Exhibit 10.1

CONSULTING/SEPARATION AGREEMENT AND FULL MUTUAL RELEASE

     This Separation Agreement and Full Mutual Release (“Agreement”) is made by
and between Barry R. Edwards (“Edwards”) and Impax Laboratories, Inc.
(“Employer” or “the Company”). Edwards and the Company are both parties to this
Agreement and are collectively referred to herein as the “Parties.” Both Edwards
and the Company desire to enter into this Agreement to fully resolve all
questions of compensation, entitlement to benefits, and any and all other
claims, whether known or unknown, which the Parties may have relating to
Edwards’ employment with, and separation from, the Company.

     NOW, THEREFORE, in consideration of the mutual promises, agreements and
representations contained herein, and intending to be legally bound hereby, the
Parties agree as follows:

     1.     Definitions. As used in this Agreement, any reference to Edwards
shall include himself, and in their capacities as such, his attorneys, heirs,
administrators, representatives, executors, legatees, successors, agents and
assigns. As used in this Agreement, any reference to the Company shall include
itself, its predecessors, successors, controlling or related entities,
affiliates, divisions, subsidiaries, managing agents, and joint ventures, and,
in their capacities as such, all of their past, present and future
representatives, agents, assigns, attorneys, directors, officers, partners,
shareholders and employees (except Edwards).

       2.     Release. Except as to the promises made in this Agreement, the
Parties hereby fully, forever, irrevocably and unconditionally release, remise,
settle and discharge each other from any and all manner of claims, charges,
complaints, debts, liabilities, demands, actions, causes of action, suits,
rights, covenants, contracts, controversies, agreements, promises, omissions,
damages, obligations and expenses of any kind, including attorneys’ fees,
whether known or unknown, which they had, now have, or hereafter may have
against each other arising from, or relating in any way to, Edwards’ employment
relationship with the Company, including, but not limited to, Title VII, the Age
Discrimination In Employment Act, the Older Worker Benefit Protection Act, the
Pennsylvania Human Relations Act, and any other federal, state or local
statutes, or common law. It is expressly agreed and understood that this is a
GENERAL RELEASE.

       3.     Company's Obligations. In consideration for this Agreement, and in
addition to the Release set forth in Paragraph 2 above, the Company agrees that:

    (a) it shall, pay Edwards a lump sum severance of $649,080 in 3 equal
installments on October 6, 2006, January 6, 2007 and April 6, 2007.

    (b) it shall, starting October 1, 2006 through September 30, 2008, pay
Edwards compensation as a special consultant of $18,750 per month, payable
weekly in the gross amount of $4327, although Edwards’ services to the Company
as CEO and Director shall cease effective October 1, 2006 upon his retirement;

 

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    (c) it shall, reimburse Edwards for reasonable expenses incurred in
conjunction with his consulting, subject to the expense reporting and policies
of the Company

    (d) it shall, through the earlier of September 30, 2008, or such time as
Edwards finds replacement health care and dental coverage, pay the COBRA
premiums for Edwards to continue the health and dental coverage that he had
while actively employed by the Company, after which time, Edwards can continue
the COBRA coverage under the terms of COBRA if he desires to do so. All other
benefits Edwards enjoyed as an employee shall cease on October 2, 2006, and
Edwards shall not be eligible for any bonus awarded by the Company under any
2006 bonus plan or for any stock options issued for 2005 or 2006;

    (e) Edwards’ Executive Life Plan shall continue two years beyond the current
term, which expires on July 7, 2007 until July 7, 2009;

    (f) Edwards’ Executive Long Term Disability Plan shall expire on July 1,
2007;

    (g) effective immediately prior to September 30, 2006, all stock options
held by Edwards shall automatically become exercisable;

    (h) the Compensation Committee of the Board of Directors has determined
that, as a result of becoming a consultant to the company, Edwards will remain
in the “Continuous Service” of the Company during the Consulting Term referenced
in ¶ 4 below and, accordingly, all of Edwards’ outstanding stock options will
continue to be exercisable throughout the Consulting Term and thereafter for a
period ending on the earlier of (i) 180 days after the end of the Consulting
Term or (ii) the Expiration Date of the option;

    (i) Edwards will be eligible to participate in the Impax Laboratories, Inc.
Executive Non-Qualified Deferred Compensation Plan (“the Plan”) pursuant to the
terms of the Plan and subject to the approval of the Compensation Committee of
the Board of Directors; and that he shall be entitled to matching contributions
through September 30, 2007 as provided in the Plan; and that such contributions
shall be forfeited in the event Edwards does not comply with the terms of this
Agreement; and

    (j) recognizing that the payments for those benefits described in (d), (e)
and (f) above will result in taxable income to Edwards, it shall, at the end of
the 2006, 2007 and 2008 tax years, pay Edwards an amount equal to the state and
federal tax he will owe as a result of the Company’s payment for those benefits.

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     4.     Edwards’ Obligation. In consideration of this Agreement, and in
addition to the                release set forth in paragraph 2 above, Edwards
agrees that he shall:

    (a) make himself available to the Company as a consultant but in no event
shall he be obligated to act as a consultant beyond September 30, 2008 (“the
Consulting Term”);

    (b) not solicit, on behalf of himself or any other person or entity, any
current employees of the Company during the term of his consulting period;

    (c) keep confidential the terms of this Agreement, and not disclose or
publish same, except in response to a subpoena, or except to his immediate
family members, his financial advisor, his attorney, or to his accountant for
the purpose of filing government tax returns;

    (d) make no negative or disparaging comments of any kind about the Company
to any person or entity;

    (e) with the exception of the laptop computer setups and certain office
furniture that Edwards was provided by the Company, return to the Company any
equipment or documents that have not already been returned; and

    (f) maintain the confidentiality of all proprietary information Edwards
obtained about the Company, whether during his time as an employee or as a
Consultant.

       5.     Acknowledgment. Edwards acknowledges that if he materially
breaches any of the provisions of paragraph 4 of this Agreement, in addition to
any other of the Company's rights and remedies, the Company shall immediately
cease all payments or benefits described in paragraph 3 above. Edwards further
acknowledges that the consideration being provided by the Company is more than
the Employer is required to provide under its normal policies, practices or
Edwards benefit plans and represents benefits to which Edwards is not otherwise
entitled.

       6.     Covenant Not To Sue. Edwards warrants that he has not filed any
complaints, charges or claims for relief against the Company with any local,
state or federal court or administrative agency that are currently outstanding.
Edwards further agrees and covenants not to sue the Company with respect to any
matter arising before the effective date of this Agreement or covered by the
release set forth in paragraph 2 above, and not to assert against the Company in
any action, suit, litigation or proceeding any matter arising before the
effective date of this Agreement or covered by the release set forth in
paragraph 2 above.

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       7.     No Admission of Liability. It is expressly understood and agreed
that this Agreement, and any acts undertaken hereunder, shall not be construed
as an admission of liability or wrongdoing on the part of either Party under any
law, regulation or ordinance.

       8.     Controlling Law. This Agreement and all matters arising out of, or
relating to it, shall be governed by, and construed in accordance with, the laws
of the Commonwealth of Pennsylvania.

       9.     Jurisdiction. Any action arising out of, or relating to, any of
the provisions of this Agreement may, at the election of the Company, be brought
and prosecuted only in the courts of, or located in, the Commonwealth of
Pennsylvania, and in the event of such election, the Parties consent to the
jurisdiction and venue of said courts.

       10.     Entire Agreement. The Parties understand that no promise,
inducement, or other agreement not expressly contained herein has been made
conferring any benefit upon them; that the Agreement contains the entire
Agreement between the Parties; and that the terms of the Agreement are
contractual and not recitals only.

       11.     Severability. If any provision of this Agreement is construed to
be invalid, illegal or unenforceable, then the remaining provisions hereof shall
not be affected thereby and shall be enforceable without regard thereto, except
that, if the release set forth in Paragraph 2 above is held for any reason to be
invalid or unenforceable, Edwards acknowledges and agrees that he shall be
obligated to return any consideration already provided by the Company in
exchange for said Release, and that the Company shall have no obligation to
provide any further consideration.

       12.     Section Headings. Section and subsection headings in this
Agreement are for convenience of reference only and shall neither constitute a
part of this Agreement nor affect its interpretation.

       13.     Amendment. The Parties agree that this Agreement may not be
altered, amended, or modified, in any respect, except by a writing duly executed
by both Parties

       14.     EDWARDS ACKNOWLEDGES THAT HE WAS GIVEN A PERIOD OF 21 DAYS,
COMMENCING ON AUGUST 14, 2006 IN WHICH TO CONSIDER THIS AGREEMENT BEFORE SIGNING
IT; THAT HE MAY USE AS MUCH OF THIS 21-DAY PERIOD AS HE WISHES PRIOR TO SIGNING;
THAT HE MAY REVOKE THIS AGREEMENT WITHIN SEVEN (7) DAYS OF SIGNING IT; AND THAT
FOR SUCH REVOCATION TO BE EFFECTIVE, WRITTEN NOTICE MUST BE RECEIVED IN WRITING
BY LARRY HSU, IMPAX LABORATORIES, INC., 121 NEW BRITAIN BOULEVARD, CHALFONT, PA
18914, NO LATER THAN THE CLOSE OF BUSINESS ON THE SEVENTH DAY AFTER EDWARDS HAS
SIGNED THIS AGREEMENT. IF EDWARDS REVOKES THIS AGREEMENT, IT SHALL NOT BE
EFFECTIVE OR ENFORCEABLE, AND EDWARDS WILL NOT RECEIVE THE CONSIDERATION
DESCRIBED IN PARAGRAPH 3 ABOVE. IF EDWARDS MATERIALLY BREACHES ANY PROVISION OF
THIS AGREEMENT AFTER IT HAS BECOME EFFECTIVE, EDWARDS SHALL NOT RECEIVE ANY
REMAINING CONSIDERATION THAT HAS NOT YET BEEN PAID AT THE TIME OF THE BREACH.

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     EDWARDS REPRESENTS THAT HE HAS READ THE TERMS OF THIS AGREEMENT; THAT HE
HAS HAD AN OPPORTUNITY TO FULLY DISCUSS AND REVIEW THE TERMS OF THIS AGREEMENT
WITH HIS ATTORNEY; THAT HE UNDERSTANDS THE CONTENTS HEREOF; AND THAT HE FREELY
AND VOLUNTARILY ASSENTS TO ALL THE TERMS AND CONDITIONS HEREOF, AND SIGNS THE
SAME AS HIS OWN FREE ACT, AND WITH THE INTENTION OF RELEASING THE COMPANY FROM
EACH AND EVERY CLAIM RELATING IN ANY WAY TO HIS EMPLOYMENT WITH THE COMPANY.

     IN WITNESS WHEREOF, and intending to be legally bound, the Parties agree to
the terms of this Agreement.

For Impax Laboratories, Inc.

Date: 8/14/06 By: /s/ Larry Hsu  

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      Larry Hsu, Ph.D.
President                         Date: 8/14/06 /s/ Barry R. Edwards  

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    Barry R. Edwards

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