Document:

EMPLOYMENT AGREEMENT

     This Employment Agreement, effective as of this 14th day of December, 1999
(the "Effective Date"), is by and among IMPAX LABORATORIES, INC., a Delaware
corporation, with a business address ,at 30831 Huntwood Ave., Hayward,
California 94544 (the "Company") and Larry Hsu, Ph.D., with a mailing address at
30831 Huntwood Avenue, Hayward, California 94544 ("Executive").

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein set forth, the Company and Executive agree as follows:

     1.   Nature of Employment.

          1.1  Duties and Responsibilities. Executive shall serve as the
President of the Company during the term of this Agreement, and use his
best efforts to promote the interests of the Company and shall devote his full
time and efforts to its business and affairs. Executive shall have general
executive powers and active management over the property, business, and affairs
of the Company, subject always to the direction of-the hoard of Directors (the
"Board") or its designee.

          1.2  Other Business Activities. Executive will devote his full
professional time, attention and effort to Company's business.
Notwithstanding the foregoing, Executive shall be entitled to participate in
other professional and business activities to the extent such activities are
reasonably likely to enhance Executive's ability to perform his obligations
hereunder, provided that such activities do not compete with the business of the
Company and do not unreasonably interfere with the then performance of his
duties hereunder.

          1.3  Board of Directors Member. Each year during the term of this
Agreement, the Board of Directors of the Company (the "Board") shall
designate Executive as one of management's slate of candidates to the Board,
shall recommend Executive as a Director to its shareholders, and shall otherwise
use its best efforts to have Executive elected as a Director and to have him
remain as a Director during the entire term of this Agreement, in all instances
subject to satisfaction by the Board of Directors of its fiduciary duties and
obligations.

     2.   Compensation.

          2.1  Salary. Executive's salary shall be at an initial annual rate of
One Hundred Seventy-Five Thousand Dollars ($175,000.00), subject to
withholding and further

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subject to discretionary increases in accordance with the Company's normal
review procedures and policies. The salary shall be paid in substantially equal
installments in accordance with the Company's standard payroll practices, as in
effect from time to time.

          2.2  Bonus. Subject to the achievement of certain short-term and
long-term performance goals established by the Board of Directors of the
Company from time to time, Executive shall be paid quarterly and annual bonuses,
payable in stock and/or cash, to be determined by the Board of Directors of this
Company or its Compensation Committee. Each such bonus shall be paid at the same
time as, and be equal to, the bonus paid to Charles Hsiao, Ph.D., and Barry
Edwards for such period.

          2.3  Medical Insurance and Other Benefits. Executive shall be
entitled to receive full health, dental, vision, and disability insurance,
as well as any other benefits customarily offered to other senior executive
officers of the Company, all upon terms no less favorable to Executive, with all
premiums and costs to be paid by the Company. The Company shall also provide to
Executive, at Company's expense, life insurance coverage at standard premium
rates having a death benefit payable to a beneficiary selected by the Executive
equal to $1,000,000 and disability insurance at standard premium rates which
provides salary replacement benefits, not to exceed $250,000 in the aggregate,
in the event Executive becomes incapacitated. Executive shall be required to
undergo a yearly physical examination, at Company's expense, with a physician of
Executive's choosing, and upon Company's request, deliver a copy of such
physician's report from such examination.

          2.4  Vacation. Executive shall be entitled to receive four (4) weeks
of paid vacation time annually, such vacation shall accrue daily, provided
however, that in the event the total vacation accrual ever reaches four (4)
weeks, then no further vacation time will accrue until Executive has used his
current annual allotment. Executive may not receive pay rather than vacation
except when Executive leaves the Company. Executive may schedule his vacations
at his discretion so long as the timing of such vacations does not interfere
with his responsibilities to the Company.

          2.5  Reimbursement of Expenses. The Company shall reimburse Executive
for all out-of-pocket expenses incurred by Executive in performing his
obligations hereunder within thirty (30) days after the date on which Executive
delivers to the Company an itemized statement, accompanied by appropriate
receipts to the extent available, describing the reimbursable expenses incurred.
The expenses to be

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reimbursed include, without limitation, telephone, fax, air freight and
travel related expenses.

     3.   Term and Termination.

          3.1  Term. The term of this Agreement shall commence on the Effective
Date and, unless terminated in accordance with this Section 3, shall
continue until the third anniversary of the Effective Date, and thereafter shall
be automatically renewed for successive periods of one year each, unless
terminated by either party by written notice of termination delivered to the
other party at least six (6) months prior to the expiration date of the initial
term or any renewal term of this Agreement (the "Term").

          3.2  Termination by the Company. The Company shall have the right to
terminate this Agreement (i) for Cause, as defined below, at any time and
without prior notice, or (ii) for any other reason on thirty (30) days written
notice to Executive.

                3.2 1    Termination for Cause. The phrase "Cause" means any of
the following:

                         (i)  any material breach by Executive of any provision
of Sections 5, 6, 7 or 8 of this Agreement;

                         (ii) any material breach of any other provision of
this Agreement by Executive (other than any such breach resulting from
Executive's incapacity due to physical or mental illness, which shall be
governed by Section 3.2.2 hereof), including without limitation the failure to
satisfactorily perform his duties as provided herein, if that breach is not
remedied within thirty (30) days after written notice to Executive describing
the acts alleged to constitute Cause;

                        (iii) any act of fraud, misappropriation, embezzlement
or similar willful and malicious conduct by Executive against the Company;
or

                         (iv) indictment of Executive for a felony or any
conviction of, or guilty plea by Executive to, a crime involving moral
turpitude if that crime of moral turpitude tends or would reasonably tend to
bring the Company into disrepute.

               3.2.2     Termination for Death Disability. For purposes hereof,
the term "disability" shall mean such physical or mental illness as shall render
Executive incapable of substantially performing his duties hereunder on a
regular basis at the Company's offices for a period of three (3) consecutive
months or for a period of six (6) months in any twelve-month period, all as
determined by a

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physician or psychiatrist, as the case may be, selected by the Company.

          3.3  Termination by the Executive. Executive may terminate
this Agreement for any reason upon thirty (30) days advance written notice to
the Company.

     4.   Termination Payments.

          4.1  No Payments. In the event of any termination of this
Agreement by Company for Cause, or by Executive without Good Reason, the
Company shall have no further payment obligations to Executive hereunder,
except for wages and benefits accrued to date and/or provided by applicable
law.

          4.2  Continued Payments . I f the Company terminates this Agreement
for any reason other than for Cause, or Executive terminates this Agreement
for Good Reason and in accordance with Section 3.3, then in lieu of any other
payments otherwise required hereunder, the Company shall, subject to Executive's
compliance with Sections 5, 6, 7 and 8 hereof, pay Executive, as liquidated
damages and not as a penalty, (a) within fifteen (15) days after the termination
date, all accrued and unpaid salary and benefits (including accrued but unused
vacation time) through the termination date and (b) the lesser of (i) an amount
equal to his salary payments at the time of the termination, in accordance with
the Company's then payment policy, and benefits provided for herein during the
six-month period following the termination date, and (ii) the entire amount of
the salary remaining due and payable from the date of such termination to the
scheduled expiration of this Agreement; provided, however, that if such
termination occurs prior to the first anniversary of the Effective Date, then in
addition to items (a) and (b) above, Executive shall be entitled to continue to
receive, in accordance with the Company's then payment policy, an amount equal
to his salary payments and, to the extent Executive is not otherwise employed,
health benefits, until the first anniversary. of the Effective Date. In the
event that this Agreement is terminated due to the death or disability of
Executive, Company shall pay to Executive a portion of any bonus otherwise
payable to Executive in accordance with Section 2.2 hereof, prorated to reflect
any early termination of this Agreement relative to the performance period to
which the bonus relates.

          4.3  Continued Medical Coverage If the Company terminates this
Agreement for any reason other than for Cause, or Executive terminates this
Agreement for Good Reason and in accordance with Section 3.3, then Company shall
maintain, at Company's cost, Executive's health, dental, vision and disability
insurance described in Section

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2.3 hereof until the first to occur of (i) the expiration of eighteen (18)
months following such termination; or (ii) Executive accepts employment which
provides health insurance. If the Company terminates this Agreement for Cause,
or Executive terminates this Agreement for any reason other than Good Reason,
Executive shall have the right to maintain, at Executive's cost, the health,
dental, vision and disability insurance described in Section 2.3 hereof, for a
period not to exceed eighteen (18) months or such longer period as may be
required by applicable law, all to the extent permitted by the applicable
insurance carrier.

          4.4  Certain Definitions.

               4.4.1     Good Reason. For purposes of this Agreement, "Good
Reason" means (i) the assignment to Executive of any duties or the
substantial reduction of Executive's duties, either of which is inconsistent
with Executive's position as President; (ii) any change in Executive's reporting
relationship which results in his not reporting to a member of the Board of
Directors of the Company; (iii) a material reduction in Executive's salary or
benefits not agreed to by Executive; (iv) a requirement of Executive to relocate
to an office that would increase Executive's one-way commute distance by more
than fifty (50) miles; or (v) a Change in Control of Company, as hereinafter
defined.

               4.4.2     Change in Control of Company. For purposes of this
Agreement, "Change in Control of Company" shall mean the occurrence of any
of the following:

               (i)  Any person or entity acquires ownership or control,
directly or indirectly, of securities of the Company (or a successor to the
Company) representing fifty percent (50%) or more of the combined voting power
of the then outstanding securities of the Company or such successor;

               (ii) (a) a sale or disposition of assets of the Company
involving fifty percent (50%) or more in value of the assets of the
Company; (b) any merger or reorganization of Company (whether or not another
entity is the survivor), in which the Company's shareholders (immediately prior
to the transaction) do not own (immediately after the transaction), either
directly or indirectly, at least fifty-one percent (51%) of the voting power of
the surviving or successor corporation; (c) any transaction pursuant to which
all of the shareholders of the Company immediately prior to the transaction,
hold (immediately after the transaction) less than fifty-one percent (51%) of
the combined voting power of the Company or any successor Company; (d) any other
event or transaction which the Board determines, in its discretion, would

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materially alter the structure, ownership or control of the Company;

provided, however, that the consummation of the transactions come plated by the
Agreement and Plan of Merger, dated as of July, 1999, between Indigo, Inc., a
California corporation, and Gemstone, a Delaware corporation, shall not
constitute a Change in Control.

     5.   Proprietary Information and Inventions. Executive acknowledges that
during his employment he may create, make, derive, produce, obtain, make
known or learn about certain information which has commercial value in the
business in which the Company is engaged and which is treated by the Company as
confidential. This information may have been created, discovered or developed by
the Company or the Executive, in the course and scope of his employment, or
otherwise received by the Company from third parties subject to a duty to
maintain the confidentiality of such information. All such information is
hereinafter called "Proprietary Information."

          5.1  Proprietary Information Defined. By way of illustration, but not
limitation, Proprietary Information includes trade secrets,- ideas,
-processes, drawings, specifications, data, formulations, computer programs,
software, other original works of authorship, know-how, improvements,
discoveries, developments, designs, innovations, techniques, business
development strategies, marketing plans, strategies, forecasts, new products,
unpublished financial statements, budgets, projections, licenses, prices, costs,
strategic alliances, ventures, and customer and supplier lists. The foregoing
obligations of confidentiality and non-use shall not apply to any Proprietary
Information that:

               5.1.1     was known to the Executive prior to the date of
disclosure pursuant to this Agreement and not obtained or derived directly
or indirectly from the Company;

               5.1.2     is or becomes public or available to the general
public otherwise than through the act or default of the Executive;

               5.1.3     is obtained subsequent to any disclosure under this
Agreement from a third party who is lawfully in possession of same and
which information is not subject to any confidential or non-use obligations owed
to the Company or others;

               5.1.4     has been furnished by the Company to a third party
without similar restrictions on disclosure; or

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               5.1.5     is required to be disclosed pursuant to requirements
of Federal, state or local statute, regulation or court order, provided
that Executive delivers prior written notice to Company of such pending
disclosure, and gives Company a reasonable opportunity to oppose such disclosure
with the applicable authority.

          5.2  Ownership of Proprietary Information. Executive acknowledges that
all Proprietary Information shall be the sole property of the Company and
its assignees (or, in some cases, its clients, suppliers or customers), and the
Company and its assignees (or, in some cases, its clients, suppliers or
customers) shall be the sole owner of all patents, copyrights, trade secrets,
and all other intellectual property rights in connection therewith (collectively
"Intellectual Property Rights"). The Company's ownership includes any and all
modifications, corrections, updates, changes, improvements, derivatives and
enhancements to the Proprietary Information and the Intellectual Property Rights
therein.

          5.3  Non-Disclosure. At all times, both during Executive's employment
and after his termination, Executive shall keep in strictest confidence and
trust all Proprietary Information, and shall not reproduce or disclose any
Proprietary Information, or use such Proprietary Information for his own account
or the account of any third party, without the written consent of the Company,
except as may be necessary in the ordinary course of performing duties as an
employee of the Company.

          5.4  Assignment of Inventions. Executive hereby assigns and transfers
to the Company, Executive's entire right, title and interest, now or
hereafter acquired, in and to all Proprietary Information and Intellectual
Property Rights therein, discovered, originated, made or conceived or learned by
Executive either alone or jointly with others, during the period of Executive's
employment which result, directly or indirectly, from (i) the use of premises or
equipment owned, leased or contracted for by the Company or supplies or
Proprietary Information of the Company, or (ii) work conducted on the time of
the Company, or (iii) work performed for the Company. Executive further
acknowledges that all original works of authorship which are made by Executive
(solely or jointly with others) within the scope of and during the period of his
employment with the Company and which are protectible by copyright are "works
made for hire," as that term is defined in the United States Copyright Act.
Executive understands and agrees that the decision whether or not to
commercialize or market any invention developed by him solely or jointly with
others is within the Company's sole discretion and for the Company's sole
benefit and that no royalty will be due to him as a result of the Company's
efforts to commercialize or market

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any such invention. Executive hereby waives all moral rights which he may
have or hereafter acquire in any Proprietary Information and any Intellectual
Property Rights therein. Executive will, at the Company's request, promptly
execute a written assignment of title to the Company for any Proprietary
Information and Intellectual Property Rights therein, and a written waiver of
all moral rights therein, and Executive will preserve all such Proprietary
Information as confidential information of the Company.

          5.5  Notice of Inventions; Execution of Documents. Executive agrees
to give Company prompt written notice of his acquisition or creation of any
Proprietary Information. Executive further agrees as to all Proprietary
Information to assist the Company in every proper way (but at the Company's
expense) to obtain and from time to time enforce patents, copyrights and other
rights and protections relating to inventions in any and all countries, and to
that end agrees to execute all documents for use in applying for and obtaining
such patents, copyrights and other rights and protections on and enforcing
inventions as the Company may desire, together with any assignments thereof to
the Company or persons designated by it. Executive's obligations to assist the
Company in obtaining and enforcing patents, copyrights and other rights
and-protections relating to Proprietary Information in any and all countries
shall continue beyond the termination of employment, but the Company shall
compensate Executive at a reasonable rate after such termination for time
actually spent, at the Company's request, on such assistance. In the event the
Company is unable, after reasonable effort, to secure signatures on any
documents needed to effect any assignment hereunder or to apply for or prosecute
any patent, copyright or other right or protection relating to an invention,
whether because of physical or mental incapacity or for any other reason
whatsoever, Executive hereby irrevocably designates and appoints the Company and
its duly authorized officers and agents as his agent and attorney-in-fact, to
act for and in his behalf and stead, to execute and file any such application or
applications and to do all other lawfully permitted acts to further the
prosecution and, issuance of patents, copyrights or similar protections thereon
with the same legal force and effect as if executed by him.

          5.6  Return of Pronrietary Information. All Proprietary Information,
including, without limitation, all written materials, records and documents
or other tangible materials made by Executive or coming into his possession as a
result of his employment with Company concerning the business or affairs of
Company shall be the sole property of Company; and, upon the termination of his
employment with Company or upon the request of Company, Executive shall promptly
deliver the same to Company.

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          5.7  Third Party Information. Executive recognizes that the Company
has received and in the future will receive from third parties their
confidential or proprietary information subject to a duty on the Company's part
to maintain the confidentiality of such information and to use it only for
certain limited purposes. Executive agrees that Executive owes the Company and
such third parties, during the term of this Agreement and thereafter, a duty to
hold all such confidential or proprietary information in the strictest
confidence and not to disclose it to any person, firm or corporation or to use
it except as necessary in carrying out the services for the Company consistent
with the Company's agreement with such third party.

     6.   Prior Inventions. Executive understands that all inventions, if any,
patented or unpatented, which Executive made prior to Executive's
employment are excluded from the scope of this Agreement. To preclude any
possible uncertainty, Executive has set forth on item 1 of Exhibit A attached
hereto a complete list of all of Executive's prior inventions, including numbers
of all patents and patent applications, and a brief description of all
unpatented inventions which are no-t the property of a previous employer.
Executive represents and covenants that the list is complete and that, if no
items are on the list, Executive has no such prior inventions. Executive agrees
to notify the Company in writing before Executive makes any disclosure or
performs any work on behalf of the Company which appears to threaten or conflict
with proprietary rights which Executive claims in any invention or idea.
Executive agrees that if in the course of performing services hereunder,
Executive incorporates into the Company's Proprietary Information or otherwise
utilizes any invention, improvement, development, concept, discovery or other
proprietary information owned by Executive or in which Executive has an
interest, the Company is hereby granted and shall have a non-exclusive,
royalty-free, perpetual, irrevocable, worldwide license to make, have made,
modify, use and sell such item as part of or in connection with such Proprietary
Information.

     7.   Conflicting Obligations.

          7.1  Trade Secrets of Others. Executive represents that he has not
brought, and will not bring with him to Company, disclose to Company, or
use in the performance of his responsibilities, any devices, materials or
documents of a former employer or other party that are proprietary or are not
generally available to the public, unless he has obtained express written
authorization from such party for their possession and use. The only devices,
materials or documents of a former employer or other party that are

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proprietary or are not generally available to the public that Executive
will bring to the Company, if any, are identified on item 2 of Exhibit A
attached hereto, and as to each such item, Executive represents that Executive
has obtained express written authorization for their possession and use and has
delivered a copy of such written authorization to the Company.

          7.2  Conflicting Confidentiality Agreements. Executive agrees that
during this employment, Executive will not breach any obligation of
confidentiality Executive has to former employers, clients, and others.
Executive represents that Executive's performance under the terms of this
Agreement, as Executive to the Company, does not and will not breach any
agreement to keep in confidence proprietary information acquired by Executive in
confidence or in trust. Executive has neither entered into, nor shall enter
into, any agreement, either written or oral, in conflict herewith.

     8.   Covenant Not to Compete; Non-Interference.

          8.1  During the term of this Agreement, Executive shall not, directly
or indirectly, engage or participate in any business, which is in
competition with any business in which the Company conducts or pursues during
the term of this Agreement. Moreover, in view of Executive's access to secrets
and proprietary information and further agrees that Executive will not, without
the Company's prior written consent, design or develop identical or
substantially similar designs as those developed for the Company during his
employment for himself or any third party during the term of this Agreement and
for a period of twelve (12) months following the termination of this Agreement.

          8.2  Executive covenants and agrees that he will not, during the term
of this Agreement and continuing until the second anniversary of the
termination of this Agreement, whether for his own account or for the account of
any other person, interfere with the relationship of the Company with, or
endeavor to entice away from the Company, any person who at any time during the
term of Executive's engagement with the Company was an employee of the Company.
Furthermore, Executive covenants and agrees that he will not, whether during the
term of this Agreement or thereafter, whether for his own account or for the
account of any other person, interfere with the relationship of the Company
with, or endeavor to entice away from the Company, any person who at any time
during the term of Executive's engagement with the Company was a customer,
supplier or business partner of the Company.

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     9.   Key Man Insurance. The Company may, in its sole discretion, at any
time after the date hereof, apply for and procure as owner for its benefit,
life insurance on Executive, in such amount and in such form or forms as the
Corporation may determine. Executive shall, at the Company's request, subject to
such medical examinations, supply such information and execute such documents as
may be required by the insurance company or companies to whom the Company has
applied for such insurance.

     10.  General Provisions.

          10.1 Mediation an Arbitration.

               10.1.1    Mediation. No party to this Agreement may initiate
litigation or arbitration with regard to any dispute with respect to this
Agreement until after all remedies set forth in this Section have been
exhausted. In the event of any dispute arising over this Agreement, any party
shall have the right by giving written notice to the other parties hereto (the
"Mediation Notice") to initiate nonbinding mediation to be conducted by a
mediator mutually agreed to by the parties or, in the event the parties are
unable to reach such agreement within thirty (30) days following the delivery of
the Mediation Notice, by a mediator appointed by the American Arbitration
Association ("AAA") in accordance with the rules and regulations of the AAA, or
by any other body mutually agreed upon by the parties. Mediation shall take
place at Hayward, California or any other location mutually agreeable to the
parties. In the event the parties resolve their dispute in mediation, they shall
enter into a written agreement, which shall be binding on all parties thereto.

               10.1.2    EXCEPT AS PROVIDED IN SECTIONS 10.1 AND 10.10 HEREOF,
EXECUTIVE AND COMPANY AGREE THAT ANY DISPUTE OR CONTROVERSY ARISING OUT OF,
OR RELATING TO THIS AGREEMENT SHALL BE SETTLED BY ARBITRATION TO BE HELD IN
ALAMEDA COUNTY, CALIFORNIA, IN ACCORDANCE WITH THE EMPLOYMENT DISPUTE RESOLUTION
RULES THEN IN EFFECT OF THE AMERICAN ARBITRATION ASSOCIATION. THE ARBITRATOR MAY
GRANT INJUNCTIONS OR OTHER RELIEF IN-SUCH DISPUTE OR CONTROVERSY. THE DECISION
OF THE ARBITRATOR SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES TO THE
ARBITRATION. JUDGMENT MAY BE ENTERED ON THE ARBITRATOR'S DECISION IN ANY COURT
HAVING JURISDICTION.

               10.1.3    THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF
EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL
DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP (EXCEPT
AS PROVIDED IN SECTION 7 HEREOF), INCLUDING, WITHOUT LIMITATION, THE FOLLOWING
CLAIMS:

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               10.1.3 (a) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF
EMPLOYMENT, BREACH OF CONTRACT, EXPRESS OR IMPLIED, BREACH OF THE COVENANT
OF GOOD FAITH AND FAIR DEALING, NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL
DISTRESS, MISREPRESENTATION, INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC
ADVANTAGE, DEFAMATION AND LIBEL;

               10.1.3 (b)  ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL,
STATE OR MUNICIPAL STATUTE, INCLUDING, WITHOUT LIMITATION, TITLE VII OF THE
CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION
IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR
LABOR STANDARDS ACT; AND

               10.1.3 (c) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS
AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.

               10.1.4  EXECUTIVE UNDERSTAND THAT EACH PARTY'S COVENANT
TO RESOLVE DISPUTES BY ARBITRATION, AS OPPOSED TO THE JUDICIAL SYSTEM IS
CONSIDERATION FOR THE OTHER PARTY'S PROMISE. EXECUTIVE FURTHER UNDERSTANDS THAT
HE HAS BEEN OFFERED EMPLOYMENT BY THE COMPANY IN CONSIDERATION OF HIS PROMISE TO
ARBITRATE DISPUTES.

          10.2 Notification of New Employer. In the event that Executive
leaves the employ of the Company, Executive hereby consents to notification
by the Company to Executive's new employer about his rights and obligations
under this Agreement.

          10.3 Notices. Except as expressly provided herein, all notices,
requests or other communications required hereunder shall be in writing and
shall be given personal delivery, national overnight courier service, or by U.S.
mail, certified or registered, postage prepaid, return receipt requested,
addressed to the respective party at the applicable address set forth above, or
to any party at such other addresses as shall be specified in writing by such
party to the other parties in accordance with the terms and conditions of this
Section. All notices, requests or communications shall be deemed effective upon
personal delivery, or five (5) days following deposit in the United States mail,
or two (2) business days following deposit with any national overnight courier
service.

          10.4 Jurisdiction. Venue and Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the
State of California (regardless of that jurisdiction or any other jurisdiction's
choice of law principles). To the extent permitted by law and except as
otherwise provided in Section 10.1 hereof, the parties hereto agree that all
actions or proceedings arising

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in connection herewith, shall be litigated in the state and federal courts
located in the State of California, and each party hereby waives any right it
may have to assert the doctrine of Forum Non Conveniens or to object to venue.
The parties each hereby stipulate that the state and federal courts located in
the County of Alameda, State of California, shall have personal jurisdiction and
venue over each party for the purpose of litigating any such dispute,
controversy or proceeding arising out of or related to this Agreement. To the
extent permitted by law, service of process sufficient for personal jurisdiction
in any action against either party may be made by registered or certified mail,
return receipt requested.

          10.5 No Assignment. This Agreement is personal to Executive, and
Executive may not assign any rights or delegate any responsibilities
hereunder without the prior approval of the Company.

          10.6 Entire Agreement. This Agreement, including the exhibit which is
referenced herein and incorporated by this reference, is the entire
agreement between the Company and Executive with respect to the subject matter
hereof and cancels and supersedes any and all prior agreements regarding the
subject matter hereof between the parties, including without limitation that
certain Employment Agreement, dated September 30, 1996, between Impax
Pharmaceuticals, Inc., and Executive. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors, heirs and
permitted assigns. This Agreement may not be altered, modified, changed or
discharged except in writing signed by both the parties.

          10.7 Survival. Sections 4.2, 4.3, 5, 6, 7, 8 and 10, each inclusive,
shall survive termination or expiration of this Agreement.

          10.8 Validity. If any one or more of the provisions (or any part
thereof) of this Agreement shall be held to be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions (or any part thereof) shall not in any way be affected or
impaired thereby.

          10.9 No Waiver of Rights. The delay or failure of either party to
enforce at any time any provision of this Agreement shall in no way be
considered a waiver of any such provision, or any other provision, of this
Agreement. No waiver of, or delay or failure to enforce any provision of this
Agreement shall in any way be considered a continuing waiver or be construed as
a subsequent waiver of any such provision, or any other provision of this
Agreement.

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          10.10     Equitable Remedies , Employee specifically acknowledges that
any violation of Section 5, 6, 7 or 8 of this Agreement could cause
irreparable injury to Company and its business and property. Employee,
therefore, agrees that in the event of his breach of any of the terms and
conditions of Section 5, 6, 7 or 8 of this Agreement, Company shall be entitled,
if it so elects, to institute and prosecute proceedings in any court of
competent jurisdiction, either at law or in equity, to enjoin him from further
violation of such provisions. The remedies provided herein shall be cumulative
and in addition to any and all other remedies which either party may have at law
or in equity.

          10.11     Attorneys' Fees. The prevailing party shall be entitled to
recover from the losing party its attorneys' fees and costs incurred in any
action or proceeding, including arbitration, brought to interpret this Agreement
or to enforce any right arising out of this Agreement. For purposes of this
Section, the prevailing party shall be that party that most closely obtains the
relief sought by it.

          10.12     EXECUTIVE ACKNOWLEDGES THAT HE HAS HAD THE OPPORTUNITY TO
CONSULT WITH THE ADVISOR OF HIS CHOICE AND THAT HE HAS FREELY AND
VOLUNTARILY ENTERED INTO THIS AGREEMENT.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year written below.

                                           IMPAX LABORATORIES, INC.

Date:  December 14, 1999                   By:
       ---------------------------             --------------------------------

                                           ------------------------------------
                                                   (Print Name and Title)

Date:  December 14, 1999                   /s/ Larry Hsu, Ph.D.
       ---------------------------         ------------------------------------
                                               Larry Hsu, Ph.D.

                                       14

<PAGE>

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year written below.

                                           IMPAX LABORATORIES, INC.

Date: December 14, 1999                    By:          [ILLEGIBLE]
      ----------------------------             --------------------------------

                                           ------------------------------------
                                                   (Print Name and Title)

Date: December 14, 1999                           /s/ Larry Hsu, Ph.D.
      ----------------------------         ------------------------------------
                                                   Larry Hsu, Ph.D.

<PAGE>

                                    EXHIBIT A
                                    ---------

IMPAX LABORATORIES, INC.,
a Delaware corporation

30831 Huntwood Ave.
Hayward, CA 94544

Dear Sir or Madam:

     1.   The following is a complete list of all inventions or improvements
relevant to the subject matter of my employment with Impax Laboratories,
Inc., a Delaware corporation (the "Company"), that have been made or conceived
or first reduced to practice by me, alone or jointly with others, prior to my
engagement by the Company:

     [ ]  No inventions or improvements.

     [ ]  See below:

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     [ ]  Additional sheets attached.

     2.   I propose to bring to my employment (or consulting, if applicable)
the following devices, materials and documents of a former employer or
other party that are proprietary or are not generally available to the public,
which materials and documents may be used in my employment pursuant to the
express written authorization of my former employer or other party (a copy of
which is attached hereto):

     [ ]  No materials.

     [ ]  See below:

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                                       15IMPAX PHARMACEUTICALS, INC.
                           1999 EQUITY INCENTIVE PLAN

1. Purposes. The purposes of the Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to Employees, Directors and Consultants of the Company and
its Affiliates. The persons eligible to receive Stock Awards are the Employees,
Directors and Consultants of the Company and its Affiliates. The Plan provides a
means whereby eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of the
following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
options, (iii) stock bonuses and (iv) rights to acquire restricted stock.

2.       Administration.

         2.1 Administration by Board. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
Section 2.3.

         2.2 Powers of Board. The Board may delegate nondiscretionary
administrative duties to such employees of the Company as it deems proper.
Subject to the provisions of the Plan, the Board shall have the following power
and authorities, subject to the Plan:

             2.2.1 to determine to which of the eligible individuals, and the
time or times at which, Stock Awards shall be granted.

             2.2.2 to determine the number of shares of Common Stock to be
subject to Stock Awards to be granted to each Participant.

             2.2.3 to determine the price to be paid for the shares of Common
Stock pursuant to each Stock Award.

             2.2.4 to determine the term and the exercise schedule of each Stock
Award.

             2.2.5 to determine the expiration/termination rate of the Company's
repurchase right, if any, with respect to any Stock Award, and to designate
certain events which will trigger an acceleration of such expiration and the
rate of such acceleration.

             2.2.6 to determine the terms and conditions of each Stock Award
(which need not be identical) entered into between the Company and any
Participant, subject to Sections 5, 6 and 11 hereof.

<PAGE>

             2.2.7 to interpret the Plan and Stock Awards granted under it, and
to establish, amend and revoke rules and regulations for its administration. The
Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Stock Award Agreement, in a manner and to
the extent it shall deem necessary or expedient to make the Plan fully
effective.

             2.2.8 to accelerate the exercise date or schedule with respect to
any Stock Award; to accelerate the vesting or expiration of the Company's
repurchase right with respect to any Shares issued pursuant to any Stock Award
granted under the Plan; or, with the consent of the holder thereof, to modify or
amend any such Stock Award.

             2.2.9 to make all determinations deemed necessary or advisable for
the administration of the Plan.

             2.2.10 to determine whether a Participant's Continuous Service has
been interrupted or terminated.

             2.2.11 to determine whether an Optionee, who is an Employee,
Director, Consultant or Officer of the Company or any Parent or Affiliate of the
Company.

             2.2.12 To amend the Plan or a Stock Award as provided in Section
11.

             2.2.13 To adopt forms of agreement for use under the Plan.

             2.2.14 To reduce the exercise price of any Stock Award to the then
current Fair Market Value if the Fair Market Value of the Common Stock subject
to such Stock Award has declined since the date the Stock Award was originally
granted or the exercise price thereof was last adjusted.

             2.2.15 To allow Participants to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of a Stock Award that number of Shares having a Fair Market Value equal
to the amount required to be withheld. All elections pursuant to this Section
2.2.15 shall be made in such form and under such conditions as the Board may
deem appropriate or advisable.

             2.2.16 Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.

                                        2
<PAGE>

         2.3 Delegation to Committee.

             2.3.1 General. The Board may delegate administration of the Plan to
a Committee or Committees of one or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.

             2.3.1 Committee Composition when Common Stock is Publicly Traded.
At such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board may (i) delegate to a committee of one or more members of
the Board who are not Outside Directors the authority to grant Stock Awards to
eligible persons who are either (1) not then Covered Employees and are not
expected to be Covered Employees at the time of recognition of income resulting
from such Stock Award or (2) not persons with respect to whom the Company wishes
to comply with Section 162(m) of the Code and/or) (ii) delegate to a committee
of one or more members of the Board who are not Non-Employee Directors the
authority to grant Stock Awards to eligible persons who are not then subject to
Section 16 of the Exchange Act.

          2.4 Binding Affect of Decisions. All decisions, determinations and
interpretations of the Board shall be final and binding on all Participants.

3.       Share Reserve.

         3.1 Aggregate Shares. The aggregate number of shares of Common Stock
that may be issued pursuant to Stock Awards issued pursuant to this Plan is
1,000,000 Shares, subject to adjustment as provided in this Plan. If any Stock
Award, expires or is terminated without being exercised in whole or in part, the
unexercised or released shares from such Stock Award shall be available for
future grant and purchase under this Plan. However, if any Common Stock acquired
pursuant to the exercise of an Option

                                        3
<PAGE>

shall for any reason be repurchased by the Company under an unvested share
repurchase option provided under the Plan, the stock repurchased by the Company
under such repurchase option shall not revert to and again become available for
issuance under the Plan. At all times during the term of this Plan, the Company
shall reserve and keep available such number of Shares as shall be required to
satisfy the requirements of outstanding Options under this Plan.

         3.2 Limitation. Prior to the Listing Date, at no time shall the total
number of shares issuable upon exercise of all outstanding Options and the total
number of shares provided for under any stock bonus or similar plan of the
Company exceed the applicable percentage as calculated in accordance with the
conditions and exclusions of Section 260.140.45 of Title 10 of the California
Code of Regulations, based on the shares of the Company which are outstanding at
the time the calculation is made.

4.       Eligibility.

         4.1 Generally. Stock Awards may be granted to Employees, Officers,
Directors, and Consultants (provided such Consultants render bona fide services
not in connection with the offer and sale of securities in a capital-raising
transaction) of the Company or any Parent, Subsidiary or Affiliate of the
Company. Incentive Stock Options may be granted only to Employees of the Company
or a Parent or Subsidiary of the Company. The Company may also, from time to
time, assume outstanding stock awards granted by another company, whether in
connection with an acquisition of such other company or otherwise, by either (a)
granting a Stock Award under this Plan in replacement of the stock award assumed
by the Company, or (b) treating the assumed stock award as if it had been
granted under this Plan if the terms of such assumed stock award could be
applied to a Stock Award granted under this Plan. Such assumption shall be
permissible if the holder of the assumed stock award would have been eligible to
be granted a stock award hereunder if the other company had applied the rules of
this Plan to such grant.

         4.2 Eligibility for Specific Stock Awards. Incentive Stock Options may
be granted only to Employees. Stock Awards other than Incentive Stock Options
may be granted to Employees, Directors and Consultants.

         4.3 Section 162(m) Limitation. Subject to the provisions of Section 10
relating to adjustments upon changes in stock, no employee shall be eligible to
be granted Options covering more than Five Hundred Thousand (500,000) shares of
the Common Stock during any calendar year. This Section shall not apply prior to
the Listing Date and, following the Listing Date, this Section shall not apply
until (i) the earliest of: (1) the first material

                                        4
<PAGE>

modification of the Plan (including any increase in the number of shares
reserved for issuance under the Plan in accordance with Section 3.1); (2) the
issuance of all of the shares of Common Stock reserved for issuance under the
Plan; (3) the expiration of the Plan; or (4) the first meeting of shareholders
at which Directors of the Company are to be elected that occurs after the close
of the third calendar year following the calendar year in which occurred the
first registration of an equity security under Section 12 of the Exchange Act;
or (ii) such other date required by Section 162(m) of the Code and the rules
and regulations promulgated thereunder.

5.       Terms and Conditions of Options.

         5.1 Option Grant. Each option granted under the Plan shall be evidenced
by a written stock option grant. Each such agreement shall designate the option
thereby granted as a Common Stock option. Each such Option shall be subject to
the terms and conditions set forth in this Section 5, and to such other terms
and conditions not inconsistent herewith as the Board may deem appropriate in
each case.

         5.2 Date of Grant. The date of grant of an Option shall be the date on
which the Board makes the determination to grant such Option unless otherwise
specified by the Board. The document representing the Option will be delivered
to Optionee with a copy of this Plan within a reasonable time after the granting
of the Option.

         5.3 Exercise Price. The exercise price of an Option shall be not less
than 100% of the Fair Market Value of the Shares on the date the Option is
granted. The exercise price of any Option granted to a person owning more than
10% of the total combined voting power of all classes of stock of the Company
or any Parent or Subsidiary of the Company ("Ten Percent Shareholder") shall not
be less than 110% of the Fair Market Value of the Shares on the date the Option
is granted. For purposes of Sections 5.3 and 5.4, in determining stock
ownership, an Optionee shall be considered as owning the voting capital stock
owned, directly or indirectly, by or for his brothers and sisters, spouse,
ancestors and lineal descendants. Voting capital stock owned, directly or
indirectly, by or for a corporation, partnership, estate or trust shall be
considered as being owned proportionately by or for its shareholders, partners
or beneficiaries, as applicable. Common Stock with respect to which any such
Optionee holds an Option shall not be counted. Additionally, for purposes of
Sections 5.3 and 5.4, outstanding capital stock shall include all capital stock
actually issued and outstanding immediately after the grant of the Option to the
Optionee. Outstanding capital stock shall not include capital stock authorized
for issue under outstanding Options held by the Optionee or by any other person.

                                        5
<PAGE>

         5.4 Exercise Period. Subject to the limitations set forth herein,
Options shall be exercisable within the times or upon the events determined by
the Board as set forth in the Option. Notwithstanding the foregoing, the term of
any Incentive Stock Option granted to any Ten Percent Shareholder shall not
exceed five (5) years. In no event shall the right to exercise be at a rate less
than twenty percent (20%) per year over five (5) years from the date the Option
is granted. No Option shall be exercisable after the expiration of ten (10)
years from the date the Option is granted.

         5.5 Limitations on Exercise. Notwithstanding the exercise periods set
forth in the Option, exercise of an Option shall always be subject to the
following:

             5.5.1 If Optionee ceases to be employed by the Company or any
Parent, Subsidiary or Affiliate of the Company for any reason except death or
disability, Optionee may exercise such Optionee's Options to the extent (and
only to the extent) that they would have been exercisable upon the date of
termination, within ninety (90) days after the date of termination; but in any
event no later than the expiration date of the Options.

             5.5.2 If Optionee's employment with the Company or any Parent,
Subsidiary, or Affiliate of the Company is terminated because of the death of
Optionee or Disability of Optionee, Optionee's Options may be exercised to the
extent (and only to the extent) that they would have been exercisable by
Optionee on the date of termination, by Optionee (or Optionee's legal
representative) within one year after the date of termination, but in any event
no later than the expiration date of the Options.

An Optionholder's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionholder's Continuous Service (other
than upon the Optionholder's death or Disability) would be prohibited at any
time solely because the issuance of shares would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in Section 5.4
or (ii) the expiration of a period of three (3) months after the termination of
the Optionholder's Continuous Service during which the exercise of the Option
would not be in violation of such registration requirements.

             5.6 Options Non-Transferable. Options granted under this Plan, and
any interest therein, shall not be transferable or assignable by Optionee, and
may not be made subject to execution, attachment or similar process, otherwise
than by will or by the laws of descent and distribution or pursuant to a
qualified

                                        6
<PAGE>

domestic relations order as defined by the Code or Title 1 of the Employee
Retirement Income Security Act, or the rules thereunder, and shall be
exercisable during the lifetime of the Optionee only by Optionee.

         5.7 Assumed Options. In the event the Company assumes an option granted
by another company, the exercise price and the number and nature of shares
issuable upon exercise, of such assumed option will be adjusted appropriately
pursuant to the Code. In the event the Company elects to grant a new option
rather than assuming an existing option (as specified in Section 4), such new
option need not be granted at Fair Market Value on the date of grant and may
instead be granted with a similarly adjusted exercise price.

         5.8 Additional Terms and Conditions to Which Incentive Stock Options
Are Subject. Options granted under this Plan which are designated as incentive
stock options shall be subject to the following additional terms and conditions:

             5.8.1 Annual Limitation. The aggregate fair market value
(determined as of the date an incentive stock option is granted) of the stock
with respect to which incentive stock options granted are exercisable for the
first time by an employee during any one (1) calendar year (under this Plan and
under all other incentive stock option plans of the Company and of any Parent or
Subsidiary corporation) shall not exceed One Hundred Thousand Dollars
($100,000).

             5.8.2 Disqualifying Dispositions. If Common Stock acquired by
exercise of an Incentive Stock Option granted pursuant to this Plan is disposed
of within two (2) years from the date of grant of the option or within one (1)
year after the transfer of the Common Stock to the Optionee, the holder of the
Common Stock immediately prior to the disposition shall promptly notify the
Company in writing of the date and terms of the disposition and shall provide
such other information regarding the disposition as the Company may reasonably
require.

         5.9  Early Exercise. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares subject to the Option prior to the full vesting of the Option.
Subject to the "Repurchase Limitation" in Section 9.7, any unvested shares so
purchased may be subject to an unvested share repurchase option in favor of the
Company or to any other restriction the Board determines to be appropriate.

         5.10 Right of Repurchase. Subject to the "Repurchase Limitation" in
Section 9.7, the Option may, but need not, include

                                        7
<PAGE>

a provision whereby the Company may elect, prior to the Listing Date, to
repurchase all or any part of the vested shares acquired by the Optionholder
pursuant to the exercise of the Option.

         5.11 Right of First Refusal. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionholder of
the intent to transfer all or any part of the shares exercised pursuant to the
Option. Except as expressly provided in this Section, such right of first
refusal shall otherwise comply with any applicable provisions of the Bylaws of
the Company.

         5.12 Re-Load Options. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option Agreement
a provision entitling the Optionholder to a further Option (a "Re-Load Option")
in the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Any such Re-Load Option shall (i) provide for a number of shares equal to the
number of shares surrendered as part or all of the exercise price of such
Option; (ii) have an expiration date which is the same as the expiration date of
the Option the exercise of which gave rise to such Re-Load Option; and (iii)
have an exercise price which is equal to one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Re-Load Option on the date of
exercise of the original Option. Notwithstanding the foregoing, a Re-Load Option
shall be subject to the same exercise price and term provisions heretofore
described for Options under the Plan.

         Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollars ($100,000) annual limitation on exercisability of Incentive Stock
Options described in Section 5.8.1 and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares under Section 3.1 and the
"Section 162(m) Limitation" on the grants of Options under Section 4.3 and shall
be subject to such other terms and conditions as the Board may determine which
are not inconsistent with the express provisions of the Plan regarding the terms
of Options.

                                       8
<PAGE>

6.       Provisions of Stock Awards Other than Options.

         6.1  Stock Bonus Awards. Each stock bonus agreement shall be in such
form and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus agreements may change from
time to time, and the terms and conditions of separate stock bonus agreements
need not be identical, but each stock bonus agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:

              (i) Consideration. A stock bonus shall be awarded in consideration
for past services actually rendered to the Company for its benefit.

              (ii) Vesting. Subject to the "Repurchase Limitation" in Section
9.7, shares of Common Stock awarded under the stock bonus agreement may, but
need not, be subject to a share repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board.

              (iii) Termination of Participant's Continuous Service. Subject to
the "Repurchase Limitation" in Section 9.7, in the event a Participant's
Continuous Service terminates, the Company may reacquire any or all of the
shares of Common Stock held by the Participant which have not vested as of the
date of termination under the terms of the stock bonus agreement.

              (iv) Transferability. For a stock bonus award made before the
Listing Date, rights to acquire shares under the stock bonus agreement shall not
be transferable except by will or by the laws of descent and distribution and
shall be exercisable during the lifetime of the Participant only by the
Participant. For a stock bonus award made on or after the Listing Date, rights
to acquire shares under the stock bonus agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the stock
bonus agreement, as the Board shall determine in its discretion, so long as
stock awarded under the stock bonus agreement remains subject to the terms of
the stock bonus agreement.

         6.2  Restricted Stock Awards. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:

                                        9
<PAGE>

              6.2.1 Purchase Price. Subject to the provisions of Section 5.3
regarding Ten Percent Shareholders, the purchase price under each restricted
stock purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. For restricted stock
awards made prior to the Listing Date, the purchase price shall not be less than
eighty-five percent (85%) of the stock's Fair Market Value on the date such
award is made or at the time the purchase is consummated. For restricted stock
awards made on or after the Listing Date, the purchase price shall not be less
than eighty-five percent (85%) of the stock's Fair Market Value on the date such
award is made or at the time the purchase is consummated.

              6.2.2 Consideration. The purchase price of stock acquired pursuant
to the restricted stock purchase agreement shall be paid either:

                    (i) in cash at the time of purchase;

                    (ii) at the discretion of the Board, according to a deferred
payment or other arrangement with the Participant; or

                    (iii) in any other form of legal consideration that may be
acceptable to the Board in its discretion; provided, however, that at any time
that the Company is incorporated in Delaware, then payment of the Common Stock's
"par value," as defined in the Delaware General Corporation Law, shall not be
made by deferred payment.

              6.2.3 Vesting. Subject to the "Repurchase Limitation" in Section
9.7, shares of Common Stock acquired under the restricted stock purchase
agreement may, but need not, be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the Board.

              6.2.4 Termination of Participant's Continuous Service. Subject to
the "Repurchase Limitation" in Section 9.7, in the event a Participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the restricted stock
purchase agreement.

              6.2.5 Transferability. For a restricted stock award made before
the Listing Date, rights to acquire shares under the restricted stock purchase
agreement shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant. For a restricted stock award made on or after the
Listing Date, rights to acquire shares under the restricted

                                       10

<PAGE>

stock purchase agreement shall be transferable by the Participant only upon such
terms and conditions as are set forth in the restricted stock purchase
agreement, as the Board shall determine in its discretion, so long as stock
awarded under the restricted stock purchase agreement remains subject to the
terms of the restricted stock purchase agreement.

7.       Covenants of the Company.

         7.1  Availability of Shares. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.

         7.2  Securities Law Compliance. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any stock issued or issuable pursuant to any such
Stock Award. If, after reasonable efforts, the Company is unable to obtain from
any such regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such Stock Awards unless and until such authority is
obtained.

8.       Use of Proceeds from Stock. Proceeds from the sale of stock pursuant to
Stock Awards shall constitute general funds of the Company.

9.       Miscellaneous.

         9.1  Acceleration of Exercisability and Vesting. The Board shall have
the power to accelerate the time at which a Stock Award may first be exercised
or the time during which a Stock Award or any part thereof will vest in
accordance with the Plan, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.

         9.2  Shareholder Rights. No Participant shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
subject to such Stock Award unless and until such Participant has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.

         9.3  No Employment or other Service Rights. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant or other holder of Stock

                                       11
<PAGE>

Awards any right to continue to serve the Company or an Affiliate in the
capacity in effect at the time the Stock Award was granted or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.

         9.4  Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring stock under any Stock Award, (i) to give
written assurances satisfactory to the Company as to the Participant's knowledge
and experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring the stock
subject to the Stock Award for the Participant's own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (iii) the issuance of the shares upon the exercise or acquisition
of stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (iv) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.

         9.5  Withholding Obligations. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means (in addition to the Company's
right to withhold from any compensation paid to the Participant by the Company)
or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares from the shares of the Common Stock
otherwise issuable to the participant as a result of the exercise or acquisition
of stock under the Stock Award; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.

                                       12

<PAGE>

         9.6  Information Obligation. Prior to the Listing Date, to the extent
required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to Participants at
least annually. This Section shall not apply to key Employees whose duties in
connection with the Company assure them access to equivalent information.

         9.7  Repurchase Limitation. The terms of any repurchase option shall be
specified in the Stock Award and may be either at Fair Market Value at the time
of repurchase or at not less than the original purchase price. To the extent
required by Section 260.140.41 and Section 260.140.42 of Title 10 of the
California Code of Regulations, any repurchase option contained in a Stock Award
granted prior to the Listing Date to a person who is not an Officer, Director or
Consultant shall be upon the terms described below:

              9.7.1 Fair Market Value. If the repurchase option gives the
Company the right to repurchase the shares upon termination of employment at not
less than the Fair Market Value of the shares to be purchased on the date of
termination of Continuous Service, then (i) the right to repurchase shall be
exercised for cash or cancellation of purchase money indebtedness for the shares
within ninety (90) days of termination of Continuous Service (or in the case of
shares issued upon exercise of Stock Awards after such date of termination,
within ninety (90) days after the date of the exercise) or such longer period as
may be agreed to by the Company and the Participant (for example, for purposes
of satisfying the requirements of Section 1202(c)(3) of the Code regarding
"qualified small business stock") and (ii) the right terminates when the shares
become publicly traded.

              9.7.2 Original Purchase Price. If the repurchase option gives the
Company the right to repurchase the Shares upon termination of Continuous
Service at the original purchase price, then (i) the right to repurchase at the
original purchase price shall lapse at the rate of at least twenty percent (20%)
of the shares per year over five (5) years from the date the Stock Award is
granted (without respect to the date the Stock Award was exercised or became
exercisable) and (ii) the right to repurchase shall be exercised for cash or
cancellation of purchase money indebtedness for the shares within ninety (90)
days of termination of Continuous Service (or in the case of shares issued upon
exercise of Options after such date of termination, within ninety (90) days
after the date of the exercise) or such longer period as may be agreed to by the
Company and the Participant (for example, for purposes of satisfying the
requirements of Section 1202(c)(3) of the Code regarding "qualified small
business stock").

                                       13
<PAGE>

10.      Adjustments upon Changes in Stock.

         10.1 Capitalization Adjustments. If any change is made in the stock
subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to Section 3.1 and the maximum number of securities subject to award to
any person pursuant to Section 4.3, and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of securities and price per
share of stock subject to such outstanding Stock awards. The Board, the
determination of which shall be final, binding and conclusive, shall make such
adjustments. (The conversion of any convertible securities of the Company shall
not be treated as a transaction "without receipt of consideration" by the
Company.)

         10.2 Change in Control-Dissolution or Liquidation. In the event of a
dissolution or liquidation of the Company, then such Stock Awards shall be
terminated if not exercised (if applicable) prior to such event.

         10.3 Change in Control--Asset Sale, Merger, Consolidation or Reverse
Merger. In the event of (i) a sale of substantially all of the assets of the
Company, (ii) a merger or consolidation in which the Company is not the
surviving corporation or (iii) a reverse merger in which the Company is the
surviving corporation but the shares of 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, then any surviving
corporation or acquiring corporation shall assume any Stock Awards outstanding
under the Plan or shall substitute similar stock awards (including an award to
acquire the same consideration paid to the shareholders in the transaction
described in this Section for those outstanding under the Plan. In the event any
surviving corporation or acquiring corporation refuses to assume such Stock
Awards or to substitute similar stock awards for those outstanding under the
Plan, then with respect to Stock Awards held by Participants whose Continuous
Service has not terminated, the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full, and the Stock Awards shall terminate if not exercised (if
applicable) at or prior to such event. With respect to any other Stock Awards
outstanding under the Plan, such Stock

                                       14
<PAGE>

Awards shall terminate if not exercised (if applicable) prior to such event.

11.      Amendment of the Plan and Stock Awards.

         11.1 Amendment of Plan. The Board at any time, and from time to time,
may amend the Plan. However, except as provided in Section 10 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the shareholders of the Company to the extent shareholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any NASDAQ or securities exchange listing requirements.

         11.2 Shareholder Approval. The Board may, in its sole discretion,
submit any other amendment to the Plan for shareholder approval, including, but
not limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.

12.      Termination or Suspension of the Plan.

         12.1 Plan Term. The Board may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate on the day before the
tenth (10th) anniversary of the date the Plan is adopted by the Board or
approved by the shareholders of the Company, whichever is earlier. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.

         12.2 No Impairment of Rights. Suspension or termination of the Plan
shall not impair rights and obligations under any Stock Award granted while the
Plan is in effect except with the written consent of the Participant.

13.      Effective Date of Plan. The Plan shall become effective upon
approval by the Board, but no Stock Award shall be exercised (or, in the case of
a stock bonus, shall be granted) unless and until the Plan has been approved by
the shareholders of the Company, which approval shall be within twelve (12)
months before or after the date the Plan is adopted by the Board.

14.      Definitions.

         14.1 "Affiliate" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

         14.2 "Board" means the Board of Directors of the Company.

                                       15
<PAGE>

         14.3  "Code" means the Internal Revenue Code of 1986, as amended.

         14.4  "Committee" means a Committee appointed by the Board in
accordance with Section 2.3.

         14.5  "Common Stock" means the common stock of the Company.

         14.6  "Company" means Impax Pharmaceuticals, Inc., a California
Corporation.

         14.7  "Consultant" means any person, including an advisor, (i) engaged
by the Company or an Affiliate to render consulting or advisory services and who
is compensated for such services or (ii) who is a member of the Board of
Directors of an Affiliate. However, the term "Consultant" shall not include
either Directors of the Company who are not compensated by the Company for their
services as Directors or Directors of the Company who are merely paid a
director's fee by the Company for their services as Directors.

         14.8  "Continuous Service" means that the Participant's service with
the Company or an Affiliate, whether as an Employee, Director or Consultant, is
not interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director of the
Company will not constitute an interruption of Continuous Service. The Board or
the chief executive officer of the Company, in the Board's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party, including sick leave, military
leave or any other personal leave.

         14.9  "Covered Employee" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.

         14.10 "Director" means a member of the Board of Directors of the
Company.

          14.11 "Disability" means (i) before the Listing Date, the inability of
a person, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of that

                                       16
<PAGE>

person's position with the Company or an Affiliate of the Company because of the
sickness or injury of the person and (ii) after the Listing Date, the permanent
and total disability of a person within the meaning of Section 22(e)(3) of the
Code.

         14.12 "Employee" means any person employed by the Company or an
Affiliate. Mere service as a Director or payment of a director's fee by the
Company or an Affiliate shall not be sufficient to constitute "employment" by
the Company or an Affiliate.

         14.13 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

         14.14 "Fair Market Value" means, as of any date, the value of the
Common Stock determined as follows:

               (i) If the Common Stock is listed on any established stock
exchange or traded on the NASDAQ National Market System or the NASDAQ SmallCap
Market, the Fair Market Value of a share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest
volume of trading in the Common Stock) on the last market trading day prior to
the day of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable.

               (ii) In the absence of such markets for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.

               (iii) Prior to the Listing Date, the value of the Common Stock
shall be determined in a manner consistent with Section 260.140.50 of Title 10
of the California Code of Regulations.

         14.15 "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

         14.16 "Listing Date" means the first date upon which any security of
the Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(0) of the California Corporate
Securities Law of 1968.

         14.17 "Non-Employee Director" means a Director of the Company who
either (i) is not a current Employee or Officer of the

                                       17
<PAGE>

Company or its parent or a subsidiary, does not receive compensation (directly
or indirectly) from the Company or its parent or a subsidiary for services
rendered as a consultant or in any capacity other than as a Director (except for
an amount as to which disclosure would not be required under Item 404(a) of
Regulation S-K promulgated pursuant to the Securities Act ("Regulation S-K")),
does not possess an interest in any other transaction as to which disclosure
would be required under Item 404(a) of Regulation S-K and is not engaged in a
business relationship as to which disclosure would be required under Item 404(b)
of Regulation S-K; or (ii) is otherwise considered a "non-employee director"
for purposes of Rule 16b-3.

         14.18 "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.

         14.19 "Officer" means (i) before the Listing Date, any person
designated by the Company AS an officer and (ii) on and after the Listing Date,
a person who is an officer of the Company within the meaning of Section 16 of
the Exchange Act and the rules and regulations promulgated thereunder.

         14.20 "Option" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.

         14.21 "Option Agreement" means a written agreement between the Company
and an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

         14.22 "Optionholder" means a person to whom an Option is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.

         14.23 "Outside Director" means a Director of the Company who either (i)
is not a current employee of the Company or an "affiliated corporation" (within
the meaning of Treasury Regulations promulgated under Section 162 (m) of the
Code), is not a former employee of the Company or an "affiliated corporation"
receiving compensation for prior services (other than benefits under a tax
qualified pension plan), was not an officer of the Company or an "affiliated
corporation" at any time and is not currently receiving direct or indirect
remuneration from the Company or an "affiliated corporation" for services in any
capacity other than as a Director or (ii) is otherwise considered an "outside
director" for purposes of Section 162 (m) of the Code.

         14.24 "Participant" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.

                                       18
<PAGE>

         14.25 "Plan" means this Impax Pharmaceuticals, Inc. 1999 Equity
Incentive Plan.

         14.26 "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act
or any successor to Rule 16b-3, as in effect from time to time.

         14.27 "Securities Act" means the Securities Act of 1933, as amended.

         14.28 "Shares" means shares of Common Stock of the Company.

         14.29 "Stock Award" means any right granted under the Plan, including
an Option, a stock bonus and a right to acquire restricted stock.

         14.30 "Stock Award Agreement" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.

         14.31 "Subsidiary" shall mean a subsidiary, as defined in Section
424(f) of the Code.

         14.32 "Ten Percent Shareholder" means a person who owns (or is deemed
to own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.

                                       19

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