and distribution. A tandem SAR must be transferred with the underlying stock option.

Stock Bonus Awards

     The board or the committee may grant stock bonus awards in consideration for past or future services rendered to us or our subsidiaries. Shares subject to stock bonus awards may, but need not, be subject to a vesting schedule. The recipient of a stock bonus award has voting rights with respect to such stock. The holder may transfer these shares only to the extent described in the award agreement, so long as shares remain subject to the terms of that agreement.

Effect of Termination of Employment or Service

     The following rules apply with regard to awards held by a participant at the time of his or her termination of employment or other service with us or our subsidiaries:

Stock Options and SARs.

	•		Death or Disability – If a participant’s employment terminates due to death or disability, then (i) any stock option or SAR, to the extent not exercisable, will terminate, and (ii) any stock option or SAR which is exercisable at the time of termination of employment or service will remain exercisable by the participant (or, in the event of death, the participant’s legal representative) at any time within one year from the date his or her employment or service terminates, but in no event after expiration of the stated term, and, to the extent not exercised within that period, will terminate.
	•		For Cause – If a participant’s employment terminates for cause (as defined in the 2002 plan) or if grounds for termination for cause exist at the time of termination of employment, any stock option or SAR will immediately terminate and cease to be exercisable.
	•		Other Reason – If a participant’s employment terminates for any other reason (other than death, disability or cause) or no reason, any stock option or SAR held by the participant, to the extent not exercisable, will terminate. Any exercisable stock option or SAR will remain exercisable for 30 days following the date of termination or, if sooner, until the expiration of the stated term of the stock option or SAR.

      Stock Bonuses. If a participant’s employment or service terminates, then any shares of common stock held by the participant which have not vested as of the date of termination under the terms of the applicable award agreement will be forfeited.

Adjustments Upon Changes in Our Common Stock

     We will make adjustments to awards granted under the 2002 plan as described below.

      Capitalization . If we make any change in our common stock without receiving payment for the change, we will adjust appropriately the terms of the 2002 plan and each award issued under the 2002 plan. These adjustments may affect:

	•		the class of securities subject to the 2002 plan or any award;
	•		the maximum number of securities subject to the 2002 plan;
	•		the maximum number of securities that may be awarded to any employee under the 2002 plan; and
	•		the number of securities and exercise price of any award granted under the 2002 plan.

     Examples of events that may require us to make these changes include:

	•		mergers and consolidations;
	•		reincorporations and reorganizations;
	•		recapitalizations;
	•		dividends in stock or other property (other than cash), including liquidating dividends;
	•		stock splits or divisions;
	•		reverse stock splits or combinations;
	•		exchanges of shares;
	•		changes in our corporate structure; and
	•		other changes to our common stock in which we do not receive payment for the change.

      Dissolution or Liquidation . If we dissolve or liquidate, awards outstanding under the 2002 plan will terminate if not exercised immediately prior to or at the same time as the dissolution or liquidation.

      Asset Sale, Merger, Consolidation or Reverse Merger. In the event of (i) a sale of all or substantially all of our assets, (ii) a merger in which we are not the surviving corporation or (iii) a reverse merger in which we are the surviving corporation but our common stock outstanding prior to the merger is converted by virtue of the merger into other property (whether securities, cash or otherwise), then any surviving or acquiring corporation will assume any outstanding awards under the 2002 plan or will substitute similar awards. In the event that any surviving or acquiring corporation refuses to assume the outstanding awards or issue substitute awards, then the vesting of all outstanding awards will be accelerated in full and all awards will terminate if not exercised at or prior to such event.

Amendment and Termination of 2002 Plan

     The board may generally amend or terminate the 2002 plan or any related award agreement at any time, although a holder must consent to any amendment or termination that adversely affects his or her rights. Under the 2002 plan, during any period in which our common stock is listed on NASDAQ or any

other national securities exchange, our stockholders must approve any amendment that would increase the number of shares of common stock for which awards may be granted under the 2002 plan (in the aggregate or on an individual basis) or modify the class of employees eligible to receive awards under the 2002 plan.

United States Federal Income Tax Consequences

     The following information is not intended to be a complete discussion of the federal income tax consequences of participation in the 2002 plan and is qualified in its entirety by references to the Code and the regulations adopted under the Code. The provisions of the Code described in this section include current tax law only and do not reflect any proposals to revise current tax law. The federal income tax consequences applicable to officers, directors, and other persons who are subject to potential liability under Section 16(b) of the Exchange Act may be different than the federal income tax consequences applicable to persons who are not subject to Section 16(b). The federal income tax consequences applicable to all persons, whether or not subject to Section 16(b), are described below.

      Nonstatutory Stock Options. Generally, there will be no federal income tax consequences to either the optionee or us on the grant of nonstatutory stock options pursuant to the 2002 plan. On the exercise of a nonstatutory stock option, the optionee has taxable ordinary income equal to the excess of the fair market value of the shares acquired on the exercise date over the exercise price of the options. We will be entitled to a federal income tax deduction (subject to the limitations contained in Code Section 162(m)) in an amount equal to such excess, provided that we comply with applicable reporting rules.

     Upon the sale of stock acquired by exercise of a nonstatutory stock option, optionees will realize long-term or short-term capital gain or loss depending upon their holding period for such stock. For individuals, capital losses are deductible only to the extent of capital gains for the year plus $3,000. An optionee who surrenders shares in payment of the exercise price of a nonstatutory stock option will not recognize gain or loss with respect to the shares so delivered unless such shares were acquired pursuant to the exercise of an ISO and the delivery of such shares is a disqualifying disposition. See “— ISOs” below.

      ISOs. Generally, under the Code, an optionee will not realize taxable income by reason of the grant or exercise of an ISO granted pursuant to the 2002 plan (see, however, discussion of alternative minimum tax below). If an optionee exercises an ISO and does not dispose of the shares until the later of (i) two years from the date the stock option was granted and (ii) one year from the date of exercise, the entire gain, if any, realized upon disposition of such shares will be taxable to the optionee as long-term capital gain, and we will not be entitled to any deduction. If an optionee disposes of the shares within the period of two years from the date of grant or one year from the date of exercise (referred to as a “disqualifying disposition”), the optionee generally will realize ordinary income in the year of disposition and we will receive a corresponding deduction in an amount equal to the excess of (i) the lesser of (a) the amount, if any, realized on the disposition and (b) the fair market value of the shares on the date the option was exercised over (ii) the option price. Any additional gain realized on the disposition will be short-term or long-term capital gain and any loss will be long-term or short-term capital loss. The optionee will be considered to have disposed of a share if he or she sells, exchanges, makes a gift of or transfers legal title to the share (except transfers, among others, by pledge, on death or to a spouse). If the disposition is by sale or exchange, the optionee’s tax basis will equal the amount paid for the shares plus any ordinary income realized as a result of the disqualifying disposition.

     The exercise of an ISO may subject the optionee to the so-called “alternative minimum tax,” referred to as “AMT.” The amount by which the fair market value of the shares purchased at the time of

the exercise exceeds the option exercise price is an adjustment for purposes of computing the AMT. In the event of a disqualifying disposition of the shares in the same taxable year as exercise of the ISO, no adjustment is then required for purposes of the AMT, but regular income tax, as described above, may result from such disqualifying disposition.

     An optionee who surrenders shares as payment of the exercise price of his or her ISO generally will not recognize gain or loss on his or her surrender of such shares. The surrender of shares previously acquired upon exercise of an ISO in payment of the exercise price of another ISO, is, however, a “disposition” of such stock. If the ISO holding period requirements described above have not been satisfied with respect to such stock, such disposition will be a disqualifying disposition that may cause the optionee to recognize ordinary income as discussed above.

     Under the Code, all of the shares received by an optionee upon exercise of an ISO by surrendering shares will be subject to the ISO holding period requirements. Of those shares, a number of shares, referred to as the “exchange shares,” equal to the number of shares surrendered by the optionee will have the same tax basis for capital gains purposes (increased by any ordinary income recognized as a result of a disqualifying disposition of the surrendered shares if they were ISO shares) and the same capital gains holding period as the shares surrendered.

     For purposes of determining ordinary income upon a subsequent disqualifying disposition of the exchange shares, the amount paid for such shares will be deemed to be the fair market value of the shares surrendered. The balance of the shares received by the optionee will have a tax basis (and a deemed purchase price) of zero and a capital gains holding period beginning on the date of exercise. The ISO holding period for all shares will be the same as if the option had been exercised for cash.

      Stock Appreciation Rights. A participant who is awarded a SAR will not have taxable income upon the grant of such SAR and we will not be entitled to a tax deduction by reason of such grant. Upon the exercise of a SAR, a participant will recognize taxable ordinary income equal to the amount of cash and the fair market value of any shares of common stock received. We may generally claim a deduction at that time equal to the amount recognized as ordinary income by the participant.

      Stock Bonus Awards. The taxability of a stock bonus award to a participant is dependent upon the extent to which the award is restricted on the date of grant. If a stock bonus award is either transferable or not subject to a substantial risk of forfeiture, a participant will recognize taxable ordinary income on the date of grant. If a stock bonus award is both non-transferable and subject to a substantial risk of forfeiture on the date of grant, then unless an election is made as described below, a participant will not recognize taxable ordinary income on the date of grant, but will at such time or times as the stock bonus award becomes either transferable or not subject to a substantial risk of forfeiture in an amount equal to the fair market value of such shares at that time. Within 30 days of receipt of a stock bonus award that is not transferable and subject to a substantial risk of forfeiture, a participant may file an election with the Internal Revenue Service to include as taxable ordinary income in the year of receipt an amount equal to the fair market value of the shares subject to the award at the time of receipt. In such event, any subsequent appreciation in the value of such shares will not be taxable as compensation to a participant upon the vesting of shares subject to the award. However, if shares subject to the award are forfeited subsequent to such election, a participant will not be entitled to a tax deduction. For purposes of determining the amount of taxable gain or loss upon a subsequent disposition of shares issued pursuant to such an award, the amount recognized as ordinary income to a participant will be treated as the cost basis for such shares. Shares which are held for more than one year after vesting (or in the event of an election as described above, the date of receipt) generally will qualify for long-term capital gain treatment. We

will be entitled to a deduction in such amount and at such time as ordinary income becomes taxable to the participant.

      Withholding of Tax; Company Deduction . Generally, whenever a participant realizes ordinary income under the 2002 plan, a corresponding deduction is available to us provided we comply with certain reporting requirements. Under Code Section 162(m), however, we will be denied a deduction for certain compensation exceeding $ 1.0 million paid to any individual who, as of the end of the taxable year, is our Chief Executive Officer or an employee whose compensation is required to be reported to stockholders by reason of being among the three most highly compensated employees, excluding (among other things) certain performance-based compensation. The deduction limit does not apply to payments that qualify as “performance-based” provided certain requirements are met.

Grants of Options to Certain Persons

     The following table sets forth equity awards outstanding as of the record date that were granted under the 2002 plan to each of our named executive officers, each nominee for election as a director, each associate of any of our executive officers, directors or nominees for election as a director, if any, all current executive officers as a group, all current directors who are not executive officers as a group and all employees (including all current officers who are not executive officers) as a group.

Name		Number of Shares Underlying Options
Larry Hsu, Ph.D., President and Chief Executive Officer and Director Nominee			75,000
Arthur A. Koch, Jr., Senior Vice President, Finance and Chief Financial Officer			50,000
Charles V. Hildebrand, Senior Vice President – Operations			61,459
Michael J. Nestor, President, IMPAX Pharmaceuticals Division			75,000
Charles Hsiao, Ph.D., Former Chairman			75,000
David S. Doll, Former Executive Vice President, Commercial Operations			—
Leslie Z. Benet, Ph.D., Director Nominee			15,000
Robert L. Burr, Director Nominee			15,000
Nigel Fleming, Ph.D., Director Nominee			15,000
Michael Markbreiter, Director Nominee			22,500
Oh Kim Sun, Director Nominee			22,500
Peter R. Terreri, Director Nominee			27,000
Executive Group (5 persons)			336,459
Non-Executive Director Group (6 persons, all of whom are director nominees)			117,000
Non-Executive Officer Employee Group (773 persons)			5,922,904
Total:			6,473,863

      The exercise prices per share and expiration dates of such outstanding options under the 2002 plan range from $3.04 to $23.04 and from May 7, 2012 to March 5, 2019, respectively. In addition, we issued 717,930 shares of restricted stock under the 2002 plan, of which 47,667 shares of restricted stock were forfeited and cancelled.

Equity Compensation Plan Information

     The following table details information regarding our existing equity compensation plans as of December 31, 2008:

Number of Securities

Remaining Available for

Number of Securities

Future Issuance Under

to be Issued Upon

Weighted Average

Equity Compensation

Exercise of

Exercise Price of

Plans (Excluding

Outstanding Options,

Outstanding Options,

Securities Reflected In

Warrants and Rights

Warrants and Rights

Column (a))

Plan Category

(a)

(b)

(c)

Equity compensation plans approved by security holders

6,027,029

$

10.45

244,631

Equity compensation plans not approved by security holders

2,253,211

(1)

$

10.72

1,641,200

(2)

Total:

8,280,240

$

10.53

1,885,831

      THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE 2002 PLAN.

PROPOSAL THREE – RATIFICATION OF
ADOPTION OF PREFERRED STOCK RIGHTS AGREEMENT

     You are being asked to ratify the adoption by the board of the rights agreement attached as Appendix B to this proxy statement. The terms of the rights agreement are similar to those of rights agreements adopted by many other publicly traded companies. The terms were designed to meet the published requirements of the Corporate Governance Policies and Guidelines issued by RiskMetrics Group ISS, a proxy advisory firm for many institutional investors. As a result, the board approved the rights agreement in a form that includes a number of provisions commonly referred to as “stockholder friendly” provisions.

Reasons for Rights Agreement

     The board’s adoption of the rights agreement was not in response to, or in anticipation of, any pending or threatened takeover bid or offer for our common stock.

     We believe that the rights agreement will be used to protect our stockholders in the event of certain unsolicited attempts to acquire control of Impax, including a partial or two-tier tender offer that fails to treat all stockholders equally or a “creeping acquisition” by the purchase of common stock on the open market, and other acquisition tactics that the board believes are unfair to stockholders and not in their best interests.

     The rights agreement is an effective means of preventing an acquirer from taking advantage of the onset of adverse market conditions, short-term declines in the price of our common stock, or anticipated improvements in operating results before such improvements are fully reflected in the price of our common stock – allowing a hostile acquirer to take control at a price that does not reflect our intrinsic value or long term prospects.

     A major function of the rights agreement is to give the board a greater period of time to evaluate the adequacy of an acquisition proposal, investigate alternatives, solicit competitive proposals and take other steps necessary to maximize stockholder value. The rights agreement also induces potential bidders to negotiate with the board and thereby strengthens the board’s bargaining position for the benefit of our stockholders. The board is in a position to evaluate a potential combination in light of our business plan and other strategic alternatives.

     The rights agreement will not prevent all attempts to acquire control of our company. In responding to an acquisition proposal, the board has a fiduciary obligation to act in our best interests and the best interests of our stockholders.

Summary of Rights Agreement

     The following summary of the rights agreement is qualified in its entirety by reference to the terms of the rights agreement, which is attached as Appendix B to this proxy statement. You are urged to read carefully the rights agreement in its entirety as the discussion below is only a summary.