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<SEC-DOCUMENT>0001047469-05-003179.txt : 20050211
<SEC-HEADER>0001047469-05-003179.hdr.sgml : 20050211
<ACCEPTANCE-DATETIME>20050211065418
ACCESSION NUMBER:		0001047469-05-003179
CONFORMED SUBMISSION TYPE:	S-1
PUBLIC DOCUMENT COUNT:		17
FILED AS OF DATE:		20050211

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			Amphastar Pharmaceuticals, Inc.
		CENTRAL INDEX KEY:			0001297184
		IRS NUMBER:				330702205

	FILING VALUES:
		FORM TYPE:		S-1
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-122725
		FILM NUMBER:		05594998

	BUSINESS ADDRESS:	
		STREET 1:		11570 SIXTH STREET
		CITY:			RANCHO CUCAMONGA
		STATE:			CA
		ZIP:			91730
		BUSINESS PHONE:		909-980-9484

	MAIL ADDRESS:	
		STREET 1:		11570 SIXTH STREET
		CITY:			RANCHO CUCAMONGA
		STATE:			CA
		ZIP:			91730
</SEC-HEADER>
<DOCUMENT>
<TYPE>S-1
<SEQUENCE>1
<FILENAME>a2151158zs-1.htm
<DESCRIPTION>S-1
<TEXT>
<HTML>
<HEAD>
</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<BR>
<FONT SIZE=3 ><A HREF="#05BHL1063_1">QuickLinks</A></FONT>
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<P ALIGN="CENTER"><FONT SIZE=1><B>As filed with the Securities and Exchange Commission on February 11, 2005  </B></FONT></P>

<P ALIGN="RIGHT"><FONT SIZE=1><B> Registration No.&nbsp;333-  </B></FONT></P>

<P><FONT SIZE=1><B> <hr noshade width=100% align=left size=4>
<hr noshade width=100% align=left size=1>  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=5><B>SECURITIES AND EXCHANGE COMMISSION<BR>  </B></FONT><FONT SIZE=2><B>Washington, D.C. 20549  </B></FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="120">
<P ALIGN="CENTER"><FONT SIZE=5><B>FORM S-1<BR>  </B></FONT><FONT SIZE=2><B>REGISTRATION STATEMENT<BR>
UNDER<BR>
THE SECURITIES ACT OF 1933  </B></FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="120">
<P ALIGN="CENTER"><FONT SIZE=5><B>AMPHASTAR PHARMACEUTICALS,&nbsp;INC.<BR>  </B></FONT><FONT SIZE=1>(Exact Name of Registrant as Specified in Its Charter) </FONT></P>

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<TD WIDTH="32%" ALIGN="CENTER"><FONT SIZE=1><B>Delaware</B></FONT><FONT SIZE=1><BR>
(State or Other Jurisdiction of<BR>
Incorporation or Organization)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="32%" ALIGN="CENTER"><FONT SIZE=1><B>2834</B></FONT><FONT SIZE=1><BR>
(Primary Standard Industrial<BR>
Classification Code Number)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="32%" ALIGN="CENTER"><FONT SIZE=1><B>33-0702205</B></FONT><FONT SIZE=1><BR>
(I.R.S. Employer<BR>
Identification Number)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=5 ALIGN="CENTER" VALIGN="TOP"><BR><FONT SIZE=1><B>11570 Sixth Street<BR>
Rancho Cucamonga, California 91730<BR>
(909)&nbsp;980-9484</B></FONT><FONT SIZE=1><BR>
(Address, Including Zip Code, and Telephone Number, Including<BR>
Area Code, of Registrant's Principal Executive Offices)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><BR>
<HR NOSHADE ALIGN="CENTER" WIDTH="120"></FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=5 ALIGN="CENTER" VALIGN="TOP"><BR><FONT SIZE=1><B>David W. Nassif<BR>
Chief Financial Officer<BR>
Amphastar Pharmaceuticals,&nbsp;Inc.<BR>
11570 Sixth Street<BR>
Rancho Cucamonga, California 91730<BR>
(909)&nbsp;980-9484<BR> </B></FONT><FONT SIZE=1>(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=5 ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=1><BR>
<BR>
<HR NOSHADE ALIGN="CENTER" WIDTH="120"></FONT></TD>
</TR>
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<TD COLSPAN=3 ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
<BR></FONT> <FONT SIZE=1><B>Copies to:</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="45%" ALIGN="CENTER"><FONT SIZE=1><B><BR>
Cynthia A. Rotell, Esq.<BR>
Latham &amp; Watkins LLP<BR>
633 West Fifth Street, Suite 4000<BR>
Los Angeles, California 90071-2007<BR>
(213) 485-1234</B></FONT></TD>
<TD WIDTH="10%"><FONT SIZE=1><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="45%" ALIGN="CENTER"><FONT SIZE=1><B><BR>
Alejandro E. Camacho, Esq.<BR>
Andrew S. Epstein, Esq.<BR>
Clifford Chance US LLP<BR>
31 West 52nd Street<BR>
New York, New York 10019-6131<BR>
(212) 878-8000</B></FONT></TD>
</TR>
</TABLE></DIV>
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<P ALIGN="CENTER"><FONT SIZE=1><B>Approximate date of commencement of proposed sale to the public:<BR>
As soon as practicable after this Registration Statement becomes effective.  </B></FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="120">


<P><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule&nbsp;415 under the Securities Act of
1933, check the following box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is filed to register additional securities for an offering pursuant to Rule&nbsp;462(b) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is a post-effective amendment filed pursuant to Rule&nbsp;462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is a post-effective amendment filed pursuant to Rule&nbsp;462(d) under the Securities Act, check the following box and list the
Securities Act registration number of the earlier effective registration statement for the same offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>


<P><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If delivery of the prospectus is expected to be made pursuant to Rule&nbsp;434, please check the following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=1><B>CALCULATION OF REGISTRATION FEE  </B></FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="68%" ALIGN="CENTER"><FONT SIZE=1><B>Title of each class of<BR>
securities to be registered</B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" ALIGN="CENTER"><FONT SIZE=1><B>Proposed maximum aggregate<BR>
offering price(1)(2)</B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>Amount of<BR>
registration fee</B></FONT><BR></TH>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=1>Common Stock, par value $.0001 per share</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="CENTER" VALIGN="BOTTOM"><FONT SIZE=1>$115,000,000</FONT></TD>
<TD WIDTH="1%" VALIGN="BOTTOM"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="CENTER" VALIGN="BOTTOM"><FONT SIZE=1>$13,536</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><HR NOSHADE></TD>
</TR>
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<DL compact>
<DT style='margin-bottom:-9pt;'><FONT SIZE=1>(1)</FONT></DT><DD><FONT SIZE=1>Includes
shares which the underwriters have the option to purchase if they sell more than the number of shares they are required to purchase in the offering. </FONT></DD><DT style='margin-bottom:-9pt;'><FONT SIZE=1>(2)</FONT></DT><DD><FONT SIZE=1>Estimated
solely for purposes of calculating the registration fee pursuant to Rule&nbsp;457(o) under the Securities Act of 1933, as amended. </FONT></DD></DL>

<P><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=1><B>The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall
file&nbsp;a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section&nbsp;8(a) of the Securities Act, or until the
registration statement shall become effective, on such date as the Commission, acting pursuant to said Section&nbsp;8(a), may determine.  </B></FONT></P>

<P><FONT SIZE=1><B> <hr noshade width=100% align=left size=1>
<hr noshade width=100% align=left size=4>  </B></FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=1,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=13217,FOLIO='blank',FILE='DISK034:[05BHL3.05BHL1063]BA1063A.;17',USER='RFARRIN',CD='11-FEB-2005;00:09' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->

<P><FONT COLOR="#FF4040" SIZE=2>The information contained in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities in any state where the offer or sale is not
permitted.</FONT></P>

<P ALIGN="CENTER"><FONT COLOR="#FF4040" SIZE=2><B>Subject to Completion, dated&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2005.  </B></FONT></P>

<P><FONT SIZE=2>PROSPECTUS </FONT></P>

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<TH WIDTH="17%" ALIGN="CENTER"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="60%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%" ALIGN="CENTER"><FONT SIZE=4>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=4>&nbsp;</FONT></TD>
<TD WIDTH="60%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=4>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares</FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER"><FONT SIZE=4>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=4>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%" ALIGN="CENTER"><BR><FONT SIZE=4><B>
<IMG SRC="g61687.jpg" ALT="GRAPHIC" WIDTH="117" HEIGHT="103">
 </B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=4><BR>&nbsp;</FONT></TD>
<TD WIDTH="60%" ALIGN="CENTER" VALIGN="CENTER"><BR><FONT SIZE=5><B>Amphastar Pharmaceuticals,&nbsp;Inc.</B></FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER"><FONT SIZE=5><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="17%"><FONT SIZE=5><B><BR>
&nbsp;</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%" ALIGN="CENTER"><FONT SIZE=5>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=5>&nbsp;</FONT></TD>
<TD WIDTH="60%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=4>Common Stock</FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER"><FONT SIZE=4>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=4>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN="CENTER" WIDTH="144">

<P><FONT SIZE=2>We
are offering&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock. This is our initial public offering, and no public market
currently exists for our shares. </FONT></P>

<P><FONT SIZE=2>We
have applied to have our common stock approved for quotation on the NASDAQ National Market under the symbol "AMPR." We anticipate that the initial public offering price will be between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share.
 </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=3><I>Investing in our common stock involves risks. See "Risk Factors" beginning on page 7.</I></FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="144">

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<TH WIDTH="75%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Per Share</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Public Offering Price</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Underwriting Discounts and Commissions</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Proceeds, before expenses, to Amphastar</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
</TR>
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<P><FONT SIZE=2>We
have granted the underwriters a 30-day option to purchase up to an additional&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares from us on the same
terms and conditions as set forth above if the
underwriters sell more than&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock in the offering. </FONT></P>


<P><FONT SIZE=2>Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underwriters expect to deliver the shares on or about&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2005. </FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="144">

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<TD WIDTH="49%"><FONT SIZE=4><B>LEHMAN BROTHERS</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=4>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="RIGHT"><FONT SIZE=4><B>UBS INVESTMENT BANK</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3 ALIGN="CENTER"><FONT SIZE=4><B><BR>
DEUTSCHE BANK SECURITIES</B></FONT></TD>
</TR>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005 </FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_bg1063_1_1"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="bg1063_table_of_contents"> </A>
<A NAME="toc_bg1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>TABLE OF CONTENTS    <BR>    </B></FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="92%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Page</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Prospectus Summary</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Risk Factors</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>7</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Forward-Looking Statements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>22</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Use of Proceeds</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>23</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Dividend Policy</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>23</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Capitalization</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>24</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Dilution</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>25</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Selected Consolidated Financial Data</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>27</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Management's Discussion and Analysis of Financial Condition and Results of Operations</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>29</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Business</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>38</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Management</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>59</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Principal Stockholders</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>68</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Certain Relationships and Related Transactions</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>70</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Description of Capital Stock</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>72</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Shares Eligible for Future Sale</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>76</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Material U.S. Federal Tax Considerations for Non-U.S. Holders</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>78</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Underwriting</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>81</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Legal Matters</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>85</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Experts</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>85</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Where You Can Find More Information</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>85</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="92%"><FONT SIZE=2>Index To Financial Statements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>F-1</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized anyone to provide you with information different from the
information contained in this prospectus. We are offering to sell shares of common stock, and seeking offers to buy common stock, only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of this prospectus, regardless of when this prospectus is delivered or when any sale of our common stock occurs. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
investors outside the U.S.: neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any
jurisdiction where action for that purpose is required, other than in the U.S. You are required to inform yourselves about and to observe any restrictions relating to this offering and the
distribution of this prospectus. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Until&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005, 25&nbsp;days after the date of this offering, all dealers that effect transactions in these securities, whether or not participating in this offering, may
be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>i</FONT></P>

<HR NOSHADE>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ca1063_prospectus_summary"> </A>
<A NAME="toc_ca1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>PROSPECTUS SUMMARY    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>This summary highlights information contained in other parts of this prospectus. Because it is a summary, it does not contain all of the
information that you should consider before investing in the shares. You should read the entire prospectus carefully, including "Risk Factors" and our financial statements and related notes.  </I></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><I> <A NAME="ca1063_amphastar_pharmaceuticals,_inc."> </A>
<A NAME="toc_ca1063_2"> </A>
<BR>    </I></FONT><FONT SIZE=2><B>Amphastar Pharmaceuticals,&nbsp;Inc.    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a fully integrated specialty pharmaceutical company that develops, manufactures, markets, and sells generic and proprietary injectable and inhalation
products. We currently manufacture and sell 67 products and are continuing to develop a portfolio of generic and branded products that target large markets with high technical barriers to entry. We
are capable of producing a broad range of dosage formulations, including solutions, emulsions, suspensions, jellies, lyophilized (or freeze-dried) products, as well as metered-dose
inhalers, or MDIs, and nasal sprays. We have long-standing relationships with all of the major group purchasing organizations, or GPOs, and drug wholesalers in the U.S. that deliver
products to our end markets, which we believe will enable us to rapidly introduce new products and quickly establish market share leadership. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
began operations in February&nbsp;1996 with a strategic focus on manufacturing and selling generic injectable products. To complement our internal growth, we acquired International
Medication Systems, Limited ("IMS") in October&nbsp;1998 and Armstrong Pharmaceuticals,&nbsp;Inc. ("Armstrong") in October&nbsp;2003 as well as the new drug application, or NDA, for
Cortrosyn&reg;, an injectable diagnostic agent, in June&nbsp;2003 and the abbreviated new drug application, or ANDA, for a generic version of Primatene&reg; Mist in July&nbsp;2004.
As we expanded our infrastructure and developed our research and development expertise, our strategic focus has evolved into developing products for large markets with high technical barriers to
entry. We believe these product candidates will generate higher margins for a longer period of time than products that face more substantial competition. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are specifically focused on applying our technical expertise to develop products that: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>require
an active pharmaceutical ingredient, or API, that is difficult to source and/or manufacture;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>involve
complex manufacturing;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>address
deficiencies in the innovator's product formulation; and/or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>improve
upon an existing product through the use of our proprietary drug delivery platforms. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>Our Competitive Advantages  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have built our company by integrating the capabilities that we believe are essential to compete effectively in the pharmaceutical industry, including: </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Experienced product development team.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our product development team consists of 43 people, 12&nbsp;of whom hold Ph.D.s, with
expertise in areas such as pharmaceutical formulation, process development, </FONT><FONT SIZE=2><I>in vivo</I></FONT><FONT SIZE=2> study, analytical chemistry, drug delivery, and clinical research. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Comprehensive manufacturing capabilities.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We manufacture pharmaceutical products in multiple dosage formulations, including
solution, emulsion, suspension, jelly, lyophilized, or freeze-dried, as well as MDIs and nasal spray products. We currently produce approximately 12.5&nbsp;million injectable units and five million
MDI units per year. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ability to develop and manufacture active pharmaceutical ingredients.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;One aspect of our development focus is on products that
are difficult to manufacture because the API is not easily </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>1</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>

<P><FONT SIZE=2>obtained.
For example, we have leveraged our technical and manufacturing expertise to develop and manufacture the API for enoxaparin, our injectable anticoagulant product candidate. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proprietary technology platforms.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our research and development efforts have resulted in the development of two proprietary
platforms focused on the improvement of drug delivery. Our sustained-release technology has enabled us to formulate injectable product candidates that are designed to allow single injections to be
effective over an extended period. Our prefilled disposable pipette (PDP) technology is a new unit-dose drug delivery system for solution, lotion, cream, jelly or syrup with multiple
potential applications. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Strong GPO and wholesaler relationships.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We have long-standing relationships with all of the major GPOs and
wholesalers in the U.S. Our relationships with GPOs and wholesalers give us access to most, if not all, of the injectable markets in the U.S. </FONT></P>

<P><FONT SIZE=2><B>Our Product Candidates  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below lists the significant product candidates that we are currently developing: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="22%" ALIGN="CENTER"><FONT SIZE=1><B>Product<BR>
Candidate</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="22%" ALIGN="CENTER"><FONT SIZE=1><B>Reference Drug<SUP>(1)</SUP></B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" ALIGN="CENTER"><FONT SIZE=1><B>Therapeutic<BR>
Classification</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>Regulatory<BR>
Path<SUP>(2)</SUP></B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>FDA Filing/<BR>
Expected<BR>
Filing Date</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="22%"><FONT SIZE=2>Enoxaparin</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="22%"><FONT SIZE=2>Lovenox&reg;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2>Anticoagulant</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="CENTER"><FONT SIZE=2>ANDA</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=2>Q1 2003</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="22%"><FONT SIZE=2><BR>
Medroxyprogesterone</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="22%"><FONT SIZE=2><BR>
DepoProvera&reg;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2><BR>
Contraceptive</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="CENTER"><FONT SIZE=2><BR>
ANDA</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=2><BR>
Q3 2004</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="22%"><FONT SIZE=2><BR>
Ampofol&reg;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="22%"><FONT SIZE=2><BR>
Diprivan&reg;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2><BR>
General Anesthetic</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="CENTER"><FONT SIZE=2><BR>
505(b)(2) NDA</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=2><BR>
Q2 2005</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="22%"><FONT SIZE=2><BR>
Fluticasone propionate</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="22%"><FONT SIZE=2><BR>
Flonase&reg; (nasal)<BR>
Flovent&reg; (MDI)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2><BR>
Anti-allergic;<BR>
Anti-inflammatory</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="CENTER"><FONT SIZE=2><BR>
ANDA<BR>
ANDA</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=2><BR>
Q2 2005<BR>
Q2 2005</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="22%"><FONT SIZE=2><BR>
Azithromycin</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="22%"><FONT SIZE=2><BR>
Zithromax&reg; (azithromycin for injection)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2><BR>
Antibiotic</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="CENTER"><FONT SIZE=2><BR>
ANDA</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=2><BR>
Q4 2005</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="22%"><FONT SIZE=2><BR>
Albuterol HFA</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="22%"><FONT SIZE=2><BR>
Proventil&reg;, Ventolin&reg;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2><BR>
Bronchodilator</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="CENTER"><FONT SIZE=2><BR>
505(b)(2) NDA</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=2><BR>
2006</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="22%"><FONT SIZE=2><BR>
Amphacaine</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="22%"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=2><BR>
Local Analgesic</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="CENTER"><FONT SIZE=2><BR>
NDA</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=2><BR>
2007</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="22%" VALIGN="TOP"><FONT SIZE=2><BR>
Epinephrine Mist HFA</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="22%" VALIGN="TOP"><FONT SIZE=2><BR>
Primatene&reg; Mist</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP"><FONT SIZE=2><BR>
Bronchodilator</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
505(b)(2) NDA</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2><BR>
2007</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-9pt;'><FONT SIZE=1><SUP>(1)</SUP></FONT></DT><DD><FONT SIZE=1>Reference
drug means the listed drug identified by the FDA as the drug product upon which an applicant relies in seeking approval of an abbreviated new drug application,
or ANDA.
<BR><BR></FONT></DD><DT style='margin-bottom:-9pt;'><FONT SIZE=1><SUP>(2)</SUP></FONT></DT><DD><FONT SIZE=1>See
"&#151;Regulatory Considerations" for information regarding the regulatory approval processes for the indicated submissions. </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are currently focusing our research and development efforts on enoxaparin and Ampofol, both of which have technical barriers that we believe we
have overcome. According to IMS Health Incorporated ("IMS Health"), an independent provider of statistical information on the pharmaceutical industry, the combined sales in the U.S. in 2004 for the
currently marketed versions of these products was in excess of $2.0&nbsp;billion. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Enoxaparin  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Enoxaparin is an injectable, low molecular weight heparin used as an anticoagulant, or blood thinner, to prevent clotting of blood in the vein, commonly referred
to as deep vein thrombosis, and </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>acute
coronary syndromes. Enoxaparin is currently marketed by Sanofi-Aventis ("Aventis") under the brand-name Lovenox. Enoxaparin is difficult to manufacture because the API is not easily obtained.
Our research and development team has developed a multi-step chemical synthesis process for converting raw material into API, thereby overcoming technical barriers to producing the API.
Aventis' sales of Lovenox in the U.S. in 2004 were approximately $1.5&nbsp;billion, according to IMS Health. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the filing of our ANDA for enoxaparin sodium with the FDA in March&nbsp;2003, we certified to the FDA that the existing patents in connection with Lovenox are
invalid, unenforceable, or will not be infringed by our generic product candidate. Teva Pharmaceuticals USA,&nbsp;Inc. has also filed an ANDA for enoxaparin. Aventis brought a patent infringement
lawsuit against both Amphastar and Teva in August&nbsp;2003 that is currently pending. In addition, in February&nbsp;2003, Aventis filed a citizen petition with the FDA, which Aventis supplemented
in February&nbsp;2004, requesting, among other things, that the FDA refrain from approving any ANDA for a generic version of Lovenox unless certain conditions are satisfied. We have responded to a
request by the FDA to conduct an analysis of enoxaparin, and we have submitted enoxaparin characterization data to the FDA. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Ampofol  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ampofol is our proprietary 1% propofol injectable emulsion product candidate. Propofol is currently manufactured and sold by AstraZeneca PLC under the trade name
Diprivan and as a generic product by a joint venture between Baxter Healthcare Corporation and Gensia, a predecessor of Teva.
Combined sales in 2004 for these products was approximately $556&nbsp;million, according to IMS Health. Propofol is used for general anesthesia, monitored anesthesia care sedation, and sedation in
the intensive care unit ("ICU") setting. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
research and development team has developed and patented a third-generation propofol, which is formulated to retard microbial growth without any preservatives or additives and with
half the amount of soybean oil and egg lecithin used in the second generation propofols. We have demonstrated in five completed clinical trials conducted in three clinical settings, including a
200-patient multi-center trial based in the ICU, that Ampofol is bioequivalent to Diprivan. We believe Ampofol will have lower manufacturing and storage costs than second generation
propofols because of the reduced lecithin amounts and the ability to store the product at room temperature. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have established a production line and completed scale-up, validation, and stability batch filling for Ampofol. We anticipate filing a 505(b)(2) NDA for Ampofol with the
FDA in the second quarter of 2005. </FONT></P>

<P><FONT SIZE=2><B>Our Existing Products and Services  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently manufacture and sell 67 injectable and inhalation products. For the nine months ended September&nbsp;30, 2004, we recorded net revenues of
$42.6&nbsp;million, including $1.1 million in revenues from contract manufacturing services. A significant portion of our revenues during that period was derived from four products or product
families: Cortrosyn, Lidocaine Jelly, Albuterol CFC, and our Critical Care Drug Portfolio. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, in November&nbsp;2004, we launched Amphadase, our branded product of the compound hyaluronidase, which is used to increase the absorption and dispersion of other agents
injected into the eye, particularly anesthetics utilized in cataract and other ophthalmic surgeries. Further, in July&nbsp;2004 we acquired the ANDA for a generic version of Primatene Mist CFC from
Alpharma USPD and reintroduced this product in December&nbsp;2004. Previous to that, epinephrine mist was only available from the innovator, Wyeth, who markets Primatene Mist. Epinephrine Mist CFC
is a bronchodilator product used for fast-acting relief of bronchial asthma. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to manufacturing products that we market and sell, we also develop and manufacture products for pharmaceutical and biotechnology companies pursuant to contractual
arrangements. </FONT></P>

<P><FONT SIZE=2><B>Our Strategy  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our goal is to be an industry leader in the development, manufacture and marketing of injectable and inhalation pharmaceutical products. The key elements of our
strategy include: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Focusing on high margin generic product opportunities;</I></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Developing proprietary products based on our technology platforms;</I></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Enhancing our sales, marketing, and distribution capabilities; and</I></FONT><FONT SIZE=2>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Complementing internal growth with strategic acquisitions.</I></FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>Other Considerations  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business is subject to a number of risks, which are highlighted in the section entitled "Risk Factors." In particular, we face challenges in the development
of and regulatory approval for our products, market acceptance of our products and competition from companies with greater resources. In addition, we have a history of net losses. For the nine months
ended September&nbsp;30, 2004, and the year ended December&nbsp;31, 2003 and 2002, we had net losses of $7.0&nbsp;million, $3.2&nbsp;million and $1.9&nbsp;million respectively. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ca1063_corporate_information"> </A>
<A NAME="toc_ca1063_3"> </A>
<BR></FONT><FONT SIZE=2><B>Corporate Information    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amphastar Pharmaceuticals,&nbsp;Inc., a California corporation, was incorporated in 1996 ("California Amphastar"). Amphastar Pharmaceuticals,&nbsp;Inc., a
Delaware corporation ("Delaware Amphastar"), was incorporated in 2004 and California Amphastar merged with and into Delaware Amphastar in 2004.
Our principal executive offices are located at 11570 Sixth Street, Rancho Cucamonga, California 91730, and our telephone number is (909)&nbsp;980-9484. Our internet address is
www.amphastar.com. Information contained on our web site does not constitute a part of this prospectus. References in this prospectus to "Amphastar," "our company," "we," "our," and "us" refer to
Amphastar Pharmaceuticals,&nbsp;Inc., and its subsidiaries, unless the context indicates otherwise. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
logos and Amphastar Pharmaceuticals are our trademarks. This prospectus contains product names, trademarks and trade names of other organizations. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>

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<A NAME="page_ca1063_1_5"> </A>
<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ca1063_the_offering"> </A>
<A NAME="toc_ca1063_4"> </A>
<BR></FONT><FONT SIZE=2><B>The Offering    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Issuer</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" VALIGN="BOTTOM"><FONT SIZE=2>Amphastar Pharmaceuticals, Inc.</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
Total common stock offered</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="49%" VALIGN="TOP"><FONT SIZE=2><BR>
Common stock to be outstanding after this offering</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
Use of proceeds</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%" VALIGN="BOTTOM"><FONT SIZE=2><BR>
We intend to use a significant portion of the net proceeds from this offering to upgrade, renovate, and equip a manufacturing and development complex and to fund preclinical and clinical development of our product candidate portfolio. We intend to
use the remaining net proceeds for general corporate purposes, including working capital, other capital expenditures, potential acquisitions, and the growth of our sales, marketing, and customer service capabilities.</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="49%" VALIGN="TOP"><FONT SIZE=2><BR>
Proposed NASDAQ National Market Symbol</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><BR>
AMPR</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
number of shares outstanding after this offering is based on 35,109,740 shares outstanding on September&nbsp;30, 2004 and excludes: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>675,676&nbsp;shares
of common stock issued in February&nbsp;2005 in a private placement at a price of $14.80&nbsp;per share;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>4,943,654
shares of common stock issuable upon exercise of options outstanding as of September&nbsp;30, 2004, with a weighted average exercise price of $6.56 per share;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>124,000
shares of common stock issued in November&nbsp;2004 upon the exercise of an outstanding warrant, at an exercise price of $7.50 per share; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>4,828,480
shares of common stock reserved for future grant under our stock incentive plan as of September&nbsp;30, 2004. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as otherwise indicated, all share information in this prospectus assumes no exercise of the underwriters' option to purchase additional shares. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ca1063_1_6"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ca1063_summary_consolidated_financial_information"> </A>
<A NAME="toc_ca1063_5"> </A>
<BR></FONT><FONT SIZE=2><B>Summary Consolidated Financial Information    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>The table below sets forth summary consolidated financial information for the periods indicated. You should read this information together
with the financial statements and the notes to those statements appearing elsewhere in this prospectus and the information under "Selected Consolidated Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."</I></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Nine Months Ended September&nbsp;30,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003<SUP>(1)</SUP></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004<SUP>(1)</SUP></B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands, except per&nbsp;share&nbsp;data)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><B>Consolidated Statement of Operations data:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Net revenues</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>32,373</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>33,045</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>48,197</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>31,527</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>42,622</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Cost of revenues</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>22,969</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>22,528</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>35,508</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>23,160</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>34,327</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>9,404</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10,517</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>12,689</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>8,367</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>8,295</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Operating expenses:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Selling, distribution and marketing</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,332</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,289</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,194</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,427</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,571</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>General and administrative</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,132</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,196</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,349</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,406</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,100</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Research and development</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,629</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,979</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,344</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,843</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,241</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Impairment of long-lived assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>623</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>126</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>185</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Management fees and rent expense&#151;related party</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>125</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>138</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>921</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>617</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>147</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2>Total operating expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>11,218</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>12,602</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>16,431</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>11,419</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>15,244</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
Loss from operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(1,814</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(2,085</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(3,742</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(3,052</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(6,949</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Non-operating income (expense):</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Interest income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>448</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>174</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>148</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>43</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Interest expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(104</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(59</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(767</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(444</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(648</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Other income (expense)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(135</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(206</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(203</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(28</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>554</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>161</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>183</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(796</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(324</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(51</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Net loss before extraordinary gain</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,653</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,902</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(4,538</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(3,376</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(7,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Extraordinary gain, net of taxes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,341</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>($1,653</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>($1,902</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>($3,197</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>($3,376</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>($7,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Net loss per share before extraordinary gain<SUP>(2)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>basic and diluted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>($0.06</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>($0.06</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>($0.14</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>($0.10</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>($0.20</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Net loss per share<SUP>(2)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>basic and diluted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>($0.06</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>($0.06</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>($0.10</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>($0.10</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>($0.20</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Weighted-average shares outstanding:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>basic and diluted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>26,741</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>31,592</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>33,520</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>33,425</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>34,403</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="73%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B><BR>
As of September&nbsp;30, 2004</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="73%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Actual</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>As Adjusted<SUP>(3)</SUP></B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="73%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2><B>Consolidated Balance Sheet data:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>Cash, cash equivalents and short-term investments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,565</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>Working capital</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>10,931</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>Total assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>132,368</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>Long-term debt and capital leases, including current portion</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>27,981</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>Accumulated deficit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(21,526</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="73%"><FONT SIZE=2>Total stockholders' equity</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>83,236</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2><SUP>(1)</SUP></FONT></DT><DD><FONT SIZE=2>Includes
the results of operations of Armstrong since October&nbsp;9, 2003.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><SUP>(2)</SUP></FONT></DT><DD><FONT SIZE=2>See
Note 2 of Notes to Consolidated Financial Statements for a description of the method used to compute basic and diluted loss per share and the number of shares used
in computing basic and diluted loss per share.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><SUP>(3)</SUP></FONT></DT><DD><FONT SIZE=2>Reflects
the sale of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock in this offering at an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, the mid-point of
our anticipated price range, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

<HR NOSHADE>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1063_risk_factors"> </A>
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<BR></FONT><FONT SIZE=2><B>RISK FACTORS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>You should carefully consider the following risk factors and other information in this prospectus before deciding to invest in our common
stock. If any of the following risks occur, our business, financial condition, results of operations, and prospects could be materially adversely affected. As a result, the trading price of our common
stock could decline and you could lose part or all of your investment.</I></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1063_risks_related_to_our_business"> </A>
<A NAME="toc_de1063_2"> </A>
<BR></FONT><FONT SIZE=2><B>Risks Related to Our Business    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><B><I>Our ability to commercialize our current product candidates, particularly our enoxaparin and Ampofol product candidates, is critical to
our success, and if we fail to do so, our business and financial condition will suffer.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have made significant investments in the development of our product candidates, particularly our enoxaparin and Ampofol product candidates, both of which are subject to regulatory
approval. In addition, we expect to expend significant additional resources to develop and commercialize our product candidates, some of which are dependent on the results of clinical trials, and to
expand our manufacturing, sales, and marketing capabilities. There can be no assurance that we will obtain regulatory approval for our product candidates or that once we obtain regulatory approval we
will be able to commercialize our product candidates or that we will realize any return from these investments. In particular, the development of pharmaceutical products is risky because, even if we
receive regulatory approval, other companies may be able to market similar products prior to the launch of our products, during which time their product may gain a significant marketing advantage. If
we fail to successfully commercialize our enoxaparin or Ampofol product candidates, we would not earn any return on our investment in these product candidates, and our business, financial condition
and results of operations may be materially adversely affected. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>One of our product candidates, enoxaparin, is the subject of a citizen petition filed with the U.S. Food and Drug Administration, or FDA, and a patent
infringement lawsuit filed against us, either of which may prevent or delay regulatory approval of our enoxaparin product candidate.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
March&nbsp;2003, we filed an abbreviated new drug application, or ANDA, with the FDA for enoxaparin sodium, seeking approval to engage in the commercial manufacture, sale, and
distribution of enoxaparin in the U.S. Our ANDA for enoxaparin includes a Paragraph&nbsp;IV certification that the existing patents associated with Aventis Pharma S.A.'s branded enoxaparin product,
Lovenox, are invalid or will not be infringed by our generic product candidate. As a result of the filing of ANDAs by us and another generic manufacturer, Aventis commenced litigation against us and
the other generic manufacturer in August&nbsp;2003 alleging infringement of one of the two patents covering their product. The FDA is stayed from finally approving our ANDA until the earlier of a
court decision in our favor or the expiration of 30&nbsp;months from Aventis' receipt of our notice of the Paragraph&nbsp;IV certification. In August&nbsp;2004, we filed a motion for summary
judgment against Aventis asking for the dismissal of the litigation, alleging that the patent that is the subject of the litigation was obtained by inequitable conduct. In November&nbsp;2004, we
filed a second motion for summary judgment against Aventis asking for the dismissal of the litigation, alleging that the patent is invalid based on the indefiniteness of its claims. The court has not
yet ruled on these motions. Although we believe in the basis of our Paragraph&nbsp;IV certification, no assurance can be given that the court will rule in our favor with respect to our current
motions for summary judgement or at all. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
February&nbsp;2003, Aventis also filed a citizen petition with the FDA requesting, among other things, that the FDA refrain from approving any ANDA for a generic version of Lovenox
unless the ANDA applicant demonstrates either that the manufacturing process used in producing the generic drug is equivalent to Aventis' manufacturing process or that the generic product is safe and
effective through clinical trials. We have filed comments with the FDA in opposition to Aventis' citizen petition. The FDA has yet to rule on Aventis' citizen petition, and there can be no assurance
that the FDA will </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

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<P><FONT SIZE=2>grant
approval of our ANDA to market enoxaparin. See "&#151;Legal and Regulatory Proceedings&#151;Enoxaparin Paragraph&nbsp;IV Litigation" and "&#151;Enoxaparin Citizen
Petition" and "Business&#151;Regulatory Considerations&#151;Generic Drug Approval." If the FDA grants Aventis' citizen petition in whole or in part, or if we do not prevail in the
litigation with Aventis, the FDA may delay or refuse to grant approval of our ANDA to market enoxaparin, which could materially adversely affect our business, financial condition, and results of
operations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>We face significant competition from both brand-name and generic manufacturers that could adversely affect the success of our products and severely limit our
growth.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Substantially
all of our marketed products are generic versions of brand-name products. We face significant competition in our marketed products from major, brand-name
pharmaceutical companies and from companies focused on the generic injectable and inhalation markets. Competition in the generic pharmaceutical industry has increased, as brand-name
competitors have entered the business by creating generic subsidiaries, purchasing generic companies, or licensing their products to generic manufacturers prior to patent expiration or as their
patents expire. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
patents for brand-name products expire, the first company to market a generic product is generally able to achieve higher sales, profitability and market share with
respect to that product because it is granted an exclusive right to market the product for 180&nbsp;days. However, as competing generic manufacturers receive regulatory approval on similar products
and the 180-day exclusivity period expires, market size, revenue, and gross profit typically decline. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
expect to face significant competition for our product candidates, including enoxaparin and Ampofol, from the product innovator and any generic manufacturers of the product. The
timeliness with which we can gain regulatory approval for these product candidates and launch them in the market will be a significant factor in their acceptance, and if competitors are able to launch
their products first or delay the launch of our products, this may materially adversely affect our product candidates' success. In addition, our competitors may succeed in developing products and
technologies that are more effective or less costly than any that we are developing, or that would render our product candidates obsolete and noncompetitive. We anticipate that we will face increased
competition in the future as new companies enter the market and advanced technologies emerge. Smaller or early-stage companies may also prove to be significant competitors, particularly through
collaborative arrangements with large and established companies. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many
of our competitors have significantly greater research and development, financial, sales and marketing, manufacturing, and other resources than we have. As a result, they may be
able to devote greater resources to the development, manufacture, marketing or sale of their products, initiate or withstand substantial price competition, or more readily take advantage of
acquisitions or other opportunities. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>If we are unable to obtain raw materials, active pharmaceutical ingredients, and other products from our suppliers that we depend on for our operations, our
ability to deliver our products to market may be impeded.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
depend on suppliers for raw materials, active pharmaceutical ingredients, or APIs, and other components that are subject to stringent FDA requirements. Certain of these materials may
only be available from one or a limited number of sources. Our suppliers may encounter problems during manufacturing due to a variety of reasons, including failure to follow specific protocols and
procedures, failure to comply with applicable regulations, equipment malfunction, and environmental factors. In addition, establishing additional or replacement suppliers for these materials may take
a substantial period of time, as suppliers must be approved by the FDA. Further, a significant portion of our raw materials may be available only from foreign sources. Foreign sources can be subject
to the special risks of doing business abroad, including transportation difficulties, political instability and labor unrest, export duties, fluctuation in currency exchange rates, and uncertainty
regarding legal recourse. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we are unable to secure on a timely basis sufficient quantities of the materials we depend on to market our products, if we encounter delays or contractual or other difficulties in
our relationships with these suppliers, or if we cannot find replacement suppliers at an acceptable cost, the manufacture and/or sale of our products may be disrupted, which could materially adversely
affect our business, financial condition, and results of operations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2004 we suffered an interruption in the supply of Cortrosyn finished product. We exhausted our inventory in June&nbsp;2004, and our sales in the second and third quarters of
2004 were adversely impacted as a result. We transferred the manufacture of this product to our Rancho Cucamonga facility and relaunched the product in August&nbsp;2004. There can be no assurance
that our revenues or profits from this product will reach the levels prior to the supply interruption. See "Management's Discussion and Analysis of Financial Condition." </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>The loss of any of the principal members of our scientific and management teams would impair our ability to successfully develop or commercialize our product
candidates, which could materially adversely affect our ability to compete.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are highly dependent on the principal members of our scientific and management teams, including Dr.&nbsp;Jack Zhang, our President and Chief Executive Officer, and Dr.&nbsp;Mary
Luo, our Chief Operating Officer. We do not maintain key person life insurance for any of our key personnel. Because we focus on applying our technical expertise to develop products with high
technical barriers to entry, we must continue to attract and retain qualified scientific and technical personnel. We do not have employment agreements with our key personnel. Competition among
pharmaceutical and biotechnology companies for qualified employees is intense, and the ability to attract and retain qualified individuals is critical to our success. The loss of the services of any
one of our key personnel may significantly delay or prevent the achievement of our product development objectives and could have a material adverse effect on our business. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>If clinical trials of any of our product candidates are delayed or are not successful, we may be unable to commercialize those product candidates in a timely
manner, or at all.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
certain of our product candidates, we are required to conduct clinical trials to obtain FDA approval. Conducting clinical trials is a lengthy, time-consuming and
expensive process, and the results of these trials are inherently uncertain. The commencement and completion of clinical trials may be delayed by many factors that are beyond our control, including: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>scheduling
conflicts with participating clinicians and clinical institutions;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>slower
than anticipated patient enrollment; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
occurrence of adverse events during the clinical trials. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
results from early clinical trials may not be predictive of results to be obtained in later clinical trials. Clinical trials may not demonstrate sufficient safety and efficacy to
obtain the necessary regulatory approvals, or a commercially viable product. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
clinical trials for our product candidates are not completed or conducted as planned, or if any of these product candidates do not prove to be safe and effective or do not receive
required regulatory approvals, the commercialization of these products would be delayed or prevented, and accordingly our business, financial condition, and results of operations could be materially
adversely affected. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>We depend on our group purchasing organization and wholesaler relationships for the sale of our products, and if we are unable to maintain those relationships,
our revenue will be harmed.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
sell our injectable pharmaceutical products to customers through arrangements with GPOs and wholesalers. The majority of hospitals contract with the GPO of their choice for their
purchasing needs. We currently derive, and expect to continue to derive, a large percentage of our revenue from </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

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<P><FONT SIZE=2>customers
that have relationships with a small number of GPOs and wholesalers. In order to maintain these relationships, we believe we will need to offer a broad product line, remain price
competitive, comply with FDA regulations, and provide high quality products. Most of our GPO agreements may be terminated on 60 or 90&nbsp;days' notice. We have written terms and return policies
with our major wholesalers, which are subject to renegotiation at any time. The GPOs and wholesalers with whom we have relationships may have relationships with manufacturers that sell competing
products or combinations of competing products from which they earn higher margins or may prefer products other than ours for other reasons. If we are unable to maintain our GPO and wholesaler
relationships, sales of our products and revenue will decline. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
network through which we sell our products continues to undergo significant consolidation, marked by mergers and acquisitions among GPOs and drug wholesalers, the growth of national
pharmacy chains, and the increasing importance of mail order businesses. As a result, a small number of GPOs, drug wholesalers, and national pharmacy chains control a significant share of the market.
This consolidation trend may increase pricing and other competitive pressures on us and could have a material adverse effect on sales of our products. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>We have a history of net losses, and we may not achieve profitability in the future.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have a history of net losses. For the years ended December&nbsp;31, 2002 and 2003 and the nine months ended September&nbsp;30, 2004, we had net losses of $1.9&nbsp;million,
$3.2&nbsp;million, and $7.0&nbsp;million respectively. We had an accumulated deficit of $21.5&nbsp;million as of September&nbsp;30, 2004. Our ability to generate revenue from existing products
or to achieve profitability is dependent on our ability to successfully and timely design, develop, obtain regulatory approval for, manufacture, and commercialize our product candidates. We expect to
increase our operating expenses over the next several years, as we expand our research and development activities, acquire or license new technologies and product candidates, and scale up our
manufacturing and quality operations and hire additional personnel. As a result, we may continue to incur operating losses. Because of the numerous risks and uncertainties associated with our product
development efforts, we are unable to predict the extent of any future losses or when we will become profitable, if at all. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>We have recently made a number of improvements to our internal controls and accounting processes, and if these improvements are insufficient to permit us to
maintain an effective system of internal controls, we may not detect in a timely manner misstatements that could occur in our financial statements in amounts that could be material. As a result,
current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our stock.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
reporting obligations as a public company will require us to devote significant resources to our operational and financial systems for the foreseeable future. As a private company,
we have had limited accounting personnel and other resources with which to address our internal controls, procedures and accounting. In anticipation of becoming a public company, we have taken a
number of recent steps to improve our internal controls and accounting processes, including hiring additional accounting personnel, establishing monthly and quarterly financial closing procedures and
establishing additional procedures with respect to account reconciliations and analyses. Upon completion of this offering, we will have had only limited operating experience with the improvements we
have made to date. We will need to make continued efforts with respect to our internal controls in order to meet the requirements of being a public company, including the rules under
Section&nbsp;404 of the Sarbanes-Oxley Act of 2002, and there can be no assurance that the improvements we have made and the efforts with respect to our accounting processes that we will need to
continue to make will be sufficient to ensure that we maintain adequate controls over our financial processes and reporting in the future. Any failure to implement required new or improved controls,
or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations or result in misstatements in our financial statements in amounts that could be material.
Insufficient internal controls could also cause investors to </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

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<P><FONT SIZE=2>lose
confidence in our reported financial information, which could have a negative effect on the trading price of our stock. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>We will need an effective sales organization to market and sell our future branded products, and our failure to have an effective sales organization may harm our
business.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have only a small sales organization to market and sell any branded products that we may develop or acquire. We cannot assure you that prior to the time that our products are
available for commercial launch we will be able to recruit or acquire additional sales and marketing personnel, license our products to pharmaceutical companies with sales organizations, or enter into
a favorable co-promotion or contract sales arrangements. If we decide to market our products through third parties, these parties may not have the same interests as we do in marketing the
products, and we may lose control over the sales of these products. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Our business may suffer if we are unable to identify, consummate, and integrate any future acquisitions successfully.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the past, we have grown our operations in part through acquisitions of companies and products. As part of our business strategy, we plan to continue to acquire businesses, products,
and technologies that we believe complement our business. Acquisitions typically entail many risks and may result in unforeseen difficulties in integrating the operations and personnel of companies
that we acquire and the products and technologies that we acquire. Potential acquisitions may require significant management attention that would otherwise be available for ongoing development of our
existing portfolio of products and product candidates. In addition, we may not be able to maintain the levels of operating efficiency that any acquired company achieved in the past or might have
achieved separately. Successful integration of the companies we acquire will depend on our ability to, among other things, eliminate redundancies and excess costs. As a result of difficulties
associated with combining operations, we may not be able to achieve cost savings and other benefits that we might hope to achieve with acquisitions. Future acquisitions could result in potentially
dilutive issuances of equity securities, result in the incurrence of debt and contingent liabilities, or have an undesirable impact on our consolidated financial statements. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>We expect that our research and development and sales and marketing efforts will require significant cash resources, and we may need to raise additional capital
that may not be available to us on favorable terms.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
plan to continue our research and development activities and expand our sales and marketing activities, which may require us to raise more capital in the future. Additional capital
may not be available on terms favorable to us, or at all. Any additional equity financing may be dilutive to stockholders, and debt financing, if available, may include restrictive covenants. If we
cannot raise capital when needed on favorable terms, or at all, it may delay our development of new products, which could harm our business. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>If a natural or man-made disaster strikes one or more of our manufacturing facilities, we may be unable to manufacture certain products for a
substantial amount of time and our revenue could decline.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have 23 facilities, located in four locations: Rancho Cucamonga and South El Monte, California, and Canton and West Roxbury, Massachusetts. Our facilities may be affected by natural
or man-made disasters. Our facilities and the manufacturing equipment that we use to produce our products would be difficult to replace and could require substantial lead time to repair or
replace. In the event that one of our facilities was affected by a disaster, we would be forced to shift production to our other manufacturing facilities or rely on third-party manufacturers, and our
other facilities or a third-party manufacturer may not have the capability to effectively supply all of the affected products. Our insurance coverage may not be sufficient in scope or amount to cover
potential losses. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>

<HR NOSHADE>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1063_other_risks_related_to_intellectual_property_rights"> </A>
<A NAME="toc_de1063_3"> </A>
<BR></FONT><FONT SIZE=2><B>Other Risks Related to Intellectual Property Rights    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><B><I>Commercialization of our enoxaparin product or any other generic product, prior to the final resolution of a pending patent infringement
litigation with respect to such product, could have a material adverse effect on our business, financial position, and results of operations and could cause the market value of our common stock to
decline.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
could invest a significant amount of time and expense in the development of enoxaparin or other generic products only to be subject to significant delays and changes in the economic
prospects for our products due to patent infringement litigation. However, upon FDA approval of our ANDA for such a product, we may consider seeking to commercialize the product prior to the final
resolution of the pending litigation. The risk involved in marketing enoxaparin or other products prior to the final resolution of a pending patent infringement action can be substantial because the
remedies available to a patent owner could include, among other things, damages measured by the profits lost by the patent owner and not by the profits earned by the infringer. In certain
circumstances the patent owner may also recover damages caused by the erosion of prices for the patented drug as a result of the introduction of the generic drug in the marketplace. Further, in the
case of a willful infringement, which requires a complex analysis of the totality of the circumstances, such damages may be trebled. Moreover, because the discount pricing typically involved with
generic products, patented branded products generally realize a substantially higher profit margin than generic products. Typically a patent owner's profit margin is reduced when a generic product is
introduced on the market. This profit reduction can act as a disincentive to the patent owner to settle patent litigation on terms that could allow our products to be marketed upon the settlement of
such litigation. However, in order to realize the economic benefits of some of our products, including enoxaparin, we may decide to risk an amount that may exceed the profit we anticipate making on
our product. An adverse court decision in a case such as this, or in other similar litigation, would have a material adverse effect on our business,
financial position, and results of operations and could cause the market value of our common stock to decline. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Third parties may claim that we infringe their proprietary rights and may delay or prevent us from manufacturing and selling our products, which would harm our
results of operations, financial condition and cash flows.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
success depends on our ability to operate without infringing the patents and proprietary rights of third parties. There has been substantial litigation in the pharmaceutical industry
with respect to the manufacture, use, and sale of new generic products and the validity and infringement of patents or proprietary rights. When seeking regulatory approval for our product candidates,
we may be required to certify to the FDA that these products do not infringe third-party patents, or that such patents are invalid. Filing such a certification against a patent, commonly known as a
Paragraph&nbsp;IV certification, gives the patent holder the right to bring a patent infringement lawsuit against us. Brand-name pharmaceutical companies regularly institute these suits,
and we expect them to continue to use these tactics because it is a cost-effective way to delay or prevent generic competition. A lawsuit stays the FDA's approval decision until the
earlier of a court decision or 30&nbsp;months from the patent holder's receipt of notice of certification. A claim of infringement and the resulting delay results in additional expenses and could
even prevent us from manufacturing and selling certain products. In this regard, we are currently a defendant in a Paragraph&nbsp;IV patent infringement litigation initiated in 2003 by Aventis
concerning one of our product candidates, enoxaparin, a generic version of Lovenox. See "Business&#151;Legal and Regulatory Proceedings&#151;Enoxaparin Paragraph&nbsp;IV Litigation." </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are subject to other patent infringement claims from time to time in the ordinary course of our business, and third parties could assert patent infringement claims against us in the
future with respect </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>to
our current products, products we may develop, or products we may license. Litigation could force us to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>delay
or prevent selling, manufacturing, or using products that incorporate or are made using the challenged intellectual property;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>incur
significant expenses or pay damages; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>enter
into licensing or royalty agreements that may not be available on acceptable terms, if at all. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
patent litigation, regardless of its outcome, would delay the regulatory approval process, be costly, and require significant time and attention of our key management and technical
personnel. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>We depend on our ability to protect our intellectual property and proprietary rights, and we cannot be certain of their confidentiality and
protection.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
inability to protect our intellectual property rights could adversely affect our ability to manufacture or sell our products. We rely on trade secrets, unpatented proprietary
know-how, continuing technological innovation, and, in some cases, patent protection to preserve our competitive position. We may not be able to obtain patent or other forms of protection
for inventions or other intellectual property developed by our officers, employees, or consultants, and we may not be able to prevent third parties from using our intellectual property. Despite our
efforts to protect our proprietary information, unauthorized parties may copy aspects of our products or obtain and use information that we regard as proprietary. Other parties may independently
develop know-how or obtain access to our technologies. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intellectual
property protection is highly uncertain and involves complex legal and technical questions. Our patents and any patent for which we have licensed or may license rights, may
be challenged, narrowed, invalidated, or circumvented. Our issued patents may not contain claims sufficiently broad to protect us against third parties with similar technologies or products, or
provide us with any competitive advantage. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
U.S. Patent and Trademark Office, or PTO, and the courts have not established a consistent policy regarding the breadth of claims allowed related to pharmaceutical patents. The
allowance of broader claims may increase the incidence and cost of patent interference proceedings and the risk of infringement litigation. On the other hand, the allowance of narrower claims may
limit the value of our proprietary rights. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
laws of some foreign countries do not protect proprietary information to the same extent as the laws of the U.S., and we may encounter significant problems and costs in protecting
our proprietary information in these foreign countries. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1063_risks_related_to_our_industry"> </A>
<A NAME="toc_de1063_4"> </A>
<BR></FONT><FONT SIZE=2><B>Risks Related to Our Industry    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><B><I>The sale of our products is subject to regulatory approvals, and our business is subject to extensive regulatory requirements, and if we
do not obtain these approvals or comply with these requirements, it could delay or prevent us from selling our products.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
clinical development, manufacturing, labeling, storage, record-keeping, advertising, export, marketing, and distribution of our products are subject to extensive regulation by the
FDA and other regulatory agencies in the U.S. and by comparable governmental authorities in foreign markets. We are dependent on obtaining timely regulatory approvals before our products can be sold.
The FDA approval process for a particular product candidate can take several years and requires us to dedicate substantial resources to securing approvals, and we cannot assure you that we will
receive regulatory approval for our product candidates. In order to receive approval from the FDA for each product </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>13</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>candidate,
we must demonstrate that the new drug product is safe and effective for its intended use, and that our manufacturing processes for that product candidate complies with the FDA's Current
Good Manufacturing Practices, or cGMPs. We cannot provide any assurance that the FDA will timely, or ever, approve our applications. The FDA may require substantial additional clinical testing or find
our drug product does not satisfy the standards for approval. In addition, in order to obtain approval for our generic product candidates, we must demonstrate that our drug product is bioequivalent to
a drug previously approved by the FDA through the new drug approval process, known as an innovator drug. Bioequivalency may be demonstrated by comparing the generic product candidate to the innovator
drug product in dosage form, strength, route of administration, quality, performance characteristics and intended use. We cannot provide any assurance that the FDA will agree that the bioequivalence
studies we submit in ANDA applications for our generic drug products will be adequate to support approval. If it determines that an ANDA application is not adequate to support approval, the FDA could
deny our application or request additional information, including clinical trials, which could delay approval of the product and impair our ability to compete with other versions of the generic drug
product. The FDA also has the authority to revoke drug approvals previously granted and remove these products from the market for a variety of reasons, including a failure to comply with applicable
regulations, the discovery of previously unknown problems with the product, or because the ingredients in the drug are no longer approved by the FDA. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a manufacturer of pharmaceutical and medical device products, we and our suppliers must comply with cGMPs, which include requirements related to production processes, quality control
and assurance, and recordkeeping. Our manufacturing facilities and procedures and those of our suppliers are subject to periodic inspection by the FDA and foreign regulatory agencies. In
May&nbsp;2000 and September&nbsp;2003, we received warning letters from the FDA alleging violations of the FDA's drug and medical device cGMP regulations. Although we instituted corrective action,
any additional violations may result in enforcement actions, including delaying or preventing new product approvals, a delay or suspension in manufacturing operations, consent decrees, or civil or
criminal penalties. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the U.S. Drug Enforcement Administration ("DEA") and comparable state-level agencies also heavily regulate the manufacturing, holding, processing, security, record keeping,
and distribution of drugs that are considered controlled substances. Some of the pain management products we manufacture are considered controlled substances. The DEA periodically inspects facilities
for compliance with its rules and regulations. If our manufacturing facilities or those of our suppliers fail to comply with applicable regulatory requirements, it could result in regulatory action
and additional costs to us. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
inability or the inability of our suppliers to comply with applicable FDA and other regulatory requirements can result in, among other things, delays in or denials of new product
approvals, warning letters, fines, consent decrees restricting or suspending manufacturing operations, injunctions, civil penalties, recall or seizure of products, total or partial suspension of
sales, and criminal prosecution. Any of these or other regulatory actions could materially adversely affect our business and our financial condition. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Recent changes in the regulatory environment may prevent us from exploiting exclusivity periods that are critical to the success of our generic
products.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
FDA's policy regarding the award of a 180-day marketing exclusivity period to generic manufacturers who successfully challenge patents relating to branded products
continues to be the subject of much litigation and legislative reform in the U.S. Pursuant to the Drug Price Competition and Patent Term Restoration Act (also known as the Hatch-Waxman Act), the FDA
currently awards 180&nbsp;days of marketing exclusivity to the first generic manufacturer who submits to the FDA a substantially complete ANDA with a Paragraph&nbsp;IV certification under the
Hatch-Waxman Act challenging the patent of the branded product if the ANDA is approved by the FDA. We may not be </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>14</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>able
to secure the benefit of this exclusivity period, which depends on a variety of factors, some of which are beyond our control, such as whether we are the first generic applicant to submit a
substantially complete ANDA for a product, whether other ANDA applicants share that exclusivity, and whether the branded product will also be marketed as a generic (sometimes referred to as an
authorized generic). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;New
court decisions, FDA interpretations, and legislative changes have modified the rules governing eligibility for and the timing of 180-day marketing exclusivity periods.
For example, the FDA had previously taken the position that it could award "shared" 180-day marketing exclusivity if different ANDA applicants were first-to-file
Paragraph&nbsp;IV certifications to different patents listed in the Orange Book, for the same product. This interpretation was recently challenged in two cases in United States district court, which
resulted in differing conclusions regarding the reasonableness of the FDA's interpretation. On appeal both decisions were vacated on other grounds in December 2004. Despite the questionable legality
of the FDA's shared
exclusivity approach, the FDA has announced that it will continue to rely on this interpretation of shared exclusivity for ANDAs filed before December&nbsp;8, 2003, when the Medicare Prescription
Drug Improvement and Modernization Act of 2003, also known as the Medicare Act, amended the Hatch-Waxman Act to prospectively eliminate this type of shared exclusivity. Until this issue is resolved,
it is unclear how the 180-day marketing exclusivity period will apply to certain of our pending ANDAs. For ANDAs that are filed on or after December&nbsp;8, 2003, the 180-day
marketing exclusivity period will only be awarded to the first ANDA applicant(s) to assert a Paragraph&nbsp;IV certification as to any patent listed in the Orange Book for that product (including
multiple ANDA applicants who file the first Paragraph&nbsp;IV certification on the same day) that receives approval from the FDA. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Medicare Act also modified the rules governing when the 180-day marketing exclusivity period is triggered or forfeited. Prior to this legislation, the 180-day
marketing exclusivity period was triggered upon the first commercial marketing of the ANDA or a final and non-appealable court decision holding the patent invalid, unenforceable or not infringed. In
response to two court cases, the FDA changed its policy in March 2000 so that the 180-day marketing exclusivity period began running immediately upon a decision holding the patent at issue
invalid, unenforceable, or not infringed at the district court rather than the appellate court level, regardless of whether the ANDA had been approved and the generic product had been marketed. In
codifying the FDA's original policy, the Medicare Act retroactively applies a final and non-appealable court decision trigger for all ANDAs filed before December&nbsp;8, 2003, leaving
intact the first commercial marketing trigger. For ANDAs filed after December&nbsp;8, 2003, the marketing exclusivity period is only triggered upon the first commercial marketing of the ANDA
product, but that exclusivity may be forfeited under certain circumstances, including if the ANDA is not marketed within a certain timeframe after a final and non-appealable court decision
in favor of the first-to-file or another ANDA applicant, or if the FDA does not tentatively approve the first-to-file applicant's ANDA within
30&nbsp;months. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
is difficult to predict if or how the FDA will change the procedures for granting 180-day marketing exclusivity in response to court decisions and legislative reforms and
the effects such changes may have on our business. Any changes in FDA regulations, procedures, or interpretations may make ANDA approvals more difficult or otherwise limit the benefits available to us
through the granting of 180-day marketing exclusivity. If we are not able to exploit the 180-day marketing exclusivity period for any of our generic product candidates for any
reason, our product may not gain market share, which could materially adversely affect our results of operations. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many
brand-name manufacturers have increasingly used state and federal legislative and regulatory means to delay or prevent generic competition. These manufacturers' efforts
have included: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>pursuing
new patents or extensions of existing patents for an existing brand product that could extend patent protection for the brand product and delay the launch of
generic products; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>15</FONT></P>

<HR NOSHADE>
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<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>pursuing
pediatric exclusivity for their brand products;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>submitting
citizen petitions to request that the Commissioner of Food and Drugs take administrative action with respect to an ANDA approval;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>seeking
changes to the United States Pharmacopeia, an industry-recognized compendia of drug standards;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>attaching
special patent extension amendments to unrelated federal legislation; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>engaging
in state-by-state initiatives to enact legislation that restricts the substitution of some brand-name drugs with generic drugs. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
these efforts to delay generic competition are successful, we may be unable to sell our products that are subject to these efforts, which could have a material adverse effect on our
future results of operations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Our business involves the use of hazardous materials and may subject us to environmental liability, which could seriously harm our financial
condition.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
research and development and manufacturing activities involve the use and disposal of hazardous materials. We are subject to federal, state and local laws and regulations governing
the use, manufacture, storage, handling, and disposal of these materials. Some of our facilities are located in areas that may experience environmental contamination due to the activities of third
parties. We are in
ongoing discussions with the Environmental Protection Agency ("EPA") regarding certain groundwater contamination issues in the Los Angeles San Gabriel Basin, have contributed to certain remediation
costs related thereto, and are a defendant in related litigation. See "Business&#151;Legal and Regulatory Proceedings&#151;Environmental Litigation and EPA Proceedings" for more
information. We cannot eliminate the risk of accidental injury or contamination from the manufacture, storage, handling, and disposal of materials we use. In the event of an accident or contamination,
we could be liable for damages or be penalized with fines, and this liability could be substantial and exceed our resources, which could materially adversely affect our financial condition. We may
have to incur significant costs to comply with future environmental laws and regulations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>We may incur significant costs from any product liability claims if our insurance for those claims is inadequate.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any of our products cause or merely appear to cause injury, we may become subject to liability claims. We also face the risk of product liability exposure related to the testing of
our product candidates in human clinical trials. We face liability risks even with respect to products that have received, or may in the future receive, regulatory approval for commercial use. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
product liability insurance may not be adequate and, at any time, insurance coverage may not be available on commercially reasonable terms or at all. A product liability claim could
result in liability to us greater than our insurance coverage or assets. Even if we have adequate insurance coverage, product liability claims could result in the decreased demand for our products,
injury to our reputation, and/or the withdrawal of clinical trial participants as well as have a negative impact on the results of operations, financial position, or cash flows of the Company. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>We face uncertainty related to pricing, reimbursement, and health care reform.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
of our products depend in part on the availability of coverage and reimbursement from third-party payors such as government insurance programs, including Medicare and Medicaid,
private health insurers, health maintenance organizations, and other health care-related organizations. Both the federal and state governments in the U.S. and foreign governments continue
to propose and pass new legislation, rules, and regulations affecting third-party payors' coverage and reimbursement policies, which are designed to contain or reduce the cost of health care. There
may be future changes that </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>16</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>result
in reductions in current coverage and reimbursement levels for our products, and we cannot predict the full scope of the changes or the impact that those changes would have on our operations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Current
cost control initiatives may decrease coverage and payment levels for existing and future products and, in turn, the price that we receive for any existing product or those that
we develop or market in the future. For example, the Medicare Act revised the Medicare payment methodology for many drugs covered under Medicare Part&nbsp;B. In addition, the new Medicare
prescription drug benefit (Medicare Part&nbsp;D), mandated by the Medicare Act, will go into effect in 2006. We cannot predict the full impact of the new payment methodologies and the new
prescription benefit on our business. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, because third-party payors are increasingly challenging the price and cost-effectiveness of medical products and services, significant uncertainty exists as to
the coverage and reimbursement status of newly approved pharmaceutical products, including injectable products. Our new products may not be considered reasonable and necessary, cost effective, or
adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize a return on our investments. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are also impacted by efforts by private payors to control costs. If there are continued pricing pressures from efforts by private payors, this could negatively impact our results of
operations and financial condition. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>We may need to change our business practices to comply with changes to fraud and abuse laws.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are subject to various federal and state laws pertaining to health care fraud and abuse, including the federal fraud and abuse law (sometimes referred to as the
"Anti-Kickback Statute"). At the federal level, the Anti-Kickback Statute prohibits any person from knowingly and willfully soliciting, receiving, offering, or providing any
remuneration, including a bribe, kickback, or rebate, directly or indirectly, in return for or to induce the referral of patients for items or services covered by federal health care programs, or the
furnishing, recommending, or arranging for products or services covered by federal health care programs. Federal health care programs have been defined to include plans and programs that provide
health benefits funded by the federal government, including Medicare and Medicaid, among others. The definition of "remuneration" has been broadly interpreted to include anything of value, including,
for example gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash and waivers of payments. Several courts have interpreted the statute's intent requirement
to mean that if any one purpose on an arrangement involving remuneration is to induce referrals or otherwise generate business involving goods or services reimbursed in whole or in part under federal
healthcare programs, the statute has been violated. Violations of the Anti-Kickback Statute may result in civil and criminal penalties including fines of up to $25,000 per violation, civil
monetary penalties of up to $50,000 per violation, assessments of up to three times the amount of the prohibited remuneration, imprisonment, and exclusion from participating in the federal health care
programs. In addition, a number of states have anti-fraud and anti-kickback laws similar to the Anti-Kickback Statute that prohibit certain direct or indirect
payments if such arrangements are designed to induce or encourage the referral of patients or the furnishing of goods or services. Some states' anti-fraud and anti-kickback
laws apply only to goods and services covered by Medicaid. Other states' anti-fraud and anti-kickback laws apply to all health care goods and services, regardless of whether
the source of payment is governmental or private. If there is a change in laws, regulations, or
administrative or judicial interpretations, we may have to change our business practices or our existing business practices could be challenged as unlawful, which could materially adversely affect our
business. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
federal and state governmental agencies, including the U.S. Department of Justice and the U.S. Department of Health and Human Services, have been investigating issues surrounding
pricing information reported by drug manufacturers and used in the calculation of reimbursements as well as sales and marketing practices. There can be no assurance that these investigations will not
result in changes to our operations, which could materially adversely affect our results of operations. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>17</FONT></P>

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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>We may become subject to federal and state false claims litigation brought by private individuals and the government.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are subject to state and federal laws that govern the submission of claims for reimbursement. The federal False Claims Act imposes civil liability on individuals or entities that
submit false or fraudulent claims for payment to the government. Violations of the False Claims Act and other similar laws may result in criminal fines, imprisonment, and civil penalties for each
false claim submitted and exclusion from federally funded health care programs, including Medicare and Medicaid. The False Claims Act also allows private individuals to bring a suit on behalf of the
government against an individual or entity for violations of the False Claims Act. These suits, known as qui tam actions, may be brought by, with only a few exceptions, any private citizen who has
material information of a false claim that has not yet been previously disclosed. These suits have increased significantly in recent years because the False Claims Act allows an individual to share in
any amounts paid to the federal government in fines or settlement as a result of a successful qui tam action. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>18</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1063_risks_related_to_this_offering"> </A>
<A NAME="toc_dg1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>Risks Related to This Offering    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><B><I>Future sales of our common stock by our stockholders could depress our stock price.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Approximately&nbsp;&nbsp;&nbsp;&nbsp;%
of our outstanding common stock upon completion of this offering will be available for sale in the public market 180&nbsp;days after the date of the
final prospectus relating to this offering, subject in some cases to volume and other limitations, while the remaining&nbsp;&nbsp;&nbsp;&nbsp;% of our outstanding common stock will not be subject to such
restrictions. Lehman Brothers&nbsp;Inc. and UBS Securities LLC may waive the 180-day restrictions prior to the expiration of the lock-up period without prior notice. If our
stockholders sell substantial amounts of our common stock in the public market, or the market perceives that these sales may occur, the market price of our common stock could fall. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Our Chief Executive Officer and Chief Operating Officer and their affiliates will beneficially own approximately&nbsp;&nbsp;&nbsp;&nbsp;% of our outstanding common stock
upon completion of this offering, and will have the ability to exercise significant control over our company and of any matter presented to our stockholders, which may result in conflicts of interest
that could cause our stock price to decline.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
Chief Executive Officer and Chief Operating Officer and their affiliates currently beneficially own approximately 30% of the outstanding shares of our common stock and will
beneficially own or control approximately&nbsp;&nbsp;&nbsp;&nbsp;% of the outstanding shares of our common stock upon completion of this offering. Accordingly, they will have substantial influence over the
outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets, or any other significant
corporate transactions, and may also delay or prevent a change of control of our company, even if such a change of control would benefit our other stockholders. The significant concentration of stock
ownership may adversely affect the trading price of our common stock due to investors' perception that conflicts of interest may exist or arise. See "Management" and "Principal Stockholders" for
details on our capital stock ownership. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>A public market for our securities may not develop or be sustained, which could cause our stock price to fall below the initial public offering
price.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior
to this offering, you could not buy or sell our common stock publicly. The initial public offering price may bear no relationship to the price at which our common stock will trade
upon completion of this offering. An active public market for our common stock may not develop or be sustained following this offering, and the market price of our common stock might fall below the
initial public offering price. The initial public offering price will be determined based on negotiations between us and the representatives of the underwriters, based on factors that may or may not
be indicative of future market performance. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Our common stock may experience price and volume fluctuations.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
market price of our common stock may fluctuate substantially due to a variety of factors, many of which are beyond our control, including: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>announcements
of technological innovations or new products by us or our competitors;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>media
reports and publications about pharmaceutical products;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>announcements
concerning our competitors or the pharmaceutical industry in general;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>new
regulatory pronouncements and changes in regulatory guidelines;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>announcements
concerning results of clinical trials for our product candidates;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>general
and industry-specific economic conditions; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>changes
in financial estimates or recommendations by securities analysts. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>19</FONT></P>

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<A NAME="page_dg1063_1_20"> </A>
<UL>
<UL>
</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
market prices of the securities of pharmaceutical and biotechnology companies have been highly volatile and are likely to remain highly volatile in the future. This volatility has
often been unrelated to the operating performance of particular companies. Moreover, market prices for securities of pharmaceutical and biotechnology companies, particularly following an initial
public offering, frequently reach levels that bear no relationship to the operating performance of these companies. These market prices may not be sustainable and are subject to wide variation. In the
past, securities class action litigation has been brought against companies that experience volatility in the market price of their securities. Whether or not meritorious, litigation brought against
us could result in substantial costs, divert management's attention and resources and harm our business. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>This offering will cause immediate and substantial dilution in net tangible book value of your shares.</I></B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
expect the initial public offering price of our common stock to be substantially higher than the net tangible book value per share of our outstanding common stock. Accordingly,
investors purchasing shares of common stock in this offering will: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>pay
a price per share that substantially exceeds the net book value of our common stock determined by the value of our net assets after subtracting liabilities; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>contribute&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the total amount invested to date to fund us but will own only&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of the shares of common stock outstanding. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional
dilution may be incurred if holders of stock options, whether currently outstanding or subsequently granted, exercise their options. See "Dilution." </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Provisions in our certificate of incorporation and bylaws or Delaware law might discourage, delay or prevent a change of control of our company, which could
negatively affect your investment.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
certificate of incorporation and bylaws contain provisions that could discourage, delay, or prevent a change of control of our company or changes in our management that our
stockholders may deem advantageous. These provisions include: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>authorizing
the issuance of preferred stock that can be created and issued by our board of directors without prior stockholder approval, commonly referred to as "blank
check" preferred stock, with rights senior to those of our common stock;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>limiting
the persons who can call special stockholder meetings;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>providing
that a supermajority vote of our stockholders is required to amend some provisions of our certificate of incorporation or bylaws;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>establishing
advance notice requirements to nominate persons for election to our board of directors or to propose matters that can be acted on by stockholders at stockholder
meetings;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>no
provision for cumulative voting in the election of directors; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>filling
vacancies on our board of directors by action of a majority of the directors and not by the stockholders. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
and other provisions in our organizational documents could allow our board of directors to affect your rights as a stockholder in a number of ways, including making it more
difficult for stockholders to replace members of our board of directors. Because our board of directors is responsible for appointing members of our management team, these provisions could in turn
affect any attempt to replace the current management team. These provisions could also limit the price that investors would be willing to pay in the future for shares of our common stock. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>20</FONT></P>

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<A NAME="page_dg1063_1_21"> </A>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are also subject to the provisions of Section&nbsp;203 of the Delaware General Corporation Law, which may discourage, delay, or prevent a change of control of our company. See
"Description of Capital Stock." </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>We will incur increased costs as a result of being a public company.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a public company, we will annually incur significant legal, accounting, and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as
well as new rules subsequently implemented by the Securities and Exchange Commission (the "SEC") and the NASDAQ National Market, have required changes in corporate governance practices of public
companies. We expect these new rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. For example, as a
result of becoming a public company, we will be implementing policies regarding internal controls and disclosure controls and procedures. In addition, we will incur additional costs associated with
our public company reporting requirements. We also expect these new rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we
may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and
retain qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these new rules, and we cannot predict or
estimate the amount of additional costs we may incur or the timing of such costs. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>We do not intend to pay dividends, which may limit the return on your investment.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our
business and do not anticipate paying any cash dividends in the foreseeable future. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>We may allocate the net proceeds from this offering in ways that may not enhance the value of our common stock.</I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
intend to use the net proceeds from this offering to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>upgrade,
renovate, and equip a manufacturing and development complex;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>fund
preclinical and clinical development of our product candidate portfolio; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>fund
general corporate purposes, including working capital, other capital expenditures, potential acquisitions, and the growth of our sales, marketing, and customer service
capabilities. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
management will, however, have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not necessarily improve our
operating results or enhance the value of our common stock. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>21</FONT></P>

<HR NOSHADE>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1063_forward-looking_statements"> </A>
<A NAME="toc_dg1063_2"> </A>
<BR></FONT><FONT SIZE=2><B>FORWARD-LOOKING STATEMENTS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus, including particularly the sections entitled "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and "Business," contains forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks,
uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to differ materially from any future results, levels of activity, performance, or
achievements expressed or implied by these forward-looking statements. These risks and other factors include those listed under "Risk Factors" and elsewhere in this prospectus. In some cases, you can
identify forward-looking statements by terminology such as "anticipates," "believes," "continue," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "should," "will," or the
negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance, or achievements. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new
information, future events or otherwise after the date of this prospectus. You should be aware that the Private Securities Litigation Reform Act of 1995 and Section&nbsp;27A of the Securities Act of
1933, as amended, or the Securities Act, do not exempt from liability any forward-looking statements that we make in connection with this offering. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>22</FONT></P>

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NAME="page_di1063_1_23"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1063_use_of_proceeds"> </A>
<A NAME="toc_di1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>USE OF PROCEEDS    <BR>    </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate that we will receive approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in net proceeds from the sale
of our common stock in this offering after deducting underwriting
discounts and commissions and estimated offering expenses. If the underwriters fully exercise their option to purchase additional shares, we estimate that the net proceeds of the offering will be
approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
intend to use a significant portion of the net proceeds from this offering to upgrade, renovate, and equip a manufacturing and development complex and to fund preclinical and clinical
development of our product candidate portfolio. We intend to use the remaining net proceeds for general corporate purposes, including working capital, other capital expenditures, potential
acquisitions, and the growth of our sales, marketing, and customer service capabilities. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
this time, we do not have any commitments or agreements with respect to any material acquisition. As of the date of this prospectus, we have not allocated any specific amounts with
respect to the remaining net proceeds. Our management will have significant flexibility and discretion in applying the remaining net proceeds from this offering. Pending any specific use, we intend to
invest the net proceeds from this offering generally in short-to-medium-term, investment grade, and interest-bearing securities. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1063_dividend_policy"> </A>
<A NAME="toc_di1063_2"> </A>
<BR></FONT><FONT SIZE=2><B>DIVIDEND POLICY    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have never declared or paid cash dividends on our capital stock. We currently intend to retain any future earnings to support our operations and to finance the
growth and development of our business. Therefore, we do not expect to pay any dividends in the foreseeable future. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>23</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1063_capitalization"> </A>
<A NAME="toc_di1063_3"> </A>
<BR></FONT><FONT SIZE=2><B>CAPITALIZATION    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our capitalization as of September&nbsp;30, 2004: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>on
an actual basis; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>on
an as adjusted basis to give effect to the completion of this offering, including the application of the estimated net proceeds from this offering as described under "Use
of Proceeds." </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
should read the following table in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Description of Capital Stock" and our
consolidated financial statements and related notes appearing elsewhere in this prospectus. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="83%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>As of September 30, 2004</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Actual</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>As Adjusted</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>(dollars in thousands)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2>Cash, cash equivalents, and short-term investments<SUP>(1)</SUP></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,565</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2><BR>
Long-term debt and capital leases, including current portion</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
27,981</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2>Stockholders' equity:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>Common stock, par value $.0001 per share; 100,000,000 shares authorized, 35,109,740 shares issued and outstanding-actual,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares issued and outstanding,
as adjusted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>Preferred stock, par value $.0001 per share; 20,000,000 shares authorized, no shares outstanding</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>Additional paid-in capital</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>104,758</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>Accumulated deficit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(21,526</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Total stockholders' equity</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>83,236</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="65%"><FONT SIZE=2>Total capitalization</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>111,217</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-9pt;'><FONT SIZE=1><SUP>(1)</SUP></FONT></DT><DD><FONT SIZE=1>Excludes
proceeds received from a $10.0&nbsp;million private placement of our common stock in February&nbsp;2005 at $14.80&nbsp;per share. </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table above excludes: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>675,676&nbsp;shares
of common stock issued in February&nbsp;2005 in a private placement at a price of $14.80&nbsp;per share;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>4,943,654
shares of common stock issuable upon exercise of options outstanding as of September&nbsp;30, 2004, with a weighted average exercise price of $6.56 per share;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>124,000
shares of common stock issued in November&nbsp;2004 upon the exercise of an outstanding warrant, at an exercise price of $7.50 per share; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>4,828,480
shares of common stock reserved for future grant under our stock incentive plans as of September&nbsp;30, 2004. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>24</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=27,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=227343,FOLIO='24',FILE='DISK034:[05BHL3.05BHL1063]DI1063A.;19',USER='LRAMIRE',CD='11-FEB-2005;00:26' -->
<A NAME="page_di1063_1_25"> </A>
<UL>
<UL>
</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1063_dilution"> </A>
<A NAME="toc_di1063_4"> </A>
<BR></FONT><FONT SIZE=2><B>DILUTION    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you invest in our common stock, your interest will be diluted to the extent of the difference between the public offering price per share of our common stock
and the pro forma net tangible book value per share of our common stock upon completion of this offering. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investors
participating in this offering will incur immediate and substantial dilution. The net tangible book value per share of our common stock as of September&nbsp;30, 2004, was
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share. Net tangible book value per share represents the amount of our total tangible assets (total assets less intangible assets) less total liabilities, divided by the
number of
shares of our common stock outstanding. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After
giving effect to our sale of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock in this offering at an assumed initial public offering
price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the
mid-point of the range as indicated on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable
by us, our pro forma as adjusted net tangible book value as of September&nbsp;30, 2004 would have been approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, or approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share. This represents an
immediate increase in pro forma net tangible book value of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share to existing stockholders before this offering and an immediate dilution of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share to new
investors participating in this offering. The following table illustrates this dilution: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="63%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Assumed initial public offering price per share</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="73%"><FONT SIZE=2>Net tangible book value per common share as of September&nbsp;30, 2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="73%"><FONT SIZE=2>Increase per share attributable to new investors</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Pro forma net tangible book value per share after this offering</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Dilution per share to new investors</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table shows, as of September&nbsp;30, 2004, the total number of shares of common stock purchased from us, the total consideration paid for these shares and the average
price per share paid by existing stockholders and new investors at an assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the mid-point of the range as indicated
on the cover page of this prospectus. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="93%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="38%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Shares Purchased</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total Consideration</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="38%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Average<BR>
Price<BR>
Per Share</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="38%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Number</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Percent</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Percent</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Existing stockholders</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>35,109,740</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>104,762,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2.98</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>New investors</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
foregoing discussion and tables assume no exercise of the underwriters' option to purchase additional shares and excludes: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>675,676&nbsp;shares
of common stock issued in February&nbsp;2005 in a private placement at a price of $14.80&nbsp;per share;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>4,943,654
shares of common stock issuable upon exercise of options outstanding as of September&nbsp;30, 2004, with a weighted average exercise price of $6.56 per share;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>124,000
shares of common stock issued in November&nbsp;2004 upon the exercise of an outstanding warrant, at an exercise price of $7.50 per share; and </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>25</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=28,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=295440,FOLIO='25',FILE='DISK034:[05BHL3.05BHL1063]DI1063A.;19',USER='LRAMIRE',CD='11-FEB-2005;00:26' -->
<A NAME="page_di1063_1_26"> </A>
<UL>
<UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>4,828,480
shares of common stock reserved for future grant under our stock incentive plans as of September&nbsp;30, 2004. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
will be further dilution to new investors with respect to the shares issued pursuant to the warrant and to the extent any of these options or the underwriters' option to purchase
additional shares is exercised. If the underwriters' option to purchase additional shares is exercised in full, the number of shares of common stock held by existing stockholders before this offering
will be reduced to&nbsp;&nbsp;&nbsp;&nbsp;% of the total number of shares of common stock to be outstanding after this offering, and the number of shares of common stock held by new investors participating in
this offering will be increased to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares or&nbsp;&nbsp;&nbsp;&nbsp;% of the total number of shares of common stock to be outstanding after this offering. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>26</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=29,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=24602,FOLIO='26',FILE='DISK034:[05BHL3.05BHL1063]DI1063A.;19',USER='LRAMIRE',CD='11-FEB-2005;00:26' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_dk1063_1_27"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dk1063_selected_consolidated_financial_data"> </A>
<A NAME="toc_dk1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>SELECTED CONSOLIDATED FINANCIAL DATA    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following selected consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus. The selected consolidated financial data in this section is not intended to replace the
consolidated financial statements and accompanying footnotes. We derived the selected consolidated financial data at December&nbsp;31, 2002 and 2003, and for each of the three years in the period
ended December&nbsp;31, 2003 from the audited consolidated financial statements included in this prospectus. We derived the selected consolidated financial data at December&nbsp;31, 1999, 2000,
2001, and for the years ended December&nbsp;31, 1999 and 2000 from our audited consolidated financial statements that are not included in this prospectus. We derived the selected consolidated
financial data at September&nbsp;30, 2004 and for the nine-month period ended September&nbsp;30, 2004 from the audited consolidated financial statements included in this prospectus. We
derived the selected consolidated financial data for the nine-month period ended September&nbsp;30, 2003 from the unaudited consolidated financial information included in this
prospectus. The unaudited financial information includes all adjustments, consisting of normal recurring accruals, which we consider necessary for a fair presentation of the results of operations for
the nine month period ended September&nbsp;30, 2003. Our historical results are not necessarily indicative of future results. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended December 31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Nine Months Ended<BR>
September 30,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003<SUP>(1)</SUP></B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004<SUP>(1)</SUP></B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=20 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands, except per share data)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=1><B>Consolidated Statement of Operations data:</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=1>Net revenues</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>25,804</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>27,272</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>32,373</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>33,045</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>48,197</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>31,527</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>42,622</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=1>Cost of revenues</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>17,603</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>22,062</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>22,969</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>22,528</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>35,508</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>23,160</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>34,327</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=1>Gross profit</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>8,201</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>5,210</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>9,404</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>10,517</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>12,689</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>8,367</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>8,295</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=1>Operating expenses:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=1>Selling, distribution and marketing</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>1,592</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>2,262</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>2,332</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>2,289</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>3,194</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>2,427</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>2,571</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=1>General and administrative</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>4,476</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>7,105</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>6,132</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>7,196</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>5,349</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>3,406</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>6,100</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=1>Research and development</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>520</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>782</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>2,629</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>2,979</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>6,344</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>4,843</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>6,241</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=1>Impairment of long-lived assets</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>623</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>126</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>185</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=1>Management fees and rent expense&#151;related party</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>125</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>138</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>921</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>617</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>147</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="31%"><FONT SIZE=1>Total operating expenses</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>6,588</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>10,149</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>11,218</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>12,602</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>16,431</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>11,419</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>15,244</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=1><BR>
Income (loss) from operations</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1><BR>
1,613</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(4,939</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(1,814</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(2,085</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(3,742</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(3,052</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1><BR>
(6,949</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=1>Non-operating income (expense):</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=1>Interest income</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>266</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>307</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>400</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>448</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>174</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>148</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>43</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=1>Interest expense</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>(20</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(240</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(104</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(59</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(767</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(444</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(648</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=1>Other income (expense)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>159</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>135</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(135</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(206</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(203</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(28</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>554</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>405</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>202</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>161</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>183</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(796</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(324</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(51</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=1>Net income (loss) before extraordinary gain</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>2,018</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(4,737</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(1,653</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(1,902</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(4,538</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(3,376</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(7,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=1>Extraordinary gain, net of taxes</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>1,341</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=1>Income taxes</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>(8</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=1>Net income (loss)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>2,010</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>($4,737</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>($1,653</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>($1,902</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>($3,197</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>($3,376</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>($7,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=1>Net income (loss) per share before extraordinary gain<SUP>(2)</SUP>:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=1>basic and diluted</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>0.09</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>($0.19</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>($0.06</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>($0.06</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>($0.14</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>($0.10</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>($0.20</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=1>Net income (loss) per common share<SUP>(2)</SUP>:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=1>basic and diluted</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>0.09</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>($0.19</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>($0.06</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>($0.06</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>($0.10</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>($0.10</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>($0.20</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=1>Weighted-average shares outstanding:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=1>basic and diluted</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>22,172</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>24,945</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>26,741</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>31,592</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>33,520</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>33,425</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>34,403</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-9pt;'><FONT SIZE=1><SUP>(1)</SUP></FONT></DT><DD><FONT SIZE=1>Includes
the results of operations of Armstrong since October&nbsp;9, 2003.
<BR><BR></FONT></DD><DT style='margin-bottom:-9pt;'><FONT SIZE=1><SUP>(2)</SUP></FONT></DT><DD><FONT SIZE=1>See
Note&nbsp;2 of Notes to Consolidated Financial Statements for a description of the method used to compute basic and diluted loss per share and the number of shares
used in computing basic and diluted loss per share. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>27</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=30,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=952664,FOLIO='27',FILE='DISK034:[05BHL3.05BHL1063]DK1063A.;27',USER='RFARRIN',CD='11-FEB-2005;03:50' -->
<A NAME="page_dk1063_1_28"> </A>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="39%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>As of December 31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="39%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>As of<BR>
September 30,<BR>
2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="39%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2000</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="39%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=17 ALIGN="CENTER"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=1><B>Consolidated Balance Sheet data:</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=1>Cash, cash equivalents and short-term investments</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>1,751</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>7,656</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>18,228</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>21,216</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>8,723</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=1>7,565</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=1>Working capital</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>10,190</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>12,124</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>18,002</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>29,453</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>7,575</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=1>10,931</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=1>Total assets</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>40,712</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>53,838</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>72,553</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>86,433</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>113,271</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=1>132,368</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=1>Long-term debt and capital leases, including current portion</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>691</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>5,636</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>15,843</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>4,097</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>21,604</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=1>27,981</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=1>Accumulated deficit</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(3,039</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(7,776</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(9,427</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(11,329</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>(14,526</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=1>(21,526</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="39%"><FONT SIZE=1>Total stockholders' equity</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>31,598</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>41,538</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>49,659</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>75,823</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=1>73,876</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=1>83,236</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>28</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=31,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=81718,FOLIO='28',FILE='DISK034:[05BHL3.05BHL1063]DK1063A.;27',USER='RFARRIN',CD='11-FEB-2005;03:50' -->
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_dm1063_1_29"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dm1063_management_s_discussion_and_an__man03466"> </A>
<A NAME="toc_dm1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>MANAGEMENT'S DISCUSSION AND<BR>  ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS    <BR>    </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>You should read this discussion together with our consolidated financial statements, the notes to such statements and the other financial
information included in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under the
Section entitled "Risk Factors" and elsewhere in this prospectus, our actual results may differ materially from those anticipated in these forward-looking statements.</I></FONT></P>

<P><FONT SIZE=2><B>Overview  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a fully integrated specialty pharmaceutical company that is engaged in developing, manufacturing, acquiring, marketing, and selling generic and proprietary
injectable and inhalation pharmaceutical products. Most of our products are used in hospital or urgent care clinical settings and are primarily sold through group purchasing organizations, or GPOs,
and drug wholesalers. We currently have a portfolio of 67 products that we sell through wholesalers and GPOs. We are also currently engaged in the development of proprietary product candidates that
build on our scientific expertise in developing generic products. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
October&nbsp;1998, we acquired International Medication Systems, Limited ("IMS") from Medeva PLC UK and in October&nbsp;2003, we acquired Armstrong Pharmaceuticals,&nbsp;Inc.
("Armstrong") from Andrx Pharmaceuticals,&nbsp;Inc. The Armstrong acquisition gave us the rights to Albuterol CFC and included a one-year distribution agreement for that product with Andrx. In 2003,
we also acquired the NDA to and trademark for Cortrosyn from Organon USA&nbsp;Inc. ("Organon") for a purchase price of $28.0&nbsp;million, originally payable as follows: $16.0&nbsp;million at
closing, $6.0&nbsp;million in June&nbsp;2004 and the remaining $6.0&nbsp;million in June&nbsp;2005. In December 2004, the due dates of the two remaining payments were extended to
June&nbsp;2005 and February&nbsp;2006 and the June&nbsp;2005 payment was decreased to $4.3&nbsp;million as a result of Organon ceasing to manufacture the finished product for us pursuant to
our contract during 2004. We also sold a royalty interest in the U.S. sales of Cortrosyn for $8.0&nbsp;million to Drug Royalty USA,&nbsp;Inc. in 2003. The Cortrosyn supply interruption in the
second and third quarters of 2004 adversely impacted our sales, margins, profitability, and cash flow for that period. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
generated net losses for the years ended December&nbsp;31, 2001, 2002, and 2003, and the nine months ended September&nbsp;30, 2004, and have an accumulated deficit of
$21.5&nbsp;million as of September&nbsp;30, 2004. </FONT></P>

<P><FONT SIZE=2><B>Financial Overview  </B></FONT></P>

<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues and cost of sales.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our net revenues consist principally of revenue generated from the
sale of our products. Included in net revenues are adjustments for estimated product returns and wholesaler chargebacks. Our cost of revenues consists of labor, raw materials, components, packaging,
quality assurance and control, manufacturing overhead costs and cost of finished products purchased from third parties. </FONT></P>

<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We have made, and expect to continue to make, substantial investments in
research and development to expand our product portfolio and grow our business. Research and development costs consist primarily of salaries and other personnel-related expenses for employees involved
with research and development activities, clinical trials and other related expenses. The Company expenses research and development costs as incurred. </FONT></P>


<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses consist primarily of
salaries and benefits, professional services fees, facilities, stock compensation, and other corporate overhead costs. After this offering, we anticipate increases in general and administrative
expenses as we add personnel, become subject to reporting obligations applicable to publicly-held companies and </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>29</FONT></P>

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<P><FONT SIZE=2>continue
to develop and prepare for commercialization of our product candidates. The timing and the extent of legal fees related to product development and costs associated with public company
compliance requirements could result in fluctuations of total general and administrative expense from period to period. </FONT></P>

<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, distribution and marketing expenses.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Selling, distribution and marketing expenses consist
primarily of shipping costs, salaries, other personnel-related expenses, as well as costs for travel, trade shows, conventions, promotional materials, catalogs, advertising, and promotion. We believe
that our selling, distribution and marketing expenses will continue to increase as we grow our business and will increase due to expenses associated with product introductions. </FONT></P>

<P><FONT SIZE=2><B>Results of Operations  </B></FONT></P>

<P><FONT SIZE=2><B><I>Nine Months Ended September&nbsp;30, 2003 and 2004  </I></B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net revenues were $31.5&nbsp;million and $42.6&nbsp;million for the nine months ended September&nbsp;30,
2003 and 2004, respectively, representing an increase of $11.1&nbsp;million, or 35%. This increase was principally due to new Albuterol revenues of $5.8&nbsp;million in the current period with no
revenues from Albuterol sales in the prior period and an additional $5.0&nbsp;million of Cortrosyn revenues in the prior period. Cortrosyn revenues for the nine months ended September&nbsp;30,
2004 include nine months of Cortrosyn revenues compared to six months of Cortrosyn revenues in the 2003 period. The majority of Albuterol sales during the 2004 period were made to Andrx under the
one-year distribution agreement. Although we have renewed the agreement, the number of units of Albuterol that Andrx will be required to purchase from us under the agreement going forward is much
lower than the number Andrx was required to purchase from us in the 2004 period. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of revenues.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cost of revenues was $23.2&nbsp;million and $34.3&nbsp;million for the nine months ended
September&nbsp;30, 2003 and 2004, respectively, representing an increase of $11.1&nbsp;million, or 48%. For these same periods, our gross profit margins were 27% and 19%, respectively. The
increase in our cost of revenues was primarily due to the inclusion of costs related to Albuterol, a product that was not in our portfolio until October&nbsp;2003, and higher costs related to
Cortrosyn production. The costs of Cortrosyn include one-time production start up costs related to transferring the manufacturing of the product to our Rancho Cucamonga facility. In
addition, our per unit manufacturing cost for Cortrosyn is significantly higher than the price we previously paid Organon through February 2004 to manufacture the finished product for us prior to the
manufacturing transfer. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, distribution, and marketing.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Selling, distribution and marketing expenses were $2.4&nbsp;million and
$2.6&nbsp;million for the nine months ended September&nbsp;30, 2003 and 2004, respectively. The increase was principally due to an increase in product distribution costs due to higher levels of
product shipments. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and administrative.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses were $3.4&nbsp;million and $6.1&nbsp;million for the nine
months ended September&nbsp;30, 2003 and 2004 respectively, representing an increase of $2.7&nbsp;million, or 79%. This increase was primarily due to increases in patent infringement litigation
expenses and increased personnel costs of $1.1&nbsp;million from higher headcount. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Research and development expenses were $4.8&nbsp;million and $6.2&nbsp;million for the nine
months ended September&nbsp;30, 2003 and 2004, respectively, representing an increase of $1.4&nbsp;million, or 29%. This increase was primarily the result of increased personnel costs from a
higher headcount and clinical trial expenses. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment of long-lived assets.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Charges related to the impairment of long-lived assets were $0.1&nbsp;million
and $0.2&nbsp;million for the nine months ended September&nbsp;30, 2003 and 2004 respectively, </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>30</FONT></P>

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<P><FONT SIZE=2>representing
an increase of 47%. The increase was primarily attributable to additional discontinued capitalized projects in property and equipment in the 2004 period. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management fees and rent expense&#151;related party.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Management fees and rent expense was $0.6&nbsp;million and
$0.1&nbsp;million for the nine months ended September&nbsp;30, 2003 and 2004, respectively, representing a decrease of $0.5&nbsp;million. The decrease was due to the fact that an obligation to
pay a management fee to APCL expired at the end of the 2003 fiscal year. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest expense was $0.4&nbsp;million and $0.6&nbsp;million for the nine months ended
September&nbsp;30, 2003 and 2004, respectively, representing an increase of $0.2&nbsp;million. This increase was primarily due to higher levels of debt, partially offset by increased
capitalization of interest expense resulting from higher levels of self-constructed assets that qualify for capitalization of interest. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other income (expense).</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Other income (expense) was $(0.03)&nbsp;million and $0.55 million for the nine months ended
September&nbsp;30, 2003 and 2004, respectively, representing an increase of $0.58&nbsp;million. This increase was primarily due to the receipt of a $0.5&nbsp;million fee from the former tenant
for the early termination of a lease on the newly purchased building. </FONT></P>

<P><FONT SIZE=2><B><I>Years Ended December&nbsp;31, 2002 and 2003  </I></B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net revenues were $33.0&nbsp;million and $48.2&nbsp;million in 2002 and 2003 respectively, representing an
increase of $15.2&nbsp;million, or 46%. Product revenues increased principally due to sales of Cortrosyn, which we acquired mid-year 2003, and which contributed $7.9&nbsp;million in
revenues in 2003. Armstrong, which we acquired in the fourth quarter of 2003, contributed $2.9&nbsp;million in domestic product revenues from Albuterol sales in 2003. Additionally, we recorded
increased
revenues across most of our product lines totaling $3.0&nbsp;million in 2003. Revenues from contract manufacturing services also increased from $0.5&nbsp;million in 2002 to $1.9&nbsp;million in
2003, due to increased efforts to expand contract relationships with other pharmaceutical, biopharmaceutical, and biotechnology companies. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of revenues.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cost of revenues was $22.5&nbsp;million and $35.5&nbsp;million in 2002 and 2003, respectively,
representing an increase of $13.0&nbsp;million, or 58%. For these same periods, our gross profit margins were 32% and 26%, respectively. The increase in cost of revenues in 2003 was principally due
to the introduction of new product lines, which contributed $8.7&nbsp;million to cost of revenues, including amortization expense of $0.9&nbsp;million relating to the intangible asset booked for
the acquisition of Cortrosyn with the balance of the increase related to costs associated with increased contract manufacturing and higher manufacturing expenses. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, distribution and marketing.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Selling, distribution and marketing expenses were $2.3&nbsp;million and
$3.2&nbsp;million in 2002 and 2003, respectively, representing an increase of $0.9&nbsp;million, or 39%. This increase was principally due to an increase in product distribution costs due to
higher levels of product shipments. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and administrative.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses were $7.2&nbsp;million and $5.3&nbsp;million in 2002 and
2003, respectively, representing a decrease of $1.9&nbsp;million, or 26%. The decrease was principally due to the recording of wages, overhead and pre-production expenses of the
manufacturing plant in Rancho Cucamonga as general and administrative expenses in fiscal 2002. Once the FDA approved this facility and production commenced in 2003, these expenses were recorded in
cost of revenues. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Research and development expenses were $3.0&nbsp;million and $6.3&nbsp;million in 2002 and
2003, respectively, representing an increase of $3.3&nbsp;million, or 110%. The increase was mainly due to significantly higher clinical trial expenses (principally related to our Ampofol product),
as well as increased expenses related to manufacturing sufficient quantities of products to be used in research and development activities. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>31</FONT></P>

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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment of long-lived assets.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;During 2003, we wrote off $0.6&nbsp;million in real estate development costs
and equipment, which was no longer being used, and for which there was no further use. There was no impairment of long-lived assets in 2002. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management fees and rent expense&#151;related party.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Management fees and rent expenses were $0.1&nbsp;million and
$0.9&nbsp;million in 2002 and 2003. The increase of $0.8&nbsp;million resulted from an amendment
to the agreement between the Company and APCL, clarifying the terms of a fee paid by us to APCL for managing the leasing arrangements and paying all of the costs related to the purchase or lease of
equipment for us. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest income.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest income was $0.4&nbsp;million and $0.2&nbsp;million in 2002 and 2003, respectively, representing
a decrease of $0.2&nbsp;million, or 50%, principally due to the investment of proceeds from a private placement closed in 2002. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest expense was $0.1&nbsp;million and $0.8&nbsp;million in 2002 and 2003, respectively,
representing an increase of $0.7&nbsp;million. The increase in 2003 was due to a significant increase in the amount of debt outstanding. Interest expense is composed of interest on debt outstanding
and the accretion of the difference between the net present value of the two remaining installment payments owed by us to Organon to complete the purchase of Cortrosyn, and the contractual obligation
of $12.0&nbsp;million. The implicit interest rate for the two payments to Organon is 7.5% per annum. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Extraordinary gain.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We recorded an extraordinary gain in the fourth quarter of 2003 from the acquisition of Armstrong in the
amount of $1.3&nbsp;million, net of tax expense of $0.04&nbsp;million. There was no extraordinary gain in 2002. </FONT></P>

<P><FONT SIZE=2><B><I>Years Ended December&nbsp;31, 2001 and 2002  </I></B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net revenues.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net revenues were $32.4&nbsp;million and $33.0&nbsp;million in 2001 and 2002, respectively, representing an
increase of $0.6&nbsp;million, or 2%. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of revenues.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cost of revenues was $23.0&nbsp;million and $22.5&nbsp;million in 2001 and 2002, respectively,
representing a decrease of $0.5&nbsp;million, or 2%. For these same periods, our gross profit margins were 29% and 32%, respectively. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, distribution, and marketing.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Selling, distribution, and marketing expenses were $2.3&nbsp;million in both 2001 and
2002. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General and administrative.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;General and administrative expenses were $6.1&nbsp;million and $7.2&nbsp;million in 2001 and
2002, respectively, representing an increase of $1.1&nbsp;million, or 18%. This increase was primarily due to increased personnel costs resulting from higher employee headcount in 2002. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Research and development costs were $2.6&nbsp;million and $3.0&nbsp;million in 2001 and 2002,
respectively, an increase of $0.4&nbsp;million, or 15%. This increase was primarily a result of increased employee headcount in the department during 2002. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management fees and rent expense&#151;related party.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Management fees relating to our agreement with Applied Physics &amp;
Chemistry Laboratory ("APCL") were $0.1&nbsp;million in each of 2001 and 2002. No rent was paid to APCL in either year. </FONT></P>


<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest income and Interest expense.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest income was $0.4&nbsp;million in both 2001 and 2002. Interest expense was
$0.1&nbsp;million in both 2001 and 2002. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>32</FONT></P>

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<P><FONT SIZE=2><B>Liquidity and Capital Resources  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At September&nbsp;30, 2004, we had financed our operations since inception primarily through sales of our products, private placements of equity securities
totaling $88.3&nbsp;million, borrowings under various credit and leasing facilities, a product royalty sale and capital contributions from a related party, APCL. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of September&nbsp;30, 2004, we had $5.8&nbsp;million in cash and cash equivalents compared to $8.1&nbsp;million at December&nbsp;31, 2003. Net cash used in operating
activities was $1.1&nbsp;million for the nine months ended September&nbsp;30, 2004, principally due to reduced sales of Cortrosyn resulting from a supply interruption. Purchases of components for
products awaiting regulatory approval were offset by increases in accounts payable and accrued liabilities. Net cash used in investing activities in the nine months ended September&nbsp;30, 2004 was
$17.9&nbsp;million due to the $1.4&nbsp;million in proceeds from sales of a building and a parcel of land being offset by $14.4&nbsp;million in purchases of property, plant, and equipment,
$1.8&nbsp;million in capitalized labor on self-constructed assets, $2.0&nbsp;million for the purchase of product rights to Epinephrine Mist CFC and $1.1&nbsp;million for the purchases of
marketable securities and short-term investments. Cash flow received from financing activities of $16.6&nbsp;million in the nine months ended September&nbsp;30, 2004 was principally the result of
a $15.6&nbsp;million private placement in the first half of fiscal 2004 and increased borrowings. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2003, we had $8.1&nbsp;million in cash and cash equivalents as compared to $15.5&nbsp;million at December&nbsp;31, 2002. The decrease was principally the
result of the $16.0&nbsp;million payment to Organon in June 2003 for purchase of product rights for Cortrosyn offset by our sale of the royalties related to Cortrosyn to DRC for $8.0&nbsp;million.
Net cash provided by operating activities was $1.2&nbsp;million for the
year ended December&nbsp;31, 2003 compared to net cash used in operating activities of $4.0&nbsp;million for the year ended December&nbsp;31, 2002. The positive cash flow from operating
activities was principally the result of the sales of Cortrosyn since June&nbsp;2003. Net cash used in investing activities was $21.5&nbsp;million for the year ended December&nbsp;31, 2003
compared to $8.1&nbsp;million for the year ended December&nbsp;31, 2002. The increase in 2003 was principally the result of the $16.0&nbsp;million payment to Organon. Net cash provided by
financing activities was $12.9&nbsp;million for the year ended December&nbsp;31, 2003 compared to $14.6&nbsp;million for the year ended December&nbsp;31, 2002. In 2002, we raised
$25.0&nbsp;million in a private placement of common stock, which we used to pay down $12.3&nbsp;million in long-term debt. In 2003, we borrowed $6.2&nbsp;million under our CB Credit
Facility (defined below) and received $8.0&nbsp;million in the form of a royalty purchase from DRC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
and our subsidiaries have three principal credit facilities: the Cathay Bank facility ("CB Credit Facility") provides for borrowings under a $6.2&nbsp;million revolving line of
credit and equipment loans in an original amount of $1.7&nbsp;million; the Bank of the West facility provides for a $5.0&nbsp;million equipment purchase facility; and a second Bank of the West
facility that provides for a $3.0&nbsp;million line of credit. At September&nbsp;30, 2004, there was $0.0, $1.1&nbsp;million and $1.0&nbsp;million, respectively, available under these
facilities. The bank facilities are secured by certain accounts receivable, inventory, equipment and leasehold improvements. Amphastar has guaranteed the obligations of its subsidiaries under the Bank
of the West facilities. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
March&nbsp;2004, the maturity date of the CB Credit Facility was extended to May&nbsp;31, 2005 with the same interest rate, general terms and conditions. The CB Credit Facility
requires the Company to maintain certain financial covenants including minimum levels of profitability and a minimum current ratio and maximum debt to net worth ratio. As of September&nbsp;30, 2004,
the Company was in violation of certain financial covenants. In November&nbsp;2004, Cathay Bank waived all covenant violations through December&nbsp;31, 2004 and extended the maturity of the
borrowings under the CB Credit Facility from May&nbsp;31, 2005 to November&nbsp;1, 2005. In addition, in November 2004, Cathay Bank exercised its warrant to purchase 124,000 shares of the
Company's common stock at an exercise price of $7.50 per share, resulting in $0.9&nbsp;million in cash proceeds. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>33</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
February&nbsp;2005, we completed a private placement of 675,676 shares of our common stock at a purchase price of $14.80 per share for aggregate gross proceeds of
$10.0&nbsp;million. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
February&nbsp;2005, we obtained $3.4&nbsp;million in equipment financing from a lease finance company. The lease obligations will be secured by a maximum $1.7&nbsp;million
letter of credit. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set
forth below are our contractual payment obligations as of December&nbsp;31, 2003 (in thousands): </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="33%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=20 ALIGN="CENTER"><FONT SIZE=1><B>Payments due by Period</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="33%" ALIGN="LEFT"><FONT SIZE=1><B>Contractual Obligations<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2008</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Beyond 2008</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="33%"><FONT SIZE=2>Long-term Debt<SUP>(1)</SUP></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>21,212</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>13,032</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5,719</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>282</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>191</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1,988</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="33%"><FONT SIZE=2>Operating Leases</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>11,875</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,823</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,352</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1,715</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1,197</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1,075</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,713</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="33%"><FONT SIZE=2>Capital Leases</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>448</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>218</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>185</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>40</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="33%"><FONT SIZE=2>Purchase Obligations</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>7,685</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>7,685</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="33%"><FONT SIZE=2>Deferred Royalty Payments<SUP>(2)</SUP></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>7,445</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,630</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,478</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>2,337</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="33%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="33%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>48,665</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>26,388</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>10,734</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>4,374</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1,393</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>3,063</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,713</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="33%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
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<DL compact>
<DT style='margin-bottom:-9pt;'><FONT SIZE=1><SUP>(1)</SUP></FONT></DT><DD><FONT SIZE=1>The
other long-term liabilities set forth above include the net present value of the two remaining payments owed by the Company to Organon relating to the
purchase of Cortrosyn. In the first quarter of 2004, Organon ceased manufacturing Cortrosyn and in June&nbsp;2004 closed its manufacturing facility, despite a contractual obligation to manufacture
Cortrosyn for us through June&nbsp;2006. This supply interruption adversely impacted sales during the second and third quarters of 2004. We transferred the manufacturing process from Organon to our
Rancho Cucamonga facility and re-launched the product in August&nbsp;2004. The Company has recorded the $8.0&nbsp;million in consideration received from DRC as deferred royalties on
the accompanying consolidated balance sheets and is reducing the liability as royalty payments are made.
<BR><BR></FONT></DD><DT style='margin-bottom:-9pt;'><FONT SIZE=1><SUP>(2)</SUP></FONT></DT><DD><FONT SIZE=1>The
payments due by period under this obligation are based on estimates of future sales. </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect our cash requirements to increase significantly in the foreseeable future as we move forward with our product candidates, and to sponsor
clinical trials for, seek regulatory approvals of, and develop, manufacture and market our development-stage current product candidates. We may also need capital to develop our field sales force and
pursue additional marketed product opportunities. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
expect that the proceeds of the offering, the proceeds from our February&nbsp;2005 private placement and February 2005 equipment lease line, the revenues from the
re-launch of Cortrosyn in August&nbsp;2004, the launch of Amphadase in November&nbsp;2004, the launch of Epinephrine Mist CFC in December&nbsp;2004, and cash flows from our existing
products will enable us to meet our obligations as they become due, including scheduled debt and lease payments. We also expect additional cash flow in the form of upfront and milestone payments from
strategic alliances. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the cash flow from operations is not sufficient to meet our obligations as they come due, then we may seek to reschedule debt payments and/or seek additional equity and debt
financing. No assurance
can be given that alternative sources of sufficient financing would be available on acceptable terms, or at all. If we are not able to reschedule debt payments and/or obtain funding from these
financing activities, we will consider postponing research and development expenditures and the acquisition of property, plant and equipment. We expect that we will be able to meet our cash flow
requirements for the next twelve months. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of September&nbsp;30, 2003 and 2004 and December&nbsp;31, 2001, 2002 and 2003, we did not have any relationships with unconsolidated entities or financial partnerships, such as
entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other
contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. As such, we are not materially exposed to any
financing, liquidity, market or credit risk that could arise if we had engaged in these relationships. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>34</FONT></P>

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<P><FONT SIZE=2><B>Quantitative and Qualitative Disclosures About Market Risk  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary exposure to market risk is interest rate sensitive investments and credit facilities, which are affected by changes in the general level of U.S.
interest rates. Due to the nature of our short-term investments (i.e., certificates of deposit), we believe that we are not subject to any material interest rate risk. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of September&nbsp;30, 2004, we had $27.7&nbsp;million in long-term debt outstanding. Of this amount, $13.4&nbsp;million had variable interest rates with a weighted
average interest rate of 4.74%. A 1% (100 basis points) increase in the index underlying these rates would increase our annual interest expense on the variable-rate debt by approximately
$100,000 per year. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most
foreign sales are negotiated with payment terms in U.S. dollars. Therefore, the Company has little exposure to foreign currency price fluctuation. Further, the Company has no
derivative financial instruments. </FONT></P>

<P><FONT SIZE=2><B>Critical Accounting Policies  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles. The preparation of consolidated financial
statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those estimates. In some cases changes in the accounting estimates are reasonably likely to occur from period to period.
Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results
of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing
basis. We refer to accounting estimates of this type as critical accounting policies, which we discuss further below. Our significant accounting policies are described in more detail in Note&nbsp;2
to our consolidated financial statements included in this prospectus. </FONT></P>

<P><FONT SIZE=2><B><I>Revenue Recognition  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net revenues consist principally of revenues generated from the sale of our pharmaceutical products. Net revenues reflect adjustments to gross revenues for
estimated product returns and wholesaler chargebacks, which are recorded in the same period that the related revenues are recorded. Generally, we recognize revenues at the time of product delivery for
domestic customers and the time of product shipment for foreign customers. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Contract
manufacturing service revenues are recognized when development and other services are provided and/or products are shipped to customers. In accordance with SEC Staff Accounting
Bulletin, or SAB, No.&nbsp;101, Revenue Recognition in Financial Statements, as well as recently issued SAB No.&nbsp;104, Revenue Recognition, we recognize revenues when persuasive evidence of an
arrangement exists, transfer of title has occurred, the price to the customer is fixed or determinable and collection of the resulting receivable is reasonably assured. In addition, we do not
recognize revenues until all customer acceptance requirements have been met. </FONT></P>

<P><FONT SIZE=2><B><I>Impairment of Long-Lived Assets  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company reviews long-lived assets and certain identifiable assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, further impairment analysis is performed.
An impairment loss is measured as the amount </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>35</FONT></P>

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<BR>

<P><FONT SIZE=2>by
which the carrying amount exceeds the fair value of the assets (assets to be held and used) or fair value less cost to sell (assets to be disposed of). </FONT></P>


<P><FONT SIZE=2><B><I>Accrual for Wholesaler Chargebacks and Return Policies  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of our sales terms to wholesale customers, we agree to reimburse wholesalers for differences between the gross sales price of products we sell to
wholesalers and expected retail prices of such products under contractual arrangements with third parties such as hospitals and group purchasing organizations. We estimate wholesaler chargebacks at
the time of sale based on the terms of agreements with customers and historical experience. We also offer certain distributors the right to return qualified excess or expired stock ("qualified
returns") for credit. Beginning in July&nbsp;1, 2003, pursuant to revised terms with the Company's distributors, qualified returns were expanded to include new product lines and are accepted in
certain instances up to 12&nbsp;months from the date of shipment and six months before and after the expiration date for credits ranging from 80% to 90% of the current list price. The Company
estimates amounts that may be incurred under its product return policies and records an accrual in the amount of such costs at the time product revenue is recognized. The accrual for estimated product
returns is based, in part, upon the historical relationship of product returns to sales, but also considers amended contract terms. The Company classifies a portion of the accrual as a
long-term obligation to reflect qualified sales, which do not become eligible for return credit under the policy until more than a year after the balance sheet date. </FONT></P>


<P><FONT SIZE=2><B><I>Expense  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of revenues consists of labor, raw materials, components, packaging, quality assurance and quality control, and manufacturing overhead costs and the cost of
finished products purchased from third parties. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research
and development costs are expensed as incurred and consist primarily of salaries and other personnel-related expenses for employees within the research and development
department, clinical trial expenses, as well as depreciation of equipment, allocable facility, raw material and production expenses and contract and consulting fees. We have made, and expect to
continue to make, substantial investments in research and development activities to expand our product portfolio and grow our business. </FONT></P>

<P><FONT SIZE=2><B><I>Stock-based compensation  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As permitted by Statement of Financial Accounting Standards No.&nbsp;123, "Accounting for Stock-Based Compensation" ("SFAS&nbsp;123"), and as amended by
SFAS&nbsp;148, "Accounting for Stock-Based Compensation&#151;Transition and Disclosure," we account for stock options granted to our employees and nonemployee members of the board of
directors in accordance with Accounting Principles Board Opinion No.&nbsp;25, "Accounting for Stock Issued to Employees" ("APB 25"), and related interpretations. Under APB 25, no compensation
expense is recorded if the exercise price of the stock options is equal to or greater than the market price of the underlying stock on the date of grant. Options granted to nonemployees have been
accounted for at deemed fair market value in accordance with SFAS&nbsp;123. </FONT></P>

<P><FONT SIZE=2><B>Recent Accounting Pronouncements  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. (FIN) 46, "Consolidation of Variable Interest Entities" an
interpretation of Accounting Research Bulletin No.&nbsp;51, "Consolidated Financial Statements." The primary objectives of FIN 46 are to provide guidance on the identification of entities which the
Company may control through means other than through voting rights ("variable interest entities") and to determine when and which business enterprise ("primary beneficiary") should consolidate the
variable interest entity. FIN 46 requires existing </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>36</FONT></P>

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<BR>

<P><FONT SIZE=2>unconsolidated
variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among the parties involved. Variable interest entities
that effectively disperse risks will not be consolidated unless a single party holds an interest or combination of interests that effectively recombines risks that were previously dispersed. In
addition, FIN 46 requires that the primary beneficiary, as well as all other enterprises with a significant variable interest in a variable interest entity, make additional disclosures. Certain
disclosure requirements of FIN 46 were effective for financial statements issued after January&nbsp;31, 2003. In December&nbsp;2003, FASB revised FIN 46 (FIN 46R) to address certain FIN 46
implementation issues. The revised provisions are applicable no later than the first reporting period ending after March&nbsp;15, 2004. The Company adopted FIN 46 and FIN 46R and determined that it
does not have any variable interest entities that require consolidation or disclosure. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
September&nbsp;2004, the Emerging Issues Task Force of FASB reached a final consensus on EITF Issue No.&nbsp;04-10, "Determining Whether to Aggregate Operating
Segments That Do Not Meet the Quantitative Thresholds." Under EITF Issue No.&nbsp;04-10, operating segments that do not meet the quantitative thresholds can be aggregated into a
reportable segment if aggregation is consistent with the objective and basic principles of FASB Statement No.&nbsp;131, the segments have similar economic characteristics, and the segments share a
majority of the other aggregation criteria as defined by FASB Statement No.&nbsp;131, paragraph&nbsp;17. EITF Issue No.&nbsp;04-10 is effective for fiscal years ending after
October&nbsp;13, 2004. The corresponding information for earlier periods, including interim periods, shall be restated unless it is impractical to do so. Restatement of previously issued financial
statements is required. The adoption of EITF Issue No.&nbsp;04-10 will not impact our financial statements and related disclosures. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
November&nbsp;2004, FASB issued Statement No.&nbsp;151, "Inventory Costs, an amendment of ARB No.&nbsp;43, Chapter&nbsp;4." This Statement clarifies the accounting for
abnormal amounts of certain inventory cost components and requires the allocation of fixed production overheads to the costs of conversion to be based on the normal capacity of the production
facilities. This Statement is effective for inventory costs incurred during fiscal years beginning after June&nbsp;15, 2005. We are currently assessing the impact of Statement No.&nbsp;151 on our
financial statements. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
December&nbsp;16, 2004, FASB issued Statement No.&nbsp;123 (revised 2004), "Share-Based Payment" ("Statement&nbsp;123(R)"). Statement 123(R) replaces FASB Statement
No.&nbsp;123, Accounting for Stock-Based Compensation, supersedes APB Opinion No.&nbsp;25, Accounting for Stock Issued to Employees and amends FASB Statement No.&nbsp;95, Statement of Cash
Flows. Generally, the approach in Statement 123(R) is similar to the approach described in Statement 123. However, Statement 123(R) requires all share-based payments to employees, including grants of
employee stock options, to be recognized in the financial statements based on their fair values (i.e., pro forma disclosure is no longer an alternative to financial statement recognition). Statement
123(R) is effective for public companies (excluding small business issuers as defined in Regulation&nbsp;S-B) at the beginning of the first interim or annual period beginning after
June&nbsp;15, 2005. We are currently assessing the impact of Statement 123(R) on our financial statements and related disclosures. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>37</FONT></P>

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<BR></FONT><FONT SIZE=2><B>BUSINESS    <BR>    </B></FONT></P>


<P><FONT SIZE=2><B>Overview  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a fully integrated specialty pharmaceutical company that develops, manufactures, markets, and sells generic and proprietary injectable and inhalation
products. We currently manufacture and sell 67 products and are continuing to develop a portfolio of generic and branded products that targets large markets with high technical barriers to entry. Our
manufacturing sites are capable of producing a broad range of dosage formulations including solutions, emulsions, suspensions, jellies, and lyophilized (freeze-dried) products, as well as
metered-dose inhalers, or MDIs, and nasal sprays. We have long-standing relationships with the leading group purchasing organizations, or GPOs, and wholesalers that deliver
products to our end markets. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
began our operations in February&nbsp;1996 with a strategy of focusing on manufacturing and selling generic injectable products. To complement our internal growth, we acquired
International Medication Systems, Limited ("IMS") in October&nbsp;1998 and Armstrong Pharmaceuticals,&nbsp;Inc. ("Armstrong") in October&nbsp;2003 as well as the NDA to Cortrosyn in June 2003
and the ANDA for a generic version of Primatene Mist in July 2004. As we expanded our infrastructure and developed our research and development expertise, our strategic focus has evolved into
developing products for large markets with high technical barriers to entry. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are specifically focused on applying our technical expertise to develop products that: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>require
an active pharmaceutical ingredient, or API, that is difficult to source and/or manufacture;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>involve
complex manufacturing;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>address
deficiencies in the innovator's product formulation; and/or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>improve
upon an existing product through the use of our proprietary drug delivery platforms. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
portfolio of product candidates that we are developing includes enoxaparin, a generic formulation of the anti-coagulant, Lovenox, and Ampofol, a proprietary formulation
of the general anesthetic, Diprivan. According to IMS Health&nbsp;Incorporated ("IMS Health"), an independent provider of statistical information on the pharmaceutical industry, the currently
marketed versions of these products generated sales in the U.S. in 2004 in excess of $2.0&nbsp;billion. We are also developing product candidates based on our proprietary sustained-release and
prefilled disposable pipette, or PDP, technology platforms. </FONT></P>


<P><FONT SIZE=2><B>Our Competitive Advantages  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have built our company by integrating the capabilities we believe are essential to compete effectively in the pharmaceutical industry, including: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Experienced product development team</I></FONT><FONT SIZE=2>. Our product development team consists of 43 people, 12 of whom have Ph.D.s, with
expertise in areas such as pharmaceutical formulation, process development, </FONT><FONT SIZE=2><I>in vivo</I></FONT><FONT SIZE=2> study, analytical chemistry, drug delivery, and clinical research.
This expertise has enabled us to focus on product candidates that are difficult to develop and/or manufacture. Our substantial research and development resources have allowed us to accelerate product
development timelines and build a portfolio of technically sophisticated product candidates.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Comprehensive manufacturing capabilities</I></FONT><FONT SIZE=2>. We manufacture pharmaceutical products in multiple dosage formulations, including
solutions, emulsions, suspensions, jellies, and lyophilized products, as well as MDIs and nasal sprays. We own seven aseptic filling lines and four MDI/nasal spray filling lines. In addition, we are
currently constructing additional manufacturing capacity, </FONT></DD></DL>
</UL>
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<UL>
<UL>

<P><FONT SIZE=2>including
a new filling line for PDPs. We currently produce approximately 12.5&nbsp;million injectable units and five million MDI units per year. We believe our manufacturing capabilities enable us
to compete effectively in our markets. </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Ability to develop and manufacture active pharmaceutical ingredients.</I></FONT><FONT SIZE=2> One aspect of our development strategy is to focus on
products that are difficult to manufacture because the API is not easily obtained. For example, our research and development team has developed a multi-step chemical process for converting
raw material into the API for enoxaparin. This expertise enables us to pursue the development of other products we identify with APIs that are difficult to source and/or manufacture.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Proprietary technology platforms.</I></FONT><FONT SIZE=2> Our research and development efforts have resulted in the development of two proprietary
platforms focused on the improvement of drug delivery. Our sustained-release technology has enabled us to formulate injectable product candidates that are designed to allow single injections to be
effective over an extended period. Our PDP technology is a new unit-dose drug delivery system designed to allow for solution, lotion, cream, jelly, or syrup with a variety of potential
applications. We have multiple product candidates in early stages of development that utilize our proprietary platforms.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Strong GPO and wholesaler relationships</I></FONT><FONT SIZE=2>. We have long-standing relationships with all of the major GPOs and
wholesalers in the U.S. GPOs and wholesalers are essential members of the distribution channel to hospitals, long-term care facilities, alternate care sites, clinics, and doctors' offices
where our products are used. We believe the breadth and composition of our product portfolio, which is comprised of 67 products, enhances our relationships with these GPOs and wholesalers. Our
relationships with these GPOs and wholesalers give us access to most, if not all, of the injectable markets in the U.S. In the future, we believe these relationships will enable us to rapidly
introduce new products and quickly establish market share leadership. </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2><B>Our Strategy  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our goal is to be an industry leader in the development, manufacture, and marketing of injectable and inhalation pharmaceutical products. To achieve this goal, we
are pursuing the following key strategies: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Focus on high margin generic product opportunities</I></FONT><FONT SIZE=2>. We believe we have significant opportunities for growth driven by our
technical expertise in the development of product candidates with high technical barriers to entry. We expect these product candidates are likely to face more limited competition, if commercialized,
than other generic products, which should enable us to earn higher margins for a longer period of time. Generic competition for these products is likely to be limited because of complexities in
product development, including the need for specialized research and development skill sets and manufacturing capabilities. Two of our generic product candidates with high barriers to entry are
enoxaparin and medroxyprogesterone.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Develop proprietary products utilizing our technical expertise</I></FONT><FONT SIZE=2>. We are applying our expertise in drug formulation to develop
proprietary versions of existing products that address deficiencies in those products. We are also developing proprietary products that utilize our sustained-release and PDP technologies. We believe
applying this expertise and these technologies will enable us to develop proprietary products with differentiated characteristics. Examples of our proprietary product candidates that capitalize on our
technological capabilities are Ampofol and Amphacaine, a sustained-release analgesic product candidate.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Enhance our sales, marketing, and distribution capabilities</I></FONT><FONT SIZE=2>. We intend to continue to maintain our strong relationships with
the leading GPOs and wholesalers in the U.S. We also expect to expand our internal sales and marketing capabilities, and in some cases, enter into strategic </FONT></DD></DL>
</UL>
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<UL>
<UL>

<P><FONT SIZE=2>alliances
to license our products to other pharmaceutical companies, in order to ensure maximum market penetration for our product candidates. </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2><I>Complement internal growth with strategic acquisitions</I></FONT><FONT SIZE=2>. In addition to making significant investments in internal product
development, we have enhanced and may continue to enhance our competitive position by acquiring products or companies with complementary products and technologies. For example, in 2003 and 2004, we
expanded our product portfolio through the acquisition of Armstrong, the purchase of the rights to Cortrosyn, an injectable diagnostic agent, from
Organon USA&nbsp;Inc. ("Organon") and its affiliates, and the purchase of the rights to Epinephrine Mist from Alpharma USPD ("Alpharma"). In addition to acquisitions, we may seek to
in-license rights to pharmaceutical products that leverage our existing infrastructure. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>Our Existing Products and Services  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently manufacture and sell 67 generic injectable and inhalation products. For the nine months ended September&nbsp;30, 2004, we recorded net revenues of
$42.6&nbsp;million including $1.1&nbsp;million in contract development and manufacturing services. The following is a description of certain significant products or product families in our
existing portfolio. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Cortrosyn  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cortrosyn (cosyntropin for injection) is a sterile lyophilized powder that is currently the only FDA-approved product indicated for use as a
diagnostic agent in the screening of patients presumed to have adrenocortical insufficiency. Symptoms of this condition include impaired renal function, weight loss, fatigue, and hypoglycemia. We
acquired the U.S. and Canadian product rights to Cortrosyn from Organon and its affiliates in June 2003 and August 2003, respectively. Organon manufactured Cortrosyn for us until February&nbsp;2004,
and we began manufacturing and selling this product in August&nbsp;2004. For the nine months ended September&nbsp;30, 2004, we recorded net revenues of $8.9&nbsp;million for this product. In
connection with our acquisition of Cortrosyn, we sold a royalty interest in the U.S. net sales of the product to a third party. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "&#151;Manufacturing" for further information about the acquisition and manufacturing of Cortrosyn. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Lidocaine Jelly  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lidocaine jelly is a local anesthetic product used primarily for urological procedures. We manufacture lidocaine jelly in a prefilled syringe with a specially
designed proprietary applicator called the Uro-Jet&reg;. Our Uro-Jet delivery system offers the only method for the administration of lidocaine jelly prior to urologic
procedures, which reduces patient discomfort. Our product is a single-use system that eliminates the need to add preservatives to prevent microbial growth. Competing lidocaine jelly
products are manufactured in an aluminum tube containing preservatives, and must be applied during (not prior to) the urological procedure. For the nine months ended September&nbsp;30, 2004, we
recorded net revenues of $8.1&nbsp;million from our lidocaine jelly product. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Albuterol CFC  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Albuterol CFC is a bronchodilator product used for the prevention and relief of bronchospasm associated with asthma and other respiratory conditions. This MDI
product contains the propellant chlorofluorocarbon, or CFC, a substance that has been shown to deplete the ozone layer in the atmosphere. As a result, the FDA has recommended the phase-out
of the CFC formulation of Albuterol by 2006. We are currently working on an Albuterol HFA product that is formulated with hydrofluoroalkane, or HFA, a non-ozone depleting chemical
propellant. For the nine months ended September&nbsp;30, 2004 we recorded net revenues of $5.8&nbsp;million for Albuterol CFC. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>40</FONT></P>

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<P><FONT SIZE=2><I> Critical Care Drug Portfolio  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We market more than 20 drugs in prefilled syringes, such as atropine, epinephrine, lidocaine, naloxone, and sodium bicarbonate, which are designed for use in
emergency room and other critical care settings. We are one of only two companies in the U.S. that offer a full portfolio of critical care drugs, or CCD, products in syringe form. We also market and
sell CCD products in the United Kingdom and Australia through a distributor. For the nine months ended September&nbsp;30, 2004, we recorded net revenues of $11.5&nbsp;million for our CCD products. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Contract Services  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We manufacture products for pharmaceutical and biotechnology companies pursuant to contractual arrangements and also provide formulation and other product
development services to these companies. </FONT></P>

<P><FONT SIZE=2><B>2004 Product Approvals and Launches  </B></FONT></P>

<UL>

<P><FONT SIZE=2><I> Amphadase  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amphadase is our branded product of the compound hyaluronidase, which is used to increase the absorption and dispersion of other agents injected into the eye,
particularly anesthetics utilized in cataract and other ophthalmic surgeries. In January&nbsp;2001, Wyeth, the innovator of bovine, or cow-derived, hyalauronidase discontinued
manufacturing its product Wydase. Although the API for hyaluronidase, which is derived from bovine tissue extracts, is difficult to obtain, we have secured an exclusive long-term supply
agreement. We launched this product in November&nbsp;2004, following receipt of FDA approval of our new drug application, or NDA. ISTA Pharmaceuticals,&nbsp;Inc. has received regulatory approval
for its hyaluronidase product, Vitrase (and a five-year exclusivity for ovine, or sheep-derived, hyaluronidase), which is expected to be launched in 2005. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Epinephrine Mist CFC  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We acquired the ANDA for a generic version of Primatene Mist from Alpharma in July 2004 and reintroduced this product in December&nbsp;2004. Previous to that,
epinephrine mist CFC was only available from the innovator, Wyeth, who markets Primatene Mist. Epinephrine Mist CFC is a bronchodilator product used for fast-acting relief of bronchial
asthma. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>41</FONT></P>

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<P><FONT SIZE=2><B>Our Product Candidates  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below lists the significant product candidates that we are currently developing: </FONT></P>

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<TABLE WIDTH="89%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="25%" ALIGN="CENTER"><FONT SIZE=1><B>Product Candidate</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="19%" ALIGN="CENTER"><FONT SIZE=1><B>Reference Drug(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="19%" ALIGN="CENTER"><FONT SIZE=1><B>Therapeutic<BR>
Classification</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>Regulatory<BR>
Path(2)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>FDA Filing/<BR>
Expected<BR>
Filing Date</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=2>Enoxaparin</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=2>Lovenox</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=2>Anticoagulant</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2>ANDA</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>Q1 2003</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=2><BR>
Medroxyprogesterone</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=2><BR>
DepoProvera</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=2><BR>
Contraceptive</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2><BR>
ANDA</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
Q3 2004</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=2><BR>
Ampofol</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=2><BR>
Diprivan</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=2><BR>
General Anesthetic</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2><BR>
505(b)(2) NDA</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
Q2 2005</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=2><BR>
Fluticasone propionate</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=2><BR>
Flonase (nasal)<BR>
Flovent (MDI)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=2><BR>
Anti-allergic; Anti-inflammatory</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2><BR>
ANDA<BR>
ANDA</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
Q2 2005<BR>
Q2 2005</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=2><BR>
Azithromycin</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=2><BR>
Zithromax (azithromycin for injection)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=2><BR>
Antibiotic</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2><BR>
ANDA</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
Q4 2005</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=2><BR>
Albuterol HFA</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=2><BR>
Proventil, Ventolin</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=2><BR>
Bronchodilator</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2><BR>
505(b)(2) NDA</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2006</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=2><BR>
Amphacaine</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=2><BR>
Local Analgesic</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2><BR>
NDA</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2007</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="25%"><FONT SIZE=2><BR>
Epinephrine Mist HFA</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=2><BR>
Epinephrine CFC</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="19%"><FONT SIZE=2><BR>
Bronchodilator</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=2><BR>
505(b)(2) NDA</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2007</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Reference
drug means the listed drug identified by the FDA as the drug product upon which an applicant relies in seeking approval of an abbreviated new drug application, or ANDA.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>See
"&#151;Regulatory Considerations" for information regarding the regulatory approval processes for the indicated submissions. </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set
forth below are descriptions of the product candidates listed in the above table. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Enoxaparin  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Enoxaparin is an injectable, low molecular weight heparin used as a blood thinner, or anticoagulant, to prevent clotting of blood in the vein, commonly referred
to as deep vein thrombosis, and acute coronary syndromes. Enoxaparin is currently sold by Sanofi-Aventis ("Aventis") under the brand-name Lovenox. Aventis' sales of Lovenox in the U.S. in 2004
totalled approximately $1.5&nbsp;billion, according to IMS Health. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
filed an ANDA for enoxaparin sodium with the FDA in March&nbsp;2003, which was accepted by the FDA in April&nbsp;2003. Aventis has two listed patents for Lovenox in the FDA's
Orange Book, which is the FDA's listing of approved drug products. In connection with our filing, we certified to the FDA that the existing patents in connection with Lovenox are invalid or will not
be infringed by our generic product candidate. Teva Pharmaceutical USA, Inc. has also filed an ANDA for enoxaparin. Aventis brought a patent infringement lawsuit against both us and Teva in
August&nbsp;2003 that is currently pending. In addition, in February&nbsp;2003, Aventis filed a citizen petition with the FDA requesting, among other things, that the FDA refrain from approving
any ANDA for a generic version of Lovenox unless certain conditions are satisfied. See "Business&#151;Legal and Regulatory Proceedings&#151;Enoxaparin Paragraph&nbsp;IV Litigation" and
"&#151;Enoxaparin Citizen Petition" and "Business&#151;Regulatory Considerations&#151;Generic Drug Approval" for additional information. We have responded to a request by the FDA
to conduct an analysis of enoxaparin and we have submitted product characterization data to the FDA. </FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Enoxaparin
is difficult to manufacture because the API is not easily obtained. Our research and development team has developed a multi-step chemical process for converting
raw material to the API, thereby overcoming technical barriers to producing the API. The FDA performed a pre-approval inspection of our API manufacturing facility in January&nbsp;2004,
and has approved the facility. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Medroxyprogesterone  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Medroxyprogesterone acetate, or MPA, a progesterone derivative, is an injectable sustained-release contraceptive product candidate with a duration of greater than
three months. Pfizer&nbsp;Inc. markets the product under the brand-name DepoProvera. Patents covering DepoProvera expired in 1994. Until July&nbsp;2004, when Teva Pharmaceutical
USA,&nbsp;Inc. announced FDA approval of its generic version of DepoProvera, there had been no generic competition for this product because of its sustained-release complexities. According to IMS
Health, U.S. sales of DepoProvera and its generic equivalent were approximately $282&nbsp;million in 2004. Our research and development team utilized its expertise in formulation of
sustained-release products to overcome the technical difficulties presented by MPA. We filed the ANDA for this product in the third quarter of 2004. In November 2004, a Black Box Warning was added to
the labeling of DepoProvera that cautions of the potential for significant bone loss with increasing duration of use of MPA. We would be required to include this warning if we market our MPA product
candidate. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Ampofol  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ampofol is our proprietary 1% propofol injectable emulsion product candidate. Propofol is currently manufactured and sold by AstraZeneca PLC under the trade name
Diprivan and as a generic by a joint venture of Baxter Healthcare Corporation ("Baxter") and Gensia Sicor Pharmaceuticals ("Gensia"), a predecessor of Teva. Combined sales in the U.S. in 2004 for
these products was approximately $556&nbsp;million, according to IMS Health. Propofol is used for general anesthesia, monitored anesthesia care sedation, and sedation in the intensive care unit, or
ICU, setting. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AstraZeneca
launched Diprivan in the U.S. in 1990 as the first generation of propofol. This formulation was easily contaminated by bacteria during administration. AstraZeneca developed a
second generation of Diprivan, which was launched in 1997 with the additive ethylene diamine tetra-acetic acid, a microbial retardant. In 1999, Gensia developed a generic version of second generation
propofol by adding sodium metabisulfite to achieve a similar microbial retardation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Both
second generation propofols are manufactured with preservatives or additives that have two deficiencies that are most commonly manifested during long-term administration
in the ICU. First, the bacterial retardants may deplete a patient's heavy metals, such as zinc, which are necessary for normal functioning of the body. Second, the second generation propofols contain
high amounts of soybean oil and egg lecithin, which can cause fat overload syndrome including hypertriglyceridemia and hyperlipidemia. In addition, Baxter-Teva's product labeling and advertising state
that its propofol with sulfite may cause life-threatening or less severe allergic-type reactions in certain susceptible people. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
research and development team has developed Ampofol, a third generation propofol, which is formulated without any preservatives or additives and half the amount of soybean oil and
egg lecithin used in the second generation propofols. We have demonstrated in five completed clinical trials that Ampofol is bioequivalent to Diprivan and that it maintains microbial growth
retardation without the use of preservatives. We have a U.S. patent for this novel formulation. We believe Ampofol will have lower manufacturing and storage costs than the second generation propofols
because of the reduced lecithin amounts and the ability to store the product at room temperature. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have established a production line and have completed scale-up, validation, and stability batch filling for Ampofol. We have completed two dose-ranging and
three bioequivalence clinical trials conducted in the three clinical settings that are required for approval by the FDA, including a </FONT></P>

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<P><FONT SIZE=2>200-patient
multi-center trial based in the ICU. We anticipate filing a 505(b)(2) NDA for Ampofol with the FDA in the second quarter of 2005. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Fluticasone Propionate  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fluticasone propionate is a synthetic corticosteroid. It is marketed in inhalable aerosol form for the management of asthma and in a nasal spray form for the
symptoms of seasonal and perennial allergic and nonallergic rhinitis. GlaxoSmithKline PLC is the innovator for both the MDI form, Flovent, for asthma, and the nasal spray form, Flonase, for symptoms
of rhinitis. The patents covering Flovent expired in May&nbsp;2004, and the patent covering Flonase is set to expire in 2006. The combined U.S. sales for these two drugs in 2004 was approximately
$1.7&nbsp;billion, according to IMS Health. We intend to file ANDAs with the FDA for both formulations in the first half of 2005. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Azithromycin  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Azithromycin is an antibiotic used to treat mild to moderate bacterial infections. Pfizer&nbsp;Inc. owns the branded product Zithromax&reg;, which
according to IMS Health had U.S. sales of $1.8&nbsp;billion in 2004 in its oral suspension, tablet, and injectable formulations. According to IMS Health, the injectable form of Zithromax had U.S.
sales of $69.0&nbsp;million in 2004. We expect to file an ANDA with the FDA covering the injectable form of the product in the second half of 2005. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Albuterol HFA  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Albuterol HFA is a bronchodilator product candidate used for the prevention and relief of bronchospasm. Albuterol HFA is being developed to replace our Albuterol
CFC in accordance with the FDA's planned phase-out of Albuterol CFC. HFA is a non-ozone depleting chemical propellant. We have exclusively licensed three patents from Virginia Commonwealth
University covering
the HFA technology. We began clinical trials on this product in February 2005 and we expect to file&nbsp;a 505(b)(2) NDA with the FDA for Albuterol HFA in 2006. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Amphacaine  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amphacaine is our sustained-release formulation of an anesthetic agent designed to provide ultralong-acting (10-68&nbsp;hours) local analgesia, pain
control and postoperative analgesia. Initially, we intend to pursue approval of the product for administration by infiltration. We are utilizing our sustained-release technology to develop this drug
and have submitted preclinical results to the FDA. We currently anticipate filing an investigational new drug application, or IND, and commencing clinical trials in the second half of 2005. We expect
to file an NDA in 2007. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Epinephrine Mist HFA  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Epinephrine Mist HFA is being developed to replace our existing Epinephrine Mist CFC product. We anticipate that in the future the CFC version of the epinephrine
mist product will be phased out because of the environmental advantages of HFA over CFC propellant. We are utilizing our formulation expertise and the HFA technology patents that we licensed to
develop Epinephrine Mist HFA. We plan to file&nbsp;a 505(b)(2) NDA with the FDA for Epinephrine Mist HFA in 2007. </FONT></P>

<P><FONT SIZE=2><B>Developing Proprietary Drug Delivery Platforms  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have developed two proprietary platforms aimed at improving drug delivery: sustained-release and PDPs. </FONT></P>

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<P><FONT SIZE=2><A
NAME="page_dq1063_1_45"> </A> </FONT> <FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sustained-release.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We believe injectable, sustained-release products offer several benefits over oral
dosage forms. Although
oral dosage forms are generally more convenient to administer, in many cases the effectiveness of oral medications is limited. For example, an orally administered drug may not be absorbed without loss
of activity, or it may have poor bioavailability due to insolubility in water or low permeability through biological membranes. We believe our injectable, sustained-release drug delivery systems will: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>minimize
system toxicity and maximize effectiveness by direct injection into the desired region;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>reduce
dosing frequency without compromising effectiveness; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>increase
dosing compliance when treatment requires multiple doses. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have developed an innovative injectable sustained-release system that enables consistent delivery of a drug over a longer period of time than currently available systems. We are
developing a new local anesthetic drug candidate, Amphacaine, using this technology and have submitted preclinical results to the FDA. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prefilled Disposable Pipette (PDP) Technology.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;PDP is a new external drug delivery system utilizing disposable plastic
dispensers, or pipettes, that can be filled with a variety of liquid products, including solutions, creams, lotions, jellies, or syrups. It is a single dose system that can be combined with
specialized applicators (for example, cotton swab, dropper, plastic applicator) that are attached to the PDP tips and provide clean and convenient medications for consumers. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PDP
has many potential applications including: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>dermatologic
medications;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>dental
products;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>cough
and cold products for both adults and children;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>oral
products for ICU patients; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>veterinary
products. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
own four issued U.S. patents related to our PDP technology that include the PDP concept, PDP applications, high efficiency filling technology, and liquid barriers. We also have
pending patent applications in 33 countries related to this technology. We are currently constructing a PDP production line that we expect will be ready in 2005. Upon completion of the production
line, we intend to commence the validation and launch of several products utilizing the PDP delivery system. In addition to manufacturing our own products in the PDP format, we may perform third-party
contract manufacturing and market turnkey equipment systems and license to third parties. </FONT></P>


<P><FONT SIZE=2><B>Research and Development  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have 31 employees dedicated to research and development, 11 of whom have Ph.D.s, with expertise in areas such as pharmaceutical formulation, process
development, </FONT><FONT SIZE=2><I>in vivo</I></FONT><FONT SIZE=2> study, analytical chemistry, drug delivery, and clinical research. Our focus on developing products with high barriers to entry
requires a significant investment in research and development, including clinical development. In particular, developing proprietary products that are reformulations of existing branded compounds
often requires clinical trials to gain regulatory approval. We have a team dedicated to designing and managing clinical trials. We have successfully completed several clinical trials including a
200-patient clinical trial for Ampofol at 12 ICU sites. We are in the process of planning clinical trials for other products under development. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have made, and will continue to make, substantial investments in research and development. Research and development costs for the nine months ending September&nbsp;30, 2004 were
approximately $6.2&nbsp;million or 15% of our net revenues for that period. </FONT></P>

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<P><FONT SIZE=2><B>Manufacturing  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our manufacturing facilities are located in Rancho Cucamonga and South El Monte, California, and Canton and West Roxbury, Massachusetts. We have in total
approximately 760,000 square feet of manufacturing, research and development, distribution, packaging, laboratory, office, and warehouse space. Our facilities are regularly inspected by the FDA in
connection with product approvals and we believe that all of our facilities are being operated in material compliance with the FDA's current Good Manufacturing Practices, or cGMP regulations. These
facilities include API, prefilled syringe filling, cold-filling, and pressure filling, as well as oncolytic manufacturing suites. We believe we currently have sufficient capacity to meet
our manufacturing demands for the foreseeable future. We are currently renovating another manufacturing facility in our headquarters complex that will add an additional 110,000 square feet, which we
expect to be constructed by 2006 to accommodate future capacity needs. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
can produce a broad range of dosage formulations, including solutions, emulsions, suspensions, jellies, lyophilized products, both aseptically filled and terminally sterilized, and
inhalation products. We currently produce approximately 17.5&nbsp;million units per year. We have leveraged our manufacturing expertise to develop production capabilities for the API for enoxaparin.
In addition to manufacturing, we have fully integrated manufacturing support systems, including quality assurance, quality control, regulatory affairs, validation, and inventory control. These support
systems enable us to maintain high standards of quality for our products and simultaneously deliver reliable services and goods to our customers on a timely basis. </FONT></P>

<P><FONT SIZE=2><B>Sales and Marketing  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our products are primarily marketed and sold to hospitals, long-term care facilities, alternate care sites, clinics, and doctors' offices. Most of
these facilities are members of one or more GPOs, which negotiate collective purchasing agreements on behalf of their members. These facilities purchase products through specialty distributors and
wholesalers. We have relationships with all of the major GPOs in the U.S., which we believe give us access to most, if not all, of the injectable markets in the U.S. We also have relationships with
all of the major specialty distributors and wholesalers who distribute pharmaceutical products nationwide. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
sales, marketing and customer service department has 11 employees. Our marketing department is responsible for establishing and maintaining contracts and relationships with the GPOs,
distributors, and wholesalers and occasionally large end-users. In connection with the expansion of our product offerings to include MDI and nasal spray products, we are expanding our
sales and marketing efforts to develop retail distribution channels. In addition, one or more of our branded product candidates may require deployment of a field sales force either directly or through
a strategic partner. </FONT></P>

<P><FONT SIZE=2><B>Competition  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We face significant competition in our current product line from major, brand-name pharmaceutical companies such as GlaxoSmithKline, Schering-Plough
Corporation, and Wyeth, and from generic manufacturers such as Hospira,&nbsp;Inc. and Warrick Pharmaceuticals, a subsidiary of Schering-Plough. In addition to these competitors, we also face
competition from other companies in the generic injectable and inhalation market such as American Pharmaceutical Partners,&nbsp;Inc., Eon Labs,&nbsp;Inc., Faulding&nbsp;Inc., a subsidiary of the
Mayne Group Limited, ISTA Pharmaceuticals, IVAX Corporation, and Teva. We face additional competition from brand-name competitors that have entered the generic pharmaceutical industry by
creating generic subsidiaries, purchasing generic companies, or licensing their products to generic manufacturers prior to or as their patents expire. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
face significant competition for our new products and product candidates from the respective product innovators and any generic manufacturer. Enoxaparin is currently marketed by
Aventis under the brand-name Lovenox, and Teva has filed an ANDA for approval of its generic version. Pfizer currently markets DepoProvera, its branded medroxyprogesterone product, and Teva recently
received </FONT></P>

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<P><FONT SIZE=2>FDA
approval for a generic version. AstraZeneca is the innovator of Diprivan, and the generic version of propofol marketed by Baxter-Teva. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
pharmaceutical products, the most important competitive factors are scope of product line, individual product characteristics, relationships with GPOs, retailers, wholesalers and
customers, delivery record, ability to develop new products, and pricing. Sales of generic pharmaceutical products tend to follow a pattern based on regulatory and competitive factors. As patents for
brand-name products and related exclusivity periods expire, the first generic pharmaceuticals manufacturer to receive regulatory approvals for generic versions of their products is
generally able to achieve significant market penetration and higher margins. As competing generic manufacturers receive regulatory approval on similar products, market size, revenue, and gross profit
typically decline. The level of market share, revenue, and gross profit attributable to a particular generic pharmaceutical product is normally related to the number of competitors in that product's
market and the timing of that product's regulatory approval and launch in relation to competing
approvals and launches. We must continue to develop and introduce new products in a timely and cost effective manner and identify niche products with significant barriers to entry in order to grow our
business. </FONT></P>

<P><FONT SIZE=2><B>Regulatory Considerations  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prescription proprietary and generic pharmaceutical products are subject to extensive pre- and post-market regulation by the FDA,
including regulations that govern the testing, manufacturing, safety, efficacy, labeling, storage, record keeping, advertising, and promotion of such products under the Federal Food, Drug, and
Cosmetic Act, or FFDCA, and its implementing regulations, and by comparable agencies and laws in foreign countries. FDA approval is required before any new unapproved drug or dosage form, including a
generic equivalent of a previously approved drug, can be marketed in the U.S. All applications for FDA approval must contain, among other things, information relating to pharmaceutical formulation,
stability, manufacturing, processing, packaging, labeling, and quality control. </FONT></P>

<P><FONT SIZE=2><I>Generic Drug Approval  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Drug Price Competition and Patent Term Restoration Act of 1984 (also known as the Hatch-Waxman Act), established abbreviated FDA approval procedures for drugs
that are shown to be equivalent to proprietary drugs previously approved by the FDA through its New Drug Application, or NDA, process. Approval to market and distribute these drugs is obtained by
filing an abbreviated new drug application, or ANDA, with the FDA. An ANDA is a comprehensive submission that contains, among other things, data and information pertaining to the active pharmaceutical
ingredient, drug product formulation, specifications and stability of the generic drug, as well as analytical methods, manufacturing process validation data, and quality control procedures.
Pre-market applications for generic drugs are termed abbreviated because they generally do not include preclinical and clinical data to demonstrate safety and effectiveness. Instead, a
generic applicant must demonstrate that its product is bioequivalent to the innovator drug. In certain situations, an applicant may obtain ANDA approval of a generic product with a strength or dosage
form that differs from a referenced innovator drug pursuant to the filing and approval of an ANDA Suitability Petition. The FDA will approve the generic product as suitable for an ANDA application if
it finds that the generic product does not raise new questions of safety and effectiveness as compared to the innovator product. A product is not eligible for ANDA approval if the FDA determines that
it is not equivalent to the referenced innovator drug, if it is intended for a different use, or if it is not subject to an approved Suitability Petition. However, such a product might be approved
under an NDA, with supportive data from clinical trials. We generally file ANDAs to obtain approval to manufacture and market our generic products. No assurance can be given that ANDAs submitted for
our products will receive FDA approval on a timely basis, if at all. </FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
NDA approval, the FDA lists in the Orange Book the approved drug product and any patents identified by the NDA applicant that relate to the drug product. Any applicant who files an
ANDA seeking approval of a generic equivalent version of a drug listed in the Orange Book before expiration of the referenced patent(s), must certify to the FDA that (1)&nbsp;no patent information
on the drug product that is the subject of the ANDA has been submitted to the FDA; (2)&nbsp;that such patent has expired; (3)&nbsp;the date on which such patent expires; or (4)&nbsp;that such
patent is invalid or will not be infringed by the manufacture, use, or sale of the drug product for which the ANDA is submitted. This last certification is known as a Paragraph&nbsp;IV
certification. A notice of the Paragraph&nbsp;IV certification must be provided to each owner of the patent that is the subject of the certification and to the holder of the approved NDA to which
the ANDA refers. Before the enactment of the Medicare Prescription Drug Improvement and Modernization Act of 2003 (also known as the Medicare Act), which amended the Hatch-Waxman Act, if the NDA
holder or patent owner(s) asserted a patent challenge within 45&nbsp;days of its receipt of the certification notice, the FDA was prevented from approving that ANDA until the earlier of
30&nbsp;months from the receipt of the notice of the Paragraph&nbsp;IV certification, the expiration of the patent, when the infringement case concerning each such patent was favorably decided in
an ANDA applicant's favor, or such shorter or longer period as may be ordered by a court. This prohibition is generally referred to as the 30-month stay. In some cases, NDA owners and
patent holders have obtained additional patents for their products after an ANDA had been filed but before that ANDA received final marketing approval, and then initiated a new patent challenge, which
resulted in more than one 30-month stay. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Medicare Act amended the Hatch-Waxman Act to eliminate certain unfair advantages of patent holders in the implementation of the Hatch-Waxman Act. As a result, the NDA owner remains
entitled to an automatic 30-month stay if it initiates a patent infringement lawsuit within 45&nbsp;days of its receipt of notice of a Paragraph&nbsp;IV certification, but only if the
patent infringement lawsuit is directed to patents that were listed in the Orange Book before the ANDA was filed. An ANDA applicant is now permitted to take legal action to enjoin or prohibit the
listing of certain of these patents as a counterclaim in response to a claim by the NDA owner that its patent covers its approved drug product. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
an ANDA applicant is the first-to-file a substantially complete ANDA with a Paragraph&nbsp;IV certification and provides appropriate notice to the FDA, the NDA holder, and all
patent owner(s) for a particular generic product, the applicant may be awarded a 180-day period of marketing exclusivity against other companies that subsequently file ANDAs for that same
product. A substantially complete ANDA is one that contains all the information required by the Hatch-Waxman Act and the FDA's regulations, including the results of any required bioequivalence
studies. The FDA may refuse to accept the filing of an ANDA that is not substantially complete or may determine during substantive review of the ANDA that additional information, such as an additional
bioequivalence study, is required to support approval. Such a determination may affect an applicant's first to file status and eligibility for a 180-day period of marketing exclusivity for the generic
product. The Medicare Act also modified the rules governing when the 180-day marketing exclusivity period is triggered or forfeited and shared exclusivity. Prior to the legislation, the
180-day marketing exclusivity period was triggered upon the first commercial marketing of the ANDA or a court decision holding the patent invalid, unenforceable, or not infringed. For
ANDAs accepted for filing before March&nbsp;2000, that court decision had to be final and non-appealable (other than a petition to the U.S. Supreme Court for a writ of certiorari). In
March&nbsp;2000, the FDA changed its position in response to two court cases that challenged the FDA's original interpretation of what constituted a court decision under the Hatch-Waxman Act. Under
the changed policy, the 180-day marketing exclusivity period began running immediately upon a district court decision holding the patent at issue invalid, unenforceable, or not infringed,
regardless of whether the ANDA had been approved and the generic product had been marketed. In codifying the FDA's original policy, the Medicare Act retroactively applies a final and
non-appealable court decision trigger for all ANDAs filed before December&nbsp;8, 2003 leaving intact the first commercial marketing trigger. As </FONT></P>

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<P><FONT SIZE=2>for
ANDAs filed after December&nbsp;8, 2003, the marketing exclusivity period is only triggered upon the first commercial marketing of the ANDA product, but that exclusivity may be forfeited under
certain circumstances, including, if the ANDA is not marketed within 75&nbsp;days after a final and nonappealable court decision by the first-to-file or other ANDA applicant,
or if the FDA does not tentatively approve the first-to-file applicant's ANDA within 30&nbsp;months. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Medicare Act also prospectively eliminated shared exclusivity for first-to-file ANDAs containing Paragraph&nbsp;IV certifications to different patents
listed in the Orange Book for the same product. The FDA had previously taken the position that it could award shared 180-day marketing exclusivity if different ANDA applicants were first
to file Paragraph&nbsp;IV certifications to different patents listed in the Orange Book for the same product. This interpretation was recently challenged in two cases in United States district
court, which resulted in differing conclusions regarding the reasonableness of the FDA's interpretation. On appeal both decisions were vacated on other grounds in December 2004. Despite the
questionable legality of the FDA's shared exclusivity approach, the FDA has announced that it will continue to rely on this interpretation of shared exclusivity for ANDAs filed before
December&nbsp;8, 2003, when the Medicare Act prospectively eliminated this type of shared exclusivity. Until this issue is resolved, it is unclear how the 180-day marketing exclusivity
period will apply to pending ANDAs. For ANDAs that are filed on or after December&nbsp;8, 2003, the 180-day marketing exclusivity period will only be awarded to the first ANDA
applicant(s) to assert a Paragraph&nbsp;IV certification as to any patent listed in the Orange Book for that product (including multiple ANDA applicants who file the first Paragraph&nbsp;IV
certification on the same day). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to patent exclusivity, the holder of the NDA for the listed drug may be entitled to a period of non-patent market exclusivity, during which the FDA cannot approve
an ANDA. If the listed drug is a new chemical entity, the FDA may not accept an ANDA for a bioequivalent product for up to five years following approval of the NDA for the new chemical entity. If the
listed drug is not a new chemical entity but the holder of the NDA conducted clinical trials essential to approval of the NDA or a supplement thereto, the FDA may not approve an ANDA for a
bioequivalent product before expiration of three years. Certain other periods of exclusivity may be available if the listed drug is indicated for treatment of a rare disease or is studied for
pediatric indications. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are currently a party to a patent infringement action brought against us by Aventis relating to our Paragraph&nbsp;IV certification for a generic version of enoxaparin, as well as a
citizen petition proceeding before the FDA relating to the same matter. See "Business&#151;Legal and Regulatory Proceedings&#151;Enoxaparin Paragraph&nbsp;IV Litigation" and
"&#151;Enoxaparin Citizen Petition." </FONT></P>

<P><FONT SIZE=2><I>New Drug Approval  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A new drug approval by the FDA is required before a new drug that is not equivalent to a previously approved drug may be marketed in the U.S. This process
generally involves: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>completion
of preclinical laboratory and animal testing in compliance with the FDA's good laboratory practice or GLP regulations;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>submission
to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may begin;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>performance
of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug product for each intended use;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>satisfactory
completion of an FDA pre-approval inspection of the facility or facilities at which the product is produced to assess compliance with the FDA's cGMP
regulations; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>submission
to and approval by the FDA of an NDA application. </FONT></DD></DL>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
results of preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND, which must become effective before human
clinical trials may begin. Further, each clinical trial must be reviewed and approved by an Independent Institutional Review Board. Human clinical trials are typically conducted in three sequential
phases that may overlap. These phases generally include: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Phase
I, during which the drug is introduced into healthy human subjects or, on occasion, patients, and is tested for safety, stability, dose tolerance, and metabolism;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Phase
II, during which the drug is introduced into a limited patient population to determine the efficacy of the product in specific targeted indications, to determine
dosage tolerance and optimal dosage, and to identify possible adverse effects and safety risks; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Phase
III, during which the clinical trial is expanded to a larger and more diverse patient group at geographically dispersed clinical trial sites to further evaluate
clinical efficacy, optimal dosage, and safety. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
drug sponsor, the FDA or the Independent Institutional Review Board at each institution at which a clinical trial is being performed may suspend a clinical trial at any time for
various reasons, including a belief that the subjects are being exposed to an unacceptable health risk. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
results of preclinical animal studies and human clinical studies, together with other detailed information, are submitted to the FDA as part of the NDA. The NDA also must contain
extensive manufacturing information. The FDA may approve or disapprove the NDA if applicable FDA regulatory criteria are not satisfied or it may require additional clinical data. Once approved, the
FDA may withdraw the product approval if compliance with pre- and post-market regulatory standards is not maintained or if problems occur after the
product reaches the marketplace. In addition, the FDA may require post-marketing studies to monitor the effect of approved products and may limit further marketing of the product based on
the results of these post-marketing studies. The FDA has broad post-market regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend
or delay issuance of approvals, seize or recall products, and withdraw approvals. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Satisfaction
of FDA new drug approval requirements typically takes several years, and the actual time required may vary substantially based upon the type, complexity and novelty of the
product or disease. Government regulation may delay or prevent marketing of potential products for a considerable period of time and impose costly procedures upon a manufacturer's activities. Success
in early stage clinical trials does not assure success in later stage clinical trials. Data obtained from clinical activities is not always conclusive and may be subject to varying interpretations
that could delay, limit or prevent regulatory approval. Even if a product receives regulatory approval, later discovery of previously unknown problems with a product may result in restrictions on the
product or even complete withdrawal of the product from the market. </FONT></P>

<P><FONT SIZE=2><I>Section&nbsp;505(b)(2) New Drug Applications  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As an alternate path to FDA approval for modifications to formulations of products previously approved by the FDA, an applicant may file an NDA under
Section&nbsp;505(b)(2) of the FFDCA. Section&nbsp;505(b)(2) was enacted as part of the Hatch-Waxman Act and permits the filing of an NDA where at least some of the information required for
approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. The Hatch-Waxman Act permits the applicant to rely upon certain
preclinical or clinical studies conducted for an approved product. The FDA may also require companies to perform additional studies or measurements to support the change from the approved product. The
FDA may then approve the new product candidate for all or some of the label indications for which the referenced product has been approved, as well as for any new indication sought by the
Section&nbsp;505(b)(2) applicant. </FONT></P>

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent that the Section&nbsp;505(b)(2) applicant is relying on studies conducted for an already approved drug product, the applicant is required to certify to the FDA concerning
any patents listed for the approved product in the Orange Book. Specifically, the applicant must certify that (1)&nbsp;the required patent information has not been filed; (2)&nbsp;the listed
patent has expired; (3)&nbsp;the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or (4)&nbsp;the listed patent is invalid or
will not be infringed by the new product. A certification that the new product will not infringe the already approved product's listed patents or that such patents are invalid is known as a
Paragraph&nbsp;IV certification. If the applicant does not challenge the listed patents, the Section&nbsp;505(b)(2) application will not be approved until all the listed patents claiming the
referenced product have expired. The Section&nbsp;505(b)(2) application also will not be approved until any non-patent exclusivity, such as exclusivity for obtaining approval of a new
chemical entity, listed in the Orange Book for the referenced product, has expired. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the applicant has provided a Paragraph&nbsp;IV certification to the FDA, the applicant must also send notice of the Paragraph&nbsp;IV certification to the NDA and patent holders
once the NDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a legal challenge to the Paragraph&nbsp;IV certification. Under the FFDCA, the filing of a patent
infringement lawsuit within 45&nbsp;days of their receipt of a Paragraph&nbsp;IV certification automatically prevents the FDA from approving the Section&nbsp;505(b)(2) NDA until the earlier of
30&nbsp;months, expiration of the patent, settlement of the lawsuit, or a decision in the infringement case that is favorable to the Section&nbsp;505(b)(2) applicant. Thus, the
Section&nbsp;505(b)(2) applicant may invest a significant amount of time and expense in the development of its products only to be subject to significant delay and patent litigation before its
products may be commercialized. Alternatively, if the listed patent holder does not file&nbsp;a patent infringement lawsuit within the required 45-day period, the applicant's NDA will
not be subject to the 30-month stay. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
the approval of many products by the FDA pursuant to Section&nbsp;505(b)(2), over the last few years, certain brand-name pharmaceutical companies and others
have filed citizen petitions objecting to the FDA's interpretation of Section&nbsp;505(b)(2). In October&nbsp;2003, the FDA responded to the citizen petitions and declined to alter its
interpretation of Section&nbsp;505(b)(2). In November&nbsp;2003, Pfizer&nbsp;Inc. sued the FDA in the U.S. District Court for the District of Columbia to challenge the FDA's approval of a
Section&nbsp;505(b)(2) NDA for a product that is a modified version of one of Pfizer's currently marketed drugs. Pfizer alleges that the FDA improperly relied upon studies in Pfizer's NDA to approve
the competitor's product. Recently, the FDA announced that it was staying approval of the Section&nbsp;505(b)(2) NDA at issue in the Pfizer case to conduct a reevaluation of the application. The FDA
also filed a motion for a stay of the Pfizer lawsuit pending the completion of this reevaluation. If the FDA does not prevail in this lawsuit, the FDA may be required to change its interpretation of
Section&nbsp;505(b)(2), which could delay or even prevent the FDA from approving any Section&nbsp;505(b)(2) NDA that we submit. </FONT></P>


<P><FONT SIZE=2><I>Manufacturing cGMP Requirements  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We and our contract manufacturers are required to comply with applicable FDA manufacturing requirements contained in the FDA's cGMP regulations. cGMP regulations
require among other things, quality control, and quality assurance as well as the corresponding maintenance of records and documentation. The manufacturing facilities for our products must meet cGMP
requirements to the satisfaction of the FDA pursuant to a pre-approval inspection before we can use them to manufacture our products. We and our third party manufacturers are also subject
to periodic inspections of facilities by the FDA and other authorities, including procedures and operations used in the testing and manufacture of our products to assess our compliance with applicable
regulations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Failure
to comply with statutory and regulatory requirements subjects a manufacturer to possible legal or regulatory action, including the seizure or recall of products, injunctions,
consent decrees </FONT></P>

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<P><FONT SIZE=2>placing
significant restrictions on or suspending manufacturing operations, and civil and criminal penalties. Adverse experiences with the product must be reported to the FDA and could result in the
imposition of market restriction through labeling changes or in product removal. Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if problems
concerning safety or efficacy of the product occur following approval. </FONT></P>

<P><FONT SIZE=2><I>Medical Device Regulation  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the FFDCA, medical devices are classified into one of three classes&#151;Class&nbsp;I, Class&nbsp;II or Class&nbsp;III&#151;depending on
the degree of risk associated with each medical device and the extent of control needed to ensure safety and effectiveness. Class&nbsp;I medical devices are subject to the FDA's general controls,
which include compliance with the applicable portions of the FDA's Quality System Regulation, facility registration and product listing, reporting of adverse medical events, and appropriate, truthful
and non-misleading labeling, advertising, and promotional materials. Class&nbsp;II devices are subject to the FDA's general controls and may also be subject to other special controls as
deemed necessary by the FDA to ensure the safety and effectiveness of the device. Class&nbsp;III medical devices are subject to the FDA's general controls, special controls, and
pre-market approval prior to marketing. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
currently market a small number of Class&nbsp;I and Class&nbsp;II medical devices. Most Class&nbsp;II devices require pre-market clearance by the FDA through the
510(k) pre-market notification process. When a 510(k) is required, the manufacturer must submit to the FDA a pre-market notification demonstrating that the device is
"substantially equivalent" to
either a device that was legally marketed prior to May&nbsp;28, 1976, the date upon which the Medical Device Amendments of 1976 were enacted, or to another commercially available, similar device
which was subsequently cleared through the 510(k) process. By regulation, the FDA is required to clear a 510(k) within 90&nbsp;days of submission of the application. As a practical matter, clearance
often takes longer. All of our devices have been cleared for marketing pursuant to the 510(k) process. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
FDA has broad post-market regulatory and enforcement powers with respect to medical devices, similar to those for drug products. Failure to comply with the applicable
U.S. medical device regulatory requirements could result in, among other things, warning letters, fines, injunctions, consent decrees, civil penalties, repairs, replacements, refunds, recalls or
seizures of products, total or partial suspension of production, the FDA's refusal to grant future pre-market clearances or approvals, withdrawals or suspensions of current product
applications, and criminal prosecution. </FONT></P>

<P><FONT SIZE=2><B>Other Regulatory Requirements  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to post-market product advertising and promotion, the FDA imposes a number of complex regulations on entities that advertise and promote
pharmaceuticals, which include, among others, standards for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational
activities, and promotional activities involving the internet. The FDA has very broad enforcement authority under the FFDCA, and failure to abide by these regulations can result in penalties,
including the issuance of a warning letter directing entities to correct deviations from FDA standards, a requirement that future advertising and promotional materials be pre-cleared by
the FDA, and state and federal civil and criminal investigations and prosecutions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are also subject to various laws and regulations regarding laboratory practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous
substances in connection with our research. In each of these areas, as above, the FDA has broad regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend or
delay issuance of approvals, seize or recall products, and withdraw approvals, any one or more of which could have a material adverse effect on us. </FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Outside
the U.S., our ability to market a product is contingent upon receiving marketing authorization from the appropriate regulatory authorities. The requirements governing marketing
authorization, pricing, and reimbursement vary widely from country to country. At present, foreign marketing authorizations are applied for at a national level, although within the European Union
registration procedures are available to companies wishing to market a product in more than one European Union
member state. The regulatory authority generally will grant marketing authorization if it is satisfied that we have presented it with adequate evidence of safety, quality and efficacy. </FONT></P>

<P><FONT SIZE=2><B>DEA Regulation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain registrations with the U.S. Drug Enforcement Administration ("DEA"), that enable us to receive, manufacture, store, and distribute controlled
substances in connection with our operations. Controlled substances are those drugs that appear on one of five schedules promulgated and administered by the DEA under the Controlled Substances Act, or
CSA. The CSA governs, among other things, the distribution, recordkeeping, handling, security, and disposal of controlled substances. We are subject to periodic and ongoing inspections by the DEA and
similar state drug enforcement authorities to assess our ongoing compliance with DEA's regulations. Any failure to comply with these regulations could lead to a variety of sanctions, including the
revocation, or a denial of renewal, of our DEA registration, injunctions, or civil or criminal penalties. </FONT></P>

<P><FONT SIZE=2><B>Reimbursement Legislation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our sales are dependent upon the availability of coverage and reimbursement from third-party payors, including federal, state, and private organizations. Thus,
our business may be significantly impacted by changes in coverage and reimbursement policies and legislation aimed at reducing health care costs. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Coverage
and reimbursement under Medicare, Medicaid, or other programs are governed through legislation for such programs. The recently enacted Medicare Act is an example of legislation
of a health insurance program that impacts our industry. The Medicare Act imposes significant changes to Medicare Part&nbsp;B payments for products, including the payment methodology for certain
drugs, including drugs administered by physicians in their offices and in hospital outpatient departments and certain drugs dispensed by pharmacies such as those inhaled through a nebulizer and oral
cancer drugs. For a number of our drugs, the Medicare Act reduced payment to 85% from 95% of the average wholesale price beginning January&nbsp;1, 2004. In 2005, the Medicare Act requires that
certain drugs covered under Medicare Part&nbsp;B be paid at 106% of the manufacturer's average sales price, calculated by a formula that accounts for the average of the total number of units sold.
In addition, physicians will have the option to enter into competitive bidding programs for drugs administered by physicians. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to revising Medicare payment methodologies under Medicare Part&nbsp;B, the Medicare Act established a prescription drug benefit (under new Part&nbsp;D), which is
scheduled to go into effect on January&nbsp;1, 2006. In the interim, beginning June&nbsp;1, 2004, a prescription drug discount program became effective for eligible individuals. The drugs covered
under the new prescription drug benefit and the transitional drug discount card program do not include those currently covered in the form administered under the current Medicare Part&nbsp;B
benefit. Drugs not covered under Part&nbsp;B include inhalation drugs that are administered through a metered-dose inhaler, and these may be covered under Part&nbsp;D. Under the
prescription drug discount card program, beneficiaries receive a variety of discount and drug options supported by Medicare contracts with private companies. Although this may increase beneficiaries'
utilization of prescription drugs, it is not clear whether and to what extent pharmaceutical companies will be affected by Medicare restrictions on drug coverage and pricing requirements. </FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Medicaid program, pharmaceutical manufacturers must remit a rebate, equal to a certain percentage of their revenue arising from Medicaid-reimbursed, qualifying outpatient drug
sales to Medicaid recipients in the individual states. Under the drug rebate program, Medicaid covers the pharmaceutical manufacturer's FDA-approved drugs (with some exceptions).
Agreements with federal and state governments provide that manufacturers of single source and innovator multiple source drugs must remit quarterly rebates based on the greater of 15.1% of the average
manufacturer's price per unit or the product of the total number of units of each dosage form and strength paid for under the state plan in the rebate period and the difference between the average
manufacturer's price and the best price per unit. Manufacturers of covered outpatient drugs, other than single source drugs and innovator multiple source drugs, will remit on a quarterly basis to each
state Medicaid agency 11% of the average manufacturer price per unit of its products marketed under ANDAs covered by the state's Medicaid program based on the total number of units for such dosage
form and strength reimbursed under the state program for the rebate period. </FONT></P>

<P><FONT SIZE=2><B>Environmental Considerations  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to environmental laws, including those promulgated by the Occupational Safety and Health Administration, the Environmental Protection Agency
("EPA"), the Department of Health Services, and the Air Quality Management District, that govern activities and operations that may have adverse environmental effects such as discharges to air and
water, as well as handling and disposal practices for solid and hazardous wastes. These laws impose strict liability for the costs of cleaning up, and for damages resulting from, sites of past spills,
disposals, or other releases of hazardous substances and materials and for the investigation and remediation of environmental contamination at properties operated by us and at off-site
locations where we have arranged for the disposal of hazardous substances. If it is determined that our operations or facilities are not in compliance with current environmental laws, we could be
subject to fines and penalties, the amount of which could be material. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have made and will continue to make expenditures to comply with current and future environmental laws. We anticipate that we will incur additional capital and operating costs in the
future to comply with existing environmental laws and new requirements arising from new or amended statutes and regulations. We cannot accurately predict the impact and costs that future regulations
will impose on our business. See "Legal and Regulatory Proceedings&#151;Environmental Litigation and EPA Proceedings" for additional information. </FONT></P>


<P><FONT SIZE=2><B>Intellectual Property  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success depends on our ability to operate without infringing the patents and proprietary rights of third parties. We cannot determine with certainty whether
patents or patent applications of other parties will materially adversely affect our ability to make, use, or sell any products. A number of pharmaceutical companies, biotechnology companies,
universities, and research institutions may have filed patent applications or may have been granted patents that cover aspects of our or our licensors' products, product candidates, or other
technologies. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
rely on trade secrets, unpatented proprietary know-how, continuing technological innovation and, in some cases, patent protection to preserve our competitive position. We
own 11 patents issued by the U.S. Patent and Trademark Office ("PTO"), covering formulations, processes, and equipment used in the manufacture of our products. We also own 14 trademarks registered
with the PTO. We have also licensed three U.S. patents relevant to our Albuterol HFA product candidate from Virginia Commonwealth University. In addition, we are prosecuting our PDP and Ampofol
patents in various countries in Europe and Asia. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intellectual
property protection is highly uncertain and involves complex legal and factual questions. Our patents and those for which we have or will license rights may be challenged, </FONT></P>

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<P><FONT SIZE=2>invalidated,
infringed, or circumvented, and the rights granted in those patents may not provide proprietary protection or competitive advantages to us. We and our licensors may not be able to develop
patentable products. Even if patent claims are allowed, the claims may not issue, or in the event of issuance, may not be sufficient to protect the technology owned by or licensed to us. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Third-party
patent applications and patents could reduce the coverage of the patents licensed, or that may be licensed to or owned by us. If patents containing competitive or conflicting
claims are issued to third parties, we may be enjoined from commercialization of products or be required to obtain licenses to these patents or to develop or obtain alternative technology. In
addition, other parties may duplicate, design around, or independently develop similar or alternative technologies to ours or those of our licensors. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Litigation
may be necessary to enforce patents issued or licensed to us or to determine the scope or validity of another party's proprietary rights. PTO interference proceedings may be
necessary if we and another party both claim to have invented the same subject matter. We could incur substantial costs and our management's attention would be diverted if: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>litigation
is required to defend against patent suits brought by third parties;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>we
participate in patent suits brought against or initiated by our licensors;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>we
initiate similar suits; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>we
participate in an interference proceeding. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, we may not prevail in any of these actions or proceedings. </FONT></P>

<P><FONT SIZE=2><B>Employees  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2004, we had a total of 729 full-time employees, of which 31 were engaged in research and development, 12 in clinical
research and regulatory affairs, 44 in quality assurance/quality control, 25 in validations, 77 in scientific affairs (including chemistry and microbiology), 440 in manufacturing, 11 in sales and
marketing and 89 in administration. We have 55 employees in Massachusetts who are represented by a labor union and are subject to a collective bargaining agreement. We have not experienced any work
stoppages and consider our relations with our employees to be good. </FONT></P>

<P><FONT SIZE=2><B>Facilities  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We own or lease a total of 23 buildings at four locations in Rancho Cucamonga and South El Monte, California, and Canton and West Roxbury, Massachusetts
comprising research and development, laboratory, manufacturing, packaging, distribution, warehouse, and office space. Three of the facilities, including our headquarters and principal manufacturing
facilities in Rancho Cucamonga, California, totaling more than 290,000 square feet, are owned by us. All of the remaining facilities, totaling more than 470,000 square feet, are leased by us until
expiration dates ranging from 2004 to 2018 (with certain renewal options). Our headquarters in Rancho Cucamonga secures our $6.2&nbsp;million credit facility. </FONT></P>

<P><FONT SIZE=2><B>Legal and Regulatory Proceedings  </B></FONT></P>

<UL>

<P><FONT SIZE=2><I> Enoxaparin Paragraph&nbsp;IV Litigation  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2003, we filed an ANDA, which is pending with the FDA, for enoxaparin sodium, seeking approval to engage in the commercial manufacture, sale, and
use of the enoxaparin product in the U.S. Aventis has two listed patents for Lovenox in the FDA's Orange Book, which is the FDA's listing of approved drug products. Our ANDA includes a
Paragraph&nbsp;IV certification that the existing </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>55</FONT></P>

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<P><FONT SIZE=2>patents
associated with Aventis' branded enoxaparin product, Lovenox&reg;, are invalid or will not be infringed by our generic product candidate. Teva also filed an ANDA on this product;
however, we believe that we are the first to file&nbsp;a substantially complete ANDA for this drug with a Paragraph&nbsp;IV certification. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a result of the filing of the ANDAs by us and Teva, Aventis Pharma S.A. and Aventis Pharmaceuticals&nbsp;Inc. filed lawsuits against us and Teva in August&nbsp;2003 in the United
States District Court for the District of New Jersey and the United States District Court, Central District of California, Eastern Division (the "California Court") alleging infringement of one of the
two patents on the product. We and Teva both answered the complaint brought in the California Court and filed a counterclaim, which sought a declaration that the patent-in-suit
are invalid, unenforceable and/or not infringed by ours or Teva's products. In February&nbsp;2004, the District of New Jersey court granted Teva's motion to transfer jurisdiction of the lawsuit to
the California Court
and subsequently the New Jersey action was consolidated with the California action. The FDA is stayed from finally approving our ANDA until the earlier of a court decision in our favor or the
expiration of 30&nbsp;months from Aventis' receipt of our notice of the Paragraph&nbsp;IV Certification. We subsequently amended our answer to allege patent unenforceability due to inequitable
conduct and to assert a counterclaim alleging that Aventis violated U.S. antitrust laws. In August&nbsp;2004, we filed a motion seeking a summary judgment that the Aventis patent in suit is
unenforceable due to Aventis' inequitable conduct in procuring the patent and seeking to dismiss the litigation. In November&nbsp;2004, we filed a second motion seeking a summary judgment that the
Aventis patent-in-suit is invalid based on indefiniteness of its claims. Our motions are currently under consideration by the California Court. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aventis
recently announced that it has been issued a notice of allowance by the PTO for the reissuance of the patent-in-suit. It is unclear what impact, if any, the reissuance of the
patent would have on the current proceedings described above. </FONT></P>

<P><FONT SIZE=2><I>Enoxaparin Citizen Petition  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under FDA regulations, interested persons may petition the FDA to take or refrain from taking certain regulatory or administrative actions. In
February&nbsp;2003, Aventis filed a citizen petition with the FDA asking the agency to take or refrain from taking certain actions that would impact our ANDA for a generic version of enoxaparin,
marketed by Aventis under the brand-name Lovenox. In its citizen petition, Aventis asks the FDA to withhold approval of any ANDA for enoxaparin unless the ANDA applicant demonstrates either that the
manufacturing process used in producing the generic drug is equivalent to Aventis' manufacturing process or the safety and effectiveness of the generic product through clinical trials. The citizen
petition also requests that the FDA withhold approval of any ANDA for enoxaparin unless the generic product contains a specific anhydro ring structure. Both of these requests are based on an assertion
by Aventis in the citizen petition that, because enoxaparin is not fully characterized, the only way to ensure that all of the pharmacologically active components of enoxaparin are present is to use
the same manufacturing process that Aventis uses in producing the drug, and that the specific anhydro ring structure, which Aventis claims may make important contributions to the effectiveness of the
product, may not be present in a generic product that is not produced by an equivalent manufacturing process. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
October&nbsp;2003, we filed comments with the FDA in opposition to Aventis' citizen petition. Our comments argued that there is no regulatory or legal basis for Aventis' request
that an ANDA applicant demonstrate that the manufacturing process used in producing the generic product is equivalent to the process used by Aventis. Our comments also noted that we manufacture our
enoxaparin sodium injection product pursuant to the established specifications which adequately characterize enoxaparin, the same specifications upon which Aventis relies. In February&nbsp;2004,
Aventis filed a supplement to its citizen petition to submit what it asserted were new discoveries in support of the citizen petition. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>56</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have made additional submissions to the FDA reiterating our position that there is no scientific or regulatory basis for Aventis' request that the FDA withhold approval of generic
versions of Lovenox, and providing additional data demonstrating the equivalency of our enoxaparin to Lovenox under ANDA approval criteria. Among other things, this data included a demonstration that
our enoxaparin product contains the specific anhydro ring structure cited by Aventis, which is now identified on Aventis' approved labeling for Lovenox. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
FDA may reject Aventis' citizen petition, approve Aventis' citizen petition in whole or in part, or grant such other relief or take such other action as the petition warrants. We do
not believe that Aventis' citizen petition will prevent the approval of our generic enoxaparin sodium injection product. However, the FDA has yet to rule on Aventis' citizen petition, and there can be
no assurance that the FDA will grant approval of our ANDA submission. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Environmental Litigation and EPA Proceedings  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our subsidiary, IMS, is one of approximately 39 defendants in six lawsuits brought by approximately 218 plaintiffs alleging negligence, strict liability, wrongful
death, permanent trespass, continuing trespass, public permanent nuisance, public continuing nuisance, strict liability for hazardous activity and fraudulent concealment, and claiming personal injury
and/or property damage from exposure to contaminated drinking water. Because of the similarity in the cases, they have been consolidated and are being referenced under In Re: Groundwater Cases
(Judicial Council Coordination Proceeding No.&nbsp;4135), Superior Court for the State of California, County of Los Angeles, Central Civil West District. These cases are being handled by the Los
Angeles County Superior Court in a special forum for complex litigation. The plaintiffs have not definitely stated how much they are seeking in damages. IMS denies all substantive allegations of the
plaintiffs and is actively defending its position to minimize any potential liability or damages. The litigation is in the discovery stage. Two of IMS's past insurance carriers are currently paying
the costs and the majority of legal fees in defending these claims. There is no limit on the dollar amount of defense coverage that the two carriers might be obligated to pay. Both insurance companies
have reserved their rights to be indemnified by IMS if IMS is later found to not merit insurance coverage, and both carriers have reserved their rights as to whether they are obligated to indemnify
IMS for underlying claims, should a judgment be rendered against IMS in the future. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Along
with approximately 35 other local businesses we were notified by the EPA in August&nbsp;1995 that we were deemed potentially responsible parties, or PRPs, with respect to a
groundwater contamination problem in the main San Gabriel Basin in the vicinity of IMS's primary manufacturing plant in South El Monte, California. Without admitting liability, we entered into a
private agreement with another PRP to conduct a Remedial Investigation and Feasibility Study as demanded by the EPA. The study was performed pursuant to an Administrative Order on Consent that was
agreed to by the EPA. In conjunction with the Administrative Order on Consent and under the approval of the California Regional Water Quality Control Board, Los Angeles Region, the Company performed
certain subsurface investigatory work on our property to determine whether any land we use could be a source of the groundwater contamination. Based upon such tests, management determined that our
operations did not contribute significantly to the groundwater contamination and we had minimal liability to clean up our former leasehold or the groundwater contamination. In 2000, the EPA drew upon
the findings of the study to adopt an Interim Record of Decision, or ROD, for remediation of groundwater in the portion of the San Gabriel Basin known as the South El Monte Operable Unit, or SEMOU. In
response, certain water purveyors in or hydrologically downgradient from the SEMOU have implemented various projects to contain, extract and/or treat eight chemicals of concern in the groundwater in
order to implement the ROD. These water purveyors then moved to obtain reimbursement for their expenses incurred in implementing the ROD. In the spring of 2002, the EPA named IMS and approximately 67
other entities as responsible parties, or RPs, relative to remediation </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>57</FONT></P>

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<P><FONT SIZE=2>costs
in the SEMOU. In response, 13 companies, including IMS, entered into an agreement with the water purveyors to fund certain agreed upon work that included, but was not limited to, elements of the
EPA's ROD. By entering into this agreement, IMS settled certain potential claims against it that were alleged by the water purveyors. Moreover, this settlement also addressed many of the claims that
the EPA would have otherwise been able to bring against IMS as an RP in the SEMOU. Collectively, the 13 settling parties raised $4.7&nbsp;million. As part of the settlement, the 13 settling entities
also received past and future credit for all matching public monies that were triggered as part of the settlement. During 2002, IMS paid its equal share of the settlement of $365,000, which had been
accrued in prior years. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2003, IMS and the other PRPs were notified that another chemical of concern (outside of the eight chemicals covered by the settlement agreement), perchlorate, was detected in the
SEMOU groundwater and that it would have to be treated immediately. The PRPs are in conversations with the EPA to discuss a settlement of this liability. On April&nbsp;12, 2004, IMS and several
other of the settling companies were made third-party defendants in litigation between the water purveyors and the non-settling industrial defendants in the SEMOU. The third-party
plaintiffs allege, among other things, a failure to adequately contribute to the groundwater cleanup costs in the SEMOU. We deny all liability relating to any and all claims in the third-party
complaints. Further, since these claims overlap with some of the EPA's claims, they may be extinguished as part of any settlement with the EPA. We have tendered the third-party complaints to its
insurance carriers, and the carriers are currently paying the costs and the majority of legal fees in defending these claims. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to the foregoing matters, from time to time we are party to additional legal proceedings arising in the ordinary course of our business. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>58</FONT></P>

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<BR></FONT><FONT SIZE=2><B>MANAGEMENT    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>Directors and Executive Officers  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our directors and executive officers and their ages and positions as of September&nbsp;30, 2004 are as follows: </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="31%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Age</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="59%" ALIGN="CENTER"><FONT SIZE=1><B>Position(s)</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2>Jack Y. Zhang, Ph.D.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>58</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>President, Chief Executive Officer and Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2>Mary Z. Luo, Ph.D.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>55</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Chief Operating Officer and Chairman of the Board</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2>David W. Nassif, J.D.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>50</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Chief Financial Officer, Senior Vice President Global Licensing, Treasurer</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="31%" VALIGN="TOP"><FONT SIZE=2>Stephen A. Campbell, J.D.</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>56</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%" VALIGN="TOP"><FONT SIZE=2>Senior Vice President, Regulatory Affairs</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2>Peter Langosh</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>52</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Vice President, Operations, and Secretary</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2>Kenneth Chang, M.D.(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>61</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2>Richard Koo(2)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>64</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2>Floyd F. Petersen(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>61</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2>Richard Prins(1)(2)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>47</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="31%" VALIGN="TOP"><FONT SIZE=2>Gordon P. Treweek, Ph.D.(2)</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>62</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="59%" VALIGN="TOP"><FONT SIZE=2>Director</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Member
of the Compensation Committee.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Member
of the Audit Committee. </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Jack Y. Zhang, Ph.D. </B></FONT><FONT SIZE=2>has served as our President and Chief Executive Officer since our inception in 1996 and has served as a member of our
board of directors since 1996. Dr.&nbsp;Zhang has over 30&nbsp;years of experience in chemistry, physics, management, and training including operations management of a chemical manufacturing
facility with more than 2,000 employees to the start-up of an analytical laboratory serving defense cleanup. Dr.&nbsp;Zhang is the co-founder of Applied Physics &amp; Chemistry
Laboratory ("APCL"), a full service, chemical analytical laboratory in Chino, California and our largest stockholder, where he held the position of President for 15&nbsp;years. Dr.&nbsp;Zhang is
named as the inventor on several U.S. and foreign patents and has authored numerous academic publications. He received a Ph.D. in chemistry from the State University of New York at Stony Brook and was
a Post Doctoral Research Associate at the California Institute of Technology. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Mary Z. Luo, Ph.D. </B></FONT><FONT SIZE=2>has served as our Chief Operating Officer and Chairman of our board of directors since our inception in 1996, and
served as our Secretary until April&nbsp;2004. Dr.&nbsp;Luo has over 25&nbsp;years of both academic and practical experience in the field of chemistry. Dr.&nbsp;Luo is the
co-founder of APCL. Dr.&nbsp;Luo provides scientific leadership through her research and activities in technology transfer, regulatory submission, intellectual property, clinical
research, recruitment, and training. In addition, Dr.&nbsp;Luo is a tenured chemistry professor at California State Polytechnic University, Pomona. Dr.&nbsp;Luo is named as the inventor on several
U.S. and foreign patents.
Dr.&nbsp;Luo received a Ph.D. in chemistry from Princeton University and was a Post Doctoral Research Associate at the California Institute of Technology. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>David W. Nassif, J.D. </B></FONT><FONT SIZE=2>has served as our Chief Financial Officer since May&nbsp;2002. Mr.&nbsp;Nassif also served as Vice President of
Global Licensing from May&nbsp;2002 until his promotion to Senior Vice President of Global Licensing in July&nbsp;2002. From March&nbsp;2001 to May&nbsp;2002, Mr.&nbsp;Nassif was a principal
in Strategic Consulting Services, providing capital raising, mergers and acquisitions, licensing, and investor relations services to various public and private life science and technology companies,
including Amphastar. From January&nbsp;2000 to March&nbsp;2001, Mr.&nbsp;Nassif was the Senior Vice President, Chief Financial Officer, Treasurer, and Secretary of RealAge,&nbsp;Inc., a
privately held health care database information marketing company. From August&nbsp;1993 to December&nbsp;1999, Mr.&nbsp;Nassif held various positions with Cypros Pharmaceutical Corporation, an
AMEX-listed specialty pharmaceutical company, </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>59</FONT></P>

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<P><FONT SIZE=2>culminating
in the position of Senior Vice President, Chief Financial Officer, Treasurer and Secretary. Mr.&nbsp;Nassif received a B.S. in finance and management information systems from the
University of Virginia and a J.D. from the University of Virginia School of Law. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Stephen A. Campbell, J.D. </B></FONT><FONT SIZE=2>has served as our Senior Vice President for Regulatory Affairs since August&nbsp;2002. From
December&nbsp;1998 until December&nbsp;2002, Mr.&nbsp;Campbell practiced civil litigation, first as a sole practitioner and then as a partner with Campbell, Paiva&nbsp;&amp; Associates.
Mr.&nbsp;Campbell entered the pharmaceutical industry in 1976 and has held positions of increasing responsibility in quality assurance, manufacturing, and regulatory affairs, with experience in
biologics, diagnostics, medical devices, and pharmaceuticals. Mr.&nbsp;Campbell received a B.A. in microbiology from California State University, Los Angeles, an M.B.A. from Azusa Pacific College,
and a J.D. from the University of La Verne College of Law. Mr.&nbsp;Campbell remains an active member of the State Bar of California. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Peter Langosh</B></FONT><FONT SIZE=2> has served as the Corporate Vice President of Operations for us and IMS since 2001 and served as a member of our board of
directors from 2002 to August&nbsp;2004. In April&nbsp;2004, Mr.&nbsp;Langosh was appointed our Secretary. Mr.&nbsp;Langosh began at IMS in 1979, and his experience includes management
responsibilities in quality control, research and development, engineering, facilities, and operations. He received a B.S. in chemistry from California State University, Long Beach and an E.M.B.A.
from Claremont Graduate University. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Kenneth Chang, M.D. </B></FONT><FONT SIZE=2>has served as a member of our board of directors since July&nbsp;2004. Dr.&nbsp;Chang also served as a member of
our board of directors from 1997 to 2003. Dr.&nbsp;Chang has been practicing medicine for more than 30&nbsp;years with more than 26&nbsp;years of experience in anesthesiology in the U.S.
Dr.&nbsp;Chang has been the Attending Physician Anesthesiologist at the Hemet Valley Medical Center, Hemet, California since 1981, and at the Menifee Valley Medical Center, Menifee, California since
1989. Dr.&nbsp;Chang received a medical degree from Taipei Medical College. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Richard Koo</B></FONT><FONT SIZE=2> has served as a member of our board of directors since 2003. Mr.&nbsp;Koo is also Chairman of our audit committee. For over
five years, Mr.&nbsp;Koo has been the managing partner of Koo, Chow and Company, Certified Public Accountants, and also serves as CEO and President of K.C. Group International&nbsp;Inc.
Mr.&nbsp;Koo has extensive experience as a CPA in auditing and taxation and has worked with PricewaterhouseCoopers LLP in various public offering audit assignments. Mr.&nbsp;Koo has worked as a
finance and taxation expert for the United Nations and has written numerous books and publications. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Floyd F. Petersen</B></FONT><FONT SIZE=2> has served as a member of our board of directors since August&nbsp;2004. From 1990 to the present, Mr.&nbsp;Petersen
has been the Director of the Loma Linda University Health Research Consulting Group, which consults on health research study design and data analysis. Since 1988, Mr.&nbsp;Petersen has been an
Assistant Professor of Biostatistics at the School of Public Health and School of Medicine of Loma Linda University. From 1996 to 2004, Mr.&nbsp;Petersen served as the Mayor of the City of Loma
Linda, California. Mr.&nbsp;Petersen received an M.P.H. in public health with a concentration in biostatistics from Loma Linda University. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Richard Prins</B></FONT><FONT SIZE=2> has served as a member of our board of directors since 2002. Since 1996, Mr.&nbsp;Prins has been Director of Investment
Banking for Ferris, Baker Watts,&nbsp;Inc. where he heads all of the firm's corporate finance activities and is responsible for executing a variety of transactions, including public offerings,
mergers and acquisitions, private placements, restructurings, as well as other corporate advisory services. Mr.&nbsp;Prins has 21&nbsp;years of experience in corporate finance and has participated
directly in more than 100 transactions with a broad cross-section of both private and public companies. Mr.&nbsp;Prins currently serves on the board of directors of Startec Global Communications.
Mr.&nbsp;Prins received a B.A. in Liberal Arts from Colgate University and an M.B.A. from Oral Roberts University. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Gordon P. Treweek, Ph.D. </B></FONT><FONT SIZE=2>has served as a member of our board of directors since 1999. Dr.&nbsp;Treweek has been the President of
Environmental Defense Sciences, a firm which provides forensic </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>60</FONT></P>

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<BR>

<P><FONT SIZE=2>environmental
expertise to a wide range of clients, since its inception in 1997. Previously, Dr.&nbsp;Treweek was a Division Manager and Vice President for 11&nbsp;years with a major hazardous
waste consulting engineering firm, and Department Manager and Vice President for 10&nbsp;years with a water and wastewater consulting engineering firm. Dr.&nbsp;Treweek received a B.S. in civil
engineering from the United States Military Academy, and an M.S. in engineering science, and a Ph.D. in environmental engineering from the California Institute of Technology. </FONT></P>


<P><FONT SIZE=2><B>Executive Officers  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our executive officers are elected by and serve at the discretion of our board of directors. Dr.&nbsp;Zhang, our Chief Executive Officer, and Dr.&nbsp;Luo,
our Chief Operating Officer, are husband and wife. </FONT></P>

<P><FONT SIZE=2><B>Board Composition  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors currently consists of seven members. All directors hold office until their successors have been elected and qualified or until their
earlier death, resignation, disqualification or removal. </FONT></P>


<P><FONT SIZE=2><B>Board Committees  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors has an audit committee and a compensation committee. We may appoint additional committees of our board of directors in the future,
including for purposes of complying with all applicable corporate governance rules of the NASDAQ National Market. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Audit Committee.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our audit committee currently consists of Mr.&nbsp;Koo, Dr.&nbsp;Treweek and Mr.&nbsp;Prins, each of
whom is an independent member of our board of directors. The functions of this committee include: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>overseeing
the engagement of our independent public accountants;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>reviewing
our audited financial statements and discussing them with the independent public accountants and our management;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>meeting
with the independent public accountants and our management to consider the adequacy of our internal controls; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>reviewing
our financial plans and reporting recommendations to our full board for approval and to authorize action. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Both
our independent registered accounting firm and internal financial personnel regularly meet with our audit committee and have unrestricted access to this committee. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compensation Committee.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our compensation committee currently consists of Dr.&nbsp;Chang, Mr.&nbsp;Petersen and
Mr.&nbsp;Prins, each of whom are independent members of our board of directors. The functions of this committee include: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>reviewing
and, as it deems appropriate, recommending to our board of directors, policies, practices, and procedures relating to the compensation of our directors, officers,
and other managerial employees and the establishment and administration of our employee benefit plans;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>determining
or recommending to the board of directors the compensation of our executive officers; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>advising
and consulting with our officers regarding managerial personnel and development. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>61</FONT></P>

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<UL>
<UL>
</UL>
</UL>

<P><FONT SIZE=2><B>Compensation Committee Interlocks and Insider Participation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dr.&nbsp;Luo and Mr.&nbsp;Prins served as members of our compensation committee during the last fiscal year. During 2003, Dr.&nbsp;Luo also served as our
Chief Operating Officer. In August&nbsp;2004, Dr.&nbsp;Luo resigned her membership on our compensation committee and was replaced by Dr.&nbsp;Chang. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
member of our compensation committee serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member
of our board of directors or compensation committee. </FONT></P>

<P><FONT SIZE=2><B>Director Compensation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our directors receive a fee of $2,500 for attendance in person ($500 for attendance by phone) at meetings of our board of directors, and they are reimbursed for
travel expenses and other out-of-pocket costs incurred in connection with their attendance at meetings. They also receive options exercisable for 4,000 shares of our common
stock annually at the fair market value of our common stock at the time of grant under our Amended and Restated 2002 Stock Option/Stock Issuance Plan (the "2002 Plan"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Petersen
received a fee of $2,400 in 2005 for consulting services. </FONT></P>

<P><FONT SIZE=2><B>Scientific Advisory Board  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our scientific advisory board is made up of a group of experienced scientists and clinicians chosen for their particular expertise. Members of our scientific
advisory board consult with us regularly on matters relating to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
research and development programs;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
design and implementation of our clinical trials;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>market
opportunities from a clinical perspective;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>new
technologies relevant to our research and development programs; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>scientific
and technical issues relevant to our business. </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
compensate scientific advisory board members with stock options pursuant to the 2002 Plan and an annual fee for attendance at meetings and other advisory services. We may add
additional </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>62</FONT></P>

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<P><FONT SIZE=2>members
to our scientific advisory board in the future. The current scientific advisory board members are: </FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="31%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="66%" ALIGN="CENTER"><FONT SIZE=1><B>Professional Affiliation</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2>Chen Ning Yang, Ph.D.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>Einstein Professor, Institute of Theoretical Physics,<BR>
State University of New York, Stony Brook<BR>
Nobel Prize Laureate, Physics, 1957</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2><BR>
Rudy Marcus, Ph.D.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2><BR>
Noyes Professor, Department of Chemistry,<BR>
California Institute of Technology<BR>
Nobel Prize Laureate, Chemistry, 1992</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2><BR>
Richard Porter, Ph.D.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2><BR>
Professor, Department of Chemistry,<BR>
State University of New York, Stony Brook</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2><BR>
Paul White, M.D., Ph.D.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2><BR>
Professor, Anesthesiology,<BR>
University of Texas Southwestern Medical Center</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2><BR>
Steven Shafer, M.D.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2><BR>
Professor of Anesthesia, Stanford University<BR>
Staff Anesthesiologist,<BR>
Palo Alto VA Health Care System<BR>
Adjunct Professor of Biopharmaceutical Science,<BR>
University of California at San Francisco</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2><BR>
Herschel Rabitz, Ph.D.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2><BR>
Professor, Department of Chemistry,<BR>
Princeton University</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2><B>Executive Compensation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information concerning all compensation paid to our Chief Executive Officer and each of our other four most highly compensated
executive officers whose salary and bonus exceeded $100,000 for services rendered to us during the fiscal year ended December&nbsp;31, 2004, who we refer to in this prospectus as our named executive
officers. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>63</FONT></P>

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<BR></FONT><FONT SIZE=2><B>Summary Compensation Table    <BR>    </B></FONT></P>

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<TABLE WIDTH="89%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="46%" ALIGN="LEFT"><FONT SIZE=1><B>Name and Principal Position(s)<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Year</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Salary ($)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>Bonus ($)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>Other Annual<BR>
Compensation<BR>
($)(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Securities<BR>
Underlying<BR>
Long Term<BR>
Options (#)</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>Jack Zhang, Ph.D.<BR></FONT> <FONT SIZE=2><I>President and Chief Executive Officer(2)(3)</I></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>2004<BR>
2003<BR>
2002</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>493,113<BR>
325,000<BR>
394,471</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;<BR>
10,000<BR>
7,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>128,000<BR>
244,000<BR>
274,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2><BR>
Mary Luo, Ph.D.<BR></FONT> <FONT SIZE=2><I>Chief Operating Officer(3)(4)</I></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2004<BR>
2003<BR>
2002</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
396,500<BR>
273,000<BR>
331,356</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
12,500<BR>
10,075</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
108,000<BR>
204,000<BR>
234,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2><BR>
David Nassif<BR></FONT> <FONT SIZE=2><I>Chief Financial Officer, Treasurer and Senior Vice President of Global Licensing(5)</I></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2004<BR>
2003<BR>
2002</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
216,000<BR>
200,000<BR>
119,618</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
6,000<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
15,000<BR>
20,000<BR>
100,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2><BR>
Stephen Campbell<BR></FONT> <FONT SIZE=2><I>Senior Vice President of Regulatory Affairs(6)</I></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2004<BR>
2003<BR>
2002</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
213,926<BR>
195,397<BR>
34,615</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
6,300<BR>
5,150<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
22,000<BR>
40,000<BR>
10,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2><BR>
Peter Langosh<BR></FONT> <FONT SIZE=2><I>Vice President of Operations And Secretary(3)</I></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2004<BR>
2003<BR>
2002</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
152,141<BR>
138,457<BR>
141,070</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10,500<BR>
6,500<BR>
3,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><BR>
8,000<BR>
4,000<BR>
10,000</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>In
accordance with the rules of the SEC, the other annual compensation described in this table does not include various perquisites and other personal benefits received by a named
executive officer that do not exceed the lesser of $50,000 or 10% of such officer's salary and bonus disclosed in this table.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>The
salary figures for Dr.&nbsp;Zhang for 2002 and 2004 include $78,125 and $60,721, respectively, in accrued paid vacation which he decided to take in the form of cash.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>The
option figures for Dr.&nbsp;Zhang, Dr.&nbsp;Luo and Mr.&nbsp;Langosh include 8,000, 8,000 and 0, respectively, for board of directors service in 2004 and 4,000, 4,000, and
4,000 options, respectively, for Board service in 2003, and 34,000, 34,000, and 4,000 options, respectively, for board of directors service between 1998 and 2002.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>The
salary figures for Dr.&nbsp;Luo for 2002 and 2004 include $65,625 and $48,750, respectively, in accrued paid vacation, which she decided to take in the form of cash.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Nassif
began his employment with us in May&nbsp;2002.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(6)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Campbell
began his employment with us in August&nbsp;2002. </FONT></DD></DL>

<P><FONT SIZE=2><B>Option Grants in 2004  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information with respect to stock options granted to each of our named executive officers during 2004. The percentage of total
options set forth below is based on options to purchase an aggregate of 804,500 shares of common stock granted to employees in 2004. All of these options were granted under the 2002 Plan at an
exercise price per share equal to the fair market value of our common stock at the time of grant, as determined by our board of directors. Potential realizable values are net of exercise price but
before taxes associated with exercise. Amounts represent hypothetical gains that could be achieved for the options if exercised at the end of the option term. The assumed 5% and 10% rates of stock
price appreciation are provided in accordance with the rules of the SEC and do not represent our estimate or projection of the future common stock price. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>64</FONT></P>

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<P><FONT SIZE=2>Actual
gains, if any, on stock option exercises will be dependent on the future performance of our common stock. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="23%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Individual Grants</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="23%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" ROWSPAN=3><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ROWSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Securities<BR>
Underlying<BR>
Options<BR>
Granted</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=3><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ROWSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>% of<BR>
Total Options<BR>
Granted to<BR>
Employees in<BR>
Fiscal Year</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Potential Realizable Value at Assumed Annual Rates of Stock Appreciation for Option Term</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="23%" ROWSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Exercise<BR>
Price Per<BR>
Share</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Expiration<BR>
Date</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>5%</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>10%</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>Jack Zhang, Ph.D.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>120,000<BR>
6,000<BR>
2,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>14.92<BR>
..75<BR>
..25</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%<BR>%<BR>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>13.75<BR>
13.75<BR>
13.75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1/1/2010<BR>
10/13/2012<BR>
10/13/2011</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>561,158<BR>
39,390<BR>
11,195</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,273,076<BR>
94,346<BR>
26,090</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>Mary Luo, Ph.D.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>100,000<BR>
6,000<BR>
2,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>12.43<BR>
..75<BR>
..25</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%<BR>%<BR>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>13.75<BR>
13.75<BR>
13.75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1/1/2010<BR>
10/13/2012<BR>
10/13/2011</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>467,632<BR>
39,390<BR>
11,195</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,060,896<BR>
94,346<BR>
26,090</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>David Nassif</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>15,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1.86</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>12.50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7/29/2014</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>117,918</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>298,827</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>Stephen Campbell</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>12,000<BR>
10,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1.49<BR>
1.24</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%<BR>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>12.50<BR>
12.50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7/29/2014<BR>
10/13/2014</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>94,334<BR>
78,612</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$<BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>239,061<BR>
199,218</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="23%"><FONT SIZE=2>Peter Langosh</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>.99</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>12.50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7/29/2014</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>62,889</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>159,374</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Aggregated Option Exercises in 2004 and Option Values at December&nbsp;31, 2004  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information concerning exercisable and unexercisable stock options held by each of the named executive officers at the end of the
fiscal year ended December&nbsp;31, 2004. The value realized upon exercise is based on per share exercise price multiplied by number of shares acquired upon exercise. The value of unexercised
in-the-money options is based on the assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share less the per share exercise
price, multiplied by the
number of shares underlying the options. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="95%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=3><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ROWSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Number of Securities Underlying Unexercised Options at December&nbsp;31,&nbsp;2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Value of Unexercised<BR>
In-the-Money Options at December&nbsp;31,&nbsp;2004</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ROWSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Shares<BR>
Acquired on<BR>
Exercise</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Value<BR>
Realized</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Exercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Unexercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Exercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Unexercisable</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Jack Zhang, Ph.D.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,120,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>66,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Mary Luo, Ph.D.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>933,334</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>66,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>David Nassif</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>130,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Stephen Campbell</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>23,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>49,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Peter Langosh</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>9,800</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>52,200</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Employee Benefit Plans  </B></FONT></P>

<P><FONT SIZE=2><B><I>Amended and Restated 2002 Stock Option/Stock Issuance Plan  </I></B></FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Introduction.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The 2002 Plan was adopted by our board of directors in November&nbsp;2002, and approved by our stockholders
in August&nbsp;2003. The board of directors approved an amendment to the 2002 Plan in April&nbsp;2004 increasing the number of options for grant under the 2002 Plan, which was approved by our
stockholders in June&nbsp;2004. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share Reserve.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;6,400,000 shares of common stock have been authorized for issuance under the 2002 Plan. In addition, no
participant in the 2002 Plan may be granted stock options, and/or stock awards for more than 400,000 shares of common stock per calendar year. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>65</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=68,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=1007310,FOLIO='65',FILE='DISK034:[05BHL3.05BHL1063]DW1063A.;16',USER='KSOLTER',CD='11-FEB-2005;01:03' -->
<A NAME="page_dw1063_1_66"> </A>
<BR>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Structure.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The 2002 Plan provides for two types of equity incentives: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>option
grants, pursuant to which eligible individuals in our employ or service may be granted options to purchase shares of common stock at an exercise price not less than
85% of the fair market value of those shares on the grant date; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>stock
awards, under which such individuals may be issued shares of common stock directly, through the purchase of such shares at a price not less than 100% of their fair
market value at the time of issuance; however, the purchase price for such shares may be paid through the cancellation of indebtedness to our company or performance of services. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Eligibility.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The individuals eligible to participate in the 2002 Plan include our employees, our non-employee
board members and any consultants we hire. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Administration.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The 2002 Plan is administered by our compensation committee and/or our board of directors (for purposes of
this description, the compensation committee and our board will be referred to generally, as the "plan administrator"). The plan administrator will determine which eligible individuals are to receive
option grants or stock awards under the 2002 Plan, the time or times when such option grants or stock awards are to be made, the number of shares subject to each such grant or award, the vesting
schedule to be in effect for the option grant or stock award, and the maximum term for which any granted option is to remain outstanding. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Plan Features.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The 2002 Plan includes the following features: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
exercise price for the shares of common stock subject to option grants made under the 2002 Plan may be paid in cash or in shares of common stock valued at fair market value on the
exercise date. Options may also be exercised through a same-day sale program without any cash outlay by the optionee. In addition, the plan administrator may provide financial assistance
to one or more
optionees in the exercise of their outstanding options or the purchase of their unvested shares by allowing such individuals to deliver a full-recourse, interest-bearing promissory note in
payment of the exercise price and any associated withholding taxes incurred in connection with such exercise or purchase. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event we merge or are acquired, options outstanding under the 2002 Plan shall be treated in one of the following ways: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
options shall continue (in the event we are the surviving corporation);
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
options will be assumed by the acquiror;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
options will be substituted by the acquiror;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
options will fully vest and then cancel; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
options will be cashed out and then cancelled. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
board may amend or modify the 2002 Plan at any time, subject to any required stockholder approval. The 2002 Plan will terminate no later than November&nbsp;2012. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2004, options to purchase 3,000,420 shares of common stock were outstanding, and 3,393,580 shares were available for future grants or awards under the 2002
Plan. </FONT></P>

<P><FONT SIZE=2><B><I>Stock Options Granted From 1998 Through 2001 (98-01 Plans)  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From 1998 through 2001, our board of directors granted options to purchase shares of our common stock pursuant to the terms of certain stand-alone option
agreements. Under these agreements, stock options were granted to employees, including key officers, non-employee board members, advisory board members, and consultants. Options granted to
employees and non-employees </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>66</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_dw1063_1_67"> </A>
<BR>

<P><FONT SIZE=2>were
non-statutory stock options. The terms of each option grant were determined by our board of directors or a committee appointed by the board for such purpose. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is a summary generally describing the terms of such grants. The options vest pursuant to an optionee's continued service with our company over a three-year
period, have a term of seven years, are non-transferable, and have an exercise price of not less than 100% of fair market value, as determined by our board of directors. The options expire
30&nbsp;days following an optionee's termination of service, except in event of termination due to death or disability, in which cases, the options expire six months following such termination. In
the event of a change of control of our company, the treatment of the options, including the accelerated vesting, assumption, or substitution of such options, is to be determined by our board of
directors, unless the terms of certain specific option agreements provide otherwise. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the aggregate, a total of 3,264,844 shares were granted subject to standalone option agreements, 2,073,734 of which were outstanding as of December&nbsp;31, 2004. </FONT></P>


<P><FONT SIZE=2><B><I>401(k) Plan  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a defined contribution 401(k) plan, whereby eligible employees can voluntarily contribute up to a defined percentage of their annual compensation up to
the maximum statutory limit. We match 50% of each 1% of employee contributions up to 4% of total employee contributions or 2% of their annual compensation and pay the administrative costs of the plan.
Employer contributions vest ratably over five years. </FONT></P>

<P><FONT SIZE=2><B>Limitation of Liability and Indemnification Matters  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our certificate of incorporation and bylaws contain provisions indemnifying our directors and officers to the fullest extent permitted by law. Prior to the
completion of this offering, we intend to enter into indemnification agreements with each of our directors that may, in some cases, be broader than the specific indemnification provisions contained
under Delaware law. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, as permitted by Delaware law, our certificate of incorporation provides that no director will be liable to us or our stockholders for monetary damages for breach of certain
fiduciary duties as a director. The effect of this provision is to restrict our rights and the rights of our stockholders in derivative suits to recover monetary damages against a director for breach
of certain fiduciary duties as a director, except that a director will be personally liable for: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
breach of the director's duty of loyalty to us or our stockholders;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>acts
or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
payment of dividends or the redemption or purchase of stock in violation of Delaware law; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
transaction from which the director derived an improper personal benefit. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
the extent that our directors, officers, and controlling persons are indemnified under the provisions contained in our certificate of incorporation, Delaware law, or contractual
arrangements against liabilities arising under the Securities Act, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>67</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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NAME="page_dy1063_1_68"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dy1063_principal_stockholders"> </A>
<A NAME="toc_dy1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>PRINCIPAL STOCKHOLDERS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information with respect to the beneficial ownership of our common stock as of December&nbsp;31, 2004 by: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>each
person known by us to own beneficially more than 5% of our common stock,
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>each
of our directors,
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>each
of our named executive officers, and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>all
of our directors and executive officers as a group. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beneficial
ownership is determined according to the rules of the SEC and generally means that a person has beneficial ownership of a security if he or she possesses sole or shared voting
or investment power of that security, including options that are currently exercisable or exercisable within 60&nbsp;days. Except as otherwise indicated, we believe that the beneficial owners of the
common stock listed below, based on the information each of them has given to us, have sole investment and voting power with respect to their shares, except where community property laws may apply. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
table lists applicable percentage ownership based on 35,245,740 shares of common stock outstanding as of December&nbsp;31, 2004. Options to purchase shares of our common stock
that are exercisable within 60&nbsp;days of December&nbsp;31, 2004 are deemed to be beneficially owned by the persons holding these options for the purpose of computing percentage ownership of
that person but are not treated as outstanding for the purpose of computing any other person's ownership percentage. Shares underlying options that are deemed beneficially owned are included in the
shares listed under "Amount
and Nature of Beneficial Ownership" and are also listed in this table separately in the column labeled "Shares Subject to Options." </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as otherwise noted, the address of each person or entity in the following table is c/o Amphastar Pharmaceuticals,&nbsp;Inc., 11570 Sixth Street, Rancho Cucamonga, California
91730. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="89%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Percentage of Shares<BR>
Beneficially Owned</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amount and<BR>
Nature of<BR>
Beneficial<BR>
Ownership</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Name and Address of Beneficial Owner<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Shares<BR>
Subject to<BR>
Options</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Before<BR>
Offering</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>After<BR>
Offering</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><B>Directors and Named Executive Officers</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>Jack Zhang, Ph.D.(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>10,856,022</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,120,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>29.85</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>Mary Luo, Ph.D.(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>10,660,866</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>933,334</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>29.47</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>David Nassif</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>Stephen Campbell</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>23,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>23,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>Richard Koo(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>364,402</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>30,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1.03</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>Peter Langosh</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>9,800</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9,800</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>Floyd Petersen</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>10,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>Kenneth Chang, M.D.(3)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>254,182</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>28,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>Richard Prins</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>8,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>Gordon Treweek, Ph.D.(4)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>180,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>20,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>All executive officers and directors as a group (ten persons)(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>13,065,360</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,187,134</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>34.90</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><B>5% Stockholders</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Applied Physics &amp; Chemistry Laboratory(5)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>9,284,312</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>26.34</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>China Development Industrial Bank(6)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,400,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9.65</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>Represents
beneficial ownership of less than 1% at the outstanding shares of common stock. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>68</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_dy1063_1_69"> </A>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Includes
9,284,312 shares held of record by Applied Physics&nbsp;&amp; Chemistry Laboratory, the sole owners of which were Drs. Zhang and Luo.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Includes
324,402 shares owned by Mr.&nbsp;Koo and 10,000 shares owned by Richard Y. Koo, a sole proprietorship.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>Includes
140,000 shares owned by the Kenneth C. Chang, M.D.,&nbsp;Inc. Retirement Trust.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>Includes
80,000 shares in the name of the Treweek Family Revocable Trust UAD 10/25/88 and 80,000 shares in the name of the Treweek Family Revocable Trust UAD 10/25/90.
Mr.&nbsp;Treweek is the trustee of both trusts.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>The
business address of Applied Physics&nbsp;&amp; Chemistry Laboratories is 13760 Magnolia Avenue, Chino, California 91710.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(6)</FONT></DT><DD><FONT SIZE=2>The
business address of China Development Industrial Bank is 9F, 125 Nanking East Road, Section&nbsp;5, Taipei, Taiwan, R.O.C. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>69</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_dy1063_1_70"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dy1063_certain_relationships_and_related_transactions"> </A>
<A NAME="toc_dy1063_2"> </A>
<BR></FONT><FONT SIZE=2><B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>Agreements with Applied Physics &amp; Chemistry Laboratories  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to completion of this offering, Applied Physics &amp; Chemistry Laboratories ("APCL") owned approximately 30% of our outstanding shares of common stock. APCL is
owned 100% by Dr.&nbsp;Zhang and Dr.&nbsp;Luo, our President and Chief Executive Officer and Chief Operating Officer, respectively. In 1997, we entered into an equipment agreement with APCL,
whereby we agreed to purchase or lease
equipment from APCL with an aggregate cost not to exceed $9.1&nbsp;million. Under the agreement, APCL managed leasing arrangements and paid all costs associated with the purchase or lease of the
equipment on the Company's behalf. APCL purchased or leased equipment based on the Company's technical requirements. Certain equipment lease agreements made by APCL on our behalf are guaranteed by us.
Title to the equipment passes to us at the end of the lease. As of December&nbsp;31, 2001, 2002 and 2003, we had guaranteed future aggregate lease payments of APCL made on our behalf of
$1.3&nbsp;million, $0.7&nbsp;million and $0.6&nbsp;million, respectively, through 2006. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Annually,
the Company compensated APCL for related equipment costs plus a management fee equal to 2.5% of all related costs incurred by APCL, in the form of shares of common stock until
a total of 6,087,334 shares were to be issued. In 2001, the Company issued 973,986 shares of common stock for equipment amounting to $1.5&nbsp;million received under capital lease obligations of
APCL. For equipment and services provided through December&nbsp;31, 2002, 5,113,344 shares were issued in total. At December&nbsp;31, 2002, an additional 279,313 shares valued at
$0.4&nbsp;million were not issued, but earned and, accordingly classified, as common stock to be issued under the agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2003, the Company issued the remaining 973,990 shares due under the agreement, comprised of the 279,313 shares due to be issued from 2002 and 694,677 shares earned in 2003, which were
valued at $1.0&nbsp;million. In April&nbsp;2003, the Company amended the equipment agreement to clarify terms related to the management fee, which resulted in the Company owing APCL an additional
517,671 shares for management fees which were valued at $776,000. Of the 694,677 shares issued in 2003, 517,671 shares related to the management fees and 177,006 shares related to equipment and
services provided in 2003. As of December&nbsp;31, 2003, we had no further obligation to APCL under the equipment agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2001, 2002 and 2003, the Company incurred rental expense of $125,000, $138,000 and $145,000 related to the equipment and lease agreements with APCL. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
time to time, we outsource laboratory test work to APCL. The total amount paid to APCL in 2001, 2002, 2003 and for the nine months ended September&nbsp;30, 2004 for laboratory
test work was approximately $37,810, $14,437, $19,000 and $12,000, respectively. In addition, we have leased office and laboratory facilities and office equipment from APCL to conduct our research and
development activities. The audit committee of the board of directors has authorized this arrangement until the earlier of the acquisition of permanent space for these activities or
December&nbsp;31, 2007, up to a maximum lease amount of $292,000 per year. Rental expense was approximately $147,000 for the nine months ended September&nbsp;30, 2004. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2001 and 2002, we charged APCL approximately $57,000 and $65,000, respectively, for certain labor services. No labor services were provided in 2003 and 2004. </FONT></P>


<P><FONT SIZE=2><B>Other Related Party Transactions  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We engaged in various consulting arrangements with one of our directors, Dr.&nbsp;Kenneth Chang, during 2001, 2002 and 2003. For the years ended
December&nbsp;31, 2001, 2002 and 2003, we expensed $24,000, $27,300 and $15,600, respectively, for Dr.&nbsp;Chang's consulting services and issued 4,800, 5,460 and 1,950 shares of common stock to
Dr.&nbsp;Chang in lieu of cash for such consulting services performed. These consulting arrangements were terminated effective January&nbsp;1, 2004. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>70</FONT></P>

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<P><FONT SIZE=2><B>Employment Agreements  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We previously entered into employment agreements dated January&nbsp;1, 2004 with Dr.&nbsp;Zhang, our President and Chief Executive Officer, and
Dr.&nbsp;Luo, our Chief Operating Officer, which had a one-year term expiring on December&nbsp;31, 2004. Dr.&nbsp;Zhang's agreement provided for a base salary of $421,000 and a stock
option grant of 120,000 shares with an exercise price of $13.75 per share, which vested on December&nbsp;31, 2004, and has a term of five years. Dr.&nbsp;Luo's agreement provided for a base salary
of $338,000, and a stock option grant of 100,000 shares with an exercise price of $13.75 per share, which vested on December&nbsp;31, 2004 and has a term of five years. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>71</FONT></P>

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<BR></FONT><FONT SIZE=2><B>DESCRIPTION OF CAPITAL STOCK    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>General  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our certificate of incorporation, we are authorized to issue up to 120,000,000 shares, $.0001 par value per share, 100,000,000 shares of which may be common
stock and 20,000,000 shares of which may be preferred stock. The following description of our capital stock is subject to, and qualified in its entirety by, the provisions of our certificate of
incorporation and bylaws, which are included as exhibits to the registration statement of which this prospectus is a part, and by the provisions of applicable law. </FONT></P>


<P><FONT SIZE=2><B>Common Stock  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2004, there were 35,245,740 shares of our common stock outstanding that were held of record by 255 stockholders. As of that same date,
there were no shares of preferred stock outstanding. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
holders of our common stock are entitled to one vote for each share held of record upon such matters and in such manner as may be provided by law. Under the Delaware General
Corporation Law and our bylaws, our board of directors may declare and pay dividends upon shares of our capital stock out of legally available funds, subject to any restrictions in our certificate of
incorporation. In the event we liquidate, dissolve, or wind up, the holders of our common stock are entitled under the Delaware General Corporation Law to share ratably in all assets remaining after
payment of liabilities and liquidation preferences of any outstanding shares of the preferred stock. Holders of our common stock have no preemptive rights or rights to convert their common stock into
any other securities. There are no redemption or sinking fund provisions applicable to our common stock. All outstanding shares of our common stock are fully paid and nonassessable. </FONT></P>

<P><FONT SIZE=2><B>Preferred Stock  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors has the authority to issue undesignated preferred stock in one or more series and to determine the powers, preferences, and rights and the
qualifications, limitations, or restrictions granted to or imposed upon any wholly unissued series of undesignated preferred stock and to fix the number of shares constituting any series and the
designation of the series, without any further vote or action by our stockholders. The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, a majority of our outstanding
voting stock. We have no present plans to issue any shares of preferred stock. </FONT></P>

<P><FONT SIZE=2><B>Registration Rights  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After the closing of this offering, the holders of approximately 799,676 shares of our common stock will be entitled to certain rights with respect to the
registration of such shares under the Securities Act. The holders of these shares are entitled to certain piggyback registration rights. If we register any securities for public sale other than for
our initial public offering, these holders will have the right to include their shares in the registration statement. In an underwritten offering, we have agreed to use our best efforts to cause the
shares to be included in the underwriting on the same terms and conditions as the securities being sold through the underwriters. We have agreed to indemnify the holders of this registration right
against liabilities under the Securities Act, the Exchange Act, or other federal or state securities law. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>72</FONT></P>

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<P><FONT SIZE=2><B>Anti-Takeover Provision  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provisions of Delaware law and our certificate of incorporation and bylaws could make our acquisition by means of a tender offer, a proxy contest or otherwise,
and the removal of incumbent officers and directors, more difficult. These provisions are expected to discourage types of coercive takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control to first negotiate with us. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or
unsolicited proposal to acquire or restructure us outweighs the disadvantages of discouraging proposals, including proposals that are priced above the then current market value of our common stock,
because, among other things, negotiation of these proposals could result in an improvement of their terms. </FONT></P>

<P><FONT SIZE=2><B>Delaware Law  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to Section&nbsp;203 of the Delaware General Corporation Law. Under this provision, we may not engage in any business combination with any
interested stockholder for a period of three years following the date the stockholder became an interested stockholder, unless: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>prior
to that date our board of directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>upon
completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock
outstanding at the time the transaction began; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>on
or following that date the business combination is approved by our board of directors and authorized at an annual or special meeting of stockholders, by the affirmative
vote of at least two-thirds of the outstanding voting stock that is not owned by the interested stockholder. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;203
defines "business combination" to include: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
merger or consolidation involving the corporation and the interested stockholder;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
sale, lease, exchange, mortgage, transfer, pledge, or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>subject
to some exceptions, any transaction that results in the issuance or transfer by the corporation or any of its direct or indirect subsidiaries of any stock of the
corporation or of any such subsidiary to the interested stockholder;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>any
transaction involving the corporation or any of its direct or indirect subsidiaries that has the effect of increasing the proportionate share of the stock of any class
or series of the corporation or of any such subsidiary beneficially owned by the interested stockholder; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges, or other financial benefits provided by or through the corporation or
any direct or indirect majority-owned subsidiary. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
general, Section&nbsp;203 defines an "interested stockholder" as any entity or person who beneficially owns, or an affiliate or associate of the corporation that at any time within
three years prior to the date of determination of interested stockholder status shares did beneficially own, 15% or more of the outstanding voting stock of the corporation, and affiliates and
associates of such person. </FONT></P>


<P><FONT SIZE=2><B>Certificate of Incorporation and Bylaws  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our certificate of incorporation and bylaws contain provisions that could have the effect of discouraging potential acquisition proposals or tender offers or
delaying or preventing a change of </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>73</FONT></P>

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<P><FONT SIZE=2>control
of our company. In particular, our certificate of incorporation and bylaws, as applicable, among other things: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>provide
that special meetings of the stockholders may be called only by our Chairman of the Board, Chief Executive Officer, President, Chief Operating Officer or the board
of directors pursuant to a resolution adopted by a majority of the total number of authorized directors of our board of directors;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>establish
procedures with respect to stockholder proposals and stockholder nominations, including requiring that advance written notice of a stockholder proposal or director
nomination generally must be received at our principal executive offices not less than 90 nor more than 120&nbsp;days prior to the first anniversary date of mailing of our proxy statement released
to stockholders in connection with the previous year's annual meeting of stockholders;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>do
not include a provision for cumulative voting in the election of directors. Under cumulative voting, a minority stockholder holding a sufficient number of shares may be
able to ensure the election of one or more directors. The absence of cumulative voting may have the effect of limiting the ability of minority stockholders to effect changes in the board of directors
and, as a result, may have the effect of deterring a hostile takeover or delaying or preventing changes in control or management of our company;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>provide
that vacancies on our board of directors may be filled by a majority of directors in office, although less than a quorum, and not by the stockholders;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>require
that the vote of holders of 66<SUP>2</SUP>/<SMALL>3</SMALL>% of the voting power of the outstanding shares entitled to vote generally in the election of directors is required
to amend various provisions of our certificate of incorporation and bylaws, including provisions relating to: </FONT></DD></DL>
</UL>
<UL>
<UL>

<P><FONT SIZE=2>&#151;&nbsp;&nbsp;&nbsp;&nbsp;the
number of directors on our board of directors; </FONT></P>

<P><FONT SIZE=2>&#151;&nbsp;&nbsp;&nbsp;&nbsp;the
election, qualification and term of office of our directors; </FONT></P>


<P><FONT SIZE=2>&#151;&nbsp;&nbsp;&nbsp;&nbsp;filling
vacancies on our board of directors; </FONT></P>

<P><FONT SIZE=2>&#151;&nbsp;&nbsp;&nbsp;&nbsp;the
indemnification of our officers and directors; </FONT></P>

<P><FONT SIZE=2>&#151;&nbsp;&nbsp;&nbsp;&nbsp;removal
of members of our board of directors; and </FONT></P>

<P><FONT SIZE=2>&#151;&nbsp;&nbsp;&nbsp;&nbsp;certain
amendments to our certificate of incorporation and by-laws; and </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>allow
us to issue without stockholder approval up to 20,000,000 shares of undesignated preferred stock with rights senior to those of the common stock and that otherwise
could adversely affect the rights and powers, including voting rights, of the holders of common stock. In some
circumstances, this issuance could have the effect of decreasing the market price of the common stock as well as having the anti-takeover effect discussed above. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
provisions are intended to enhance the likelihood of continuity and stability in the composition of our board and in the policies formulated by them and to discourage certain types
of transactions that may involve an actual or threatened change of control of our company. These provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal and to
discourage certain tactics that may be used in proxy fights. However, these provisions could have the effect of discouraging others from making tender offers for our shares that could result from
actual or rumored takeover attempts. These provisions also may have the effect of preventing changes in our management. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>74</FONT></P>

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<P><FONT SIZE=2><B>Transfer Agent and Registrar  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transfer agent and registrar for our common stock is Continental Stock Transfer&nbsp;&amp; Trust Company. </FONT></P>

<P><FONT SIZE=2><B>NASDAQ Stock Market National Market Listing  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have applied to have our common stock approved for quotation on the NASDAQ National Market under the symbol "AMPR." </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>75</FONT></P>

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<BR></FONT><FONT SIZE=2><B>SHARES ELIGIBLE FOR FUTURE SALE    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to this offering, there has been no public market for our common stock. Future sales of substantial amounts of our common stock in the public market
following this offering or the possibility
of sales of this kind occurring could cause the prevailing market price of our common stock to fall and impede our ability to raise capital through an offering of equity securities. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
completion of this offering, we will have a total of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock outstanding based upon&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
outstanding as of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2004,
assuming no exercise of the underwriters' option to purchase additional shares and no exercise of outstanding options prior to completion of this offering. The shares offered by this prospectus will
be freely tradable unless they are purchased by our "affiliates," as defined in Rule&nbsp;144 under the Securities Act. Shares purchased by affiliates may generally only be sold pursuant to an
effective registration statement under the Securities Act or in compliance with Rule&nbsp;144. The remaining&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock are "restricted," which means they were
originally sold in offerings that were not subject to a registration statement filed with the SEC. These restricted shares may generally be resold only through registration under the Securities Act or
under an available exemption from registration, such as provided by Rule&nbsp;144. </FONT></P>

<P><FONT SIZE=2><B>Lockup Agreements  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All officers and directors and holders of over&nbsp;&nbsp;&nbsp;&nbsp;% of our outstanding common stock have entered into the contractual "lockup" agreements described in
"Underwriting." As a result of these contractual restrictions, notwithstanding possible earlier eligibility for sale under the provisions of Rules&nbsp;144, 144(k) and 701, additional shares will be
available for sale beginning 180&nbsp;days after the date of this prospectus, subject in some cases to certain volume limitations. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the purpose of underwriters to comply with NASD Rule&nbsp;2711(f)(4), if (i)&nbsp;we issue an earnings release or material news or a material event relating to us occurs during
the last 17&nbsp;days of the 180-day lock-up period, or (ii)&nbsp;prior to the expiration of the 180-day lock-up period, we announce that we will
release earnings results during the 16-day period beginning on the last day of the 180-day lock-up period, then in each case, the restrictions applicable during the
180-day lock-up period, unless otherwise waived in writing by Lehman Brothers&nbsp;Inc. and UBS Securities LLC in their sole discretion, will continue to apply until the
expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. However, the restrictions in the prior sentence
will not apply if any research published or distributed by any underwriter relating to us would be compliant under Rule&nbsp;139 of the Securities Act and our shares of common stock are "actively
traded securities" as defined in Rule&nbsp;101(c)(1) of Regulation&nbsp;M of the Exchange Act. </FONT></P>

<P><FONT SIZE=2><B>Rule&nbsp;144  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, under Rule&nbsp;144 as currently in effect, beginning three months after the date of this prospectus, a person or persons whose shares are
aggregated, who has beneficially owned restricted
shares for at least one year, including persons who may be deemed to be our "affiliates," would be entitled to sell within any three-month period a number of shares that does not exceed the greater
of: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>1%
of the number of shares of common stock then outstanding, which will equal approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares immediately after this offering; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
average weekly trading volume of our common stock as reported through the NASDAQ National Market during the four calendar weeks preceding the filing of a Form&nbsp;144
with respect to such sale. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
under Rule&nbsp;144 are also subject to certain manner of sale provisions and notice requirements and to the availability of certain public information about us. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>76</FONT></P>

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<P><FONT SIZE=2><B>Rule&nbsp;144(k)  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Rule&nbsp;144(k), a person who is not deemed to have been one of our "affiliates" at any time during three months preceding a sale and who has
beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner other than an "affiliate," is entitled to sell these shares without complying
with the manner of sale, public information, volume limitation, or notice provisions of Rule&nbsp;144. </FONT></P>


<P><FONT SIZE=2><B>Rule&nbsp;701  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to certain limitations on the aggregate offering price of a transaction and other conditions, Rule&nbsp;701 permits resales of shares issued prior to
the date the issuer becomes subject to the reporting requirements of the Exchange Act, pursuant to certain compensatory benefit plans and contracts commencing 90&nbsp;days after the issuer becomes
subject to the reporting requirements of the Exchange Act, in reliance upon Rule&nbsp;144 but without compliance with certain restrictions, including the holding period requirements. In addition,
the SEC has indicated that Rule&nbsp;701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirements of the Exchange Act,
along with the shares acquired upon exercise of these options, including exercises after the date the issuer becomes so subject. Securities issued in reliance on Rule&nbsp;701 are restricted
securities and, subject to the contractual restrictions described above, beginning 90&nbsp;days after the date of this prospectus, may be sold by persons other than "affiliates" subject only to the
manner of sale provisions of Rule&nbsp;144 and by "affiliates" under Rule&nbsp;144 without compliance with its one-year minimum holding period requirement. </FONT></P>

<P><FONT SIZE=2><B>S-8 Registration Statement  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to file&nbsp;a registration statement on Form&nbsp;S-8 under the Securities Act covering the shares of common stock subject to
outstanding options or reserved for issuance under our various stock option plans. Upon the effectiveness of this registration statement, all of these shares will, subject to Rule&nbsp;144 volume
limitations applicable to affiliates, be available for sale in the open market, except to the extent that these shares are subject to vesting restrictions or the contractual restrictions described
above. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>77</FONT></P>

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NAME="ec1063_material_u.s._federal_tax_cons__mat02216"> </A>
<A NAME="toc_ec1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS    <BR>    </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of the material U.S. federal income tax consequences of the ownership and disposition of our common stock to non-U.S.
holders, but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based upon the provisions of the Internal Revenue Code of 1986, as
amended, or the Code, Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, all as of the date hereof. These authorities may be changed, possibly retroactively,
so as to result in United States federal income tax consequences different from those set forth below. We have not sought any ruling from the Internal Revenue Service, or the IRS, with respect to the
statements made and the conclusions reached in the following summary, and there can be no assurance the IRS will agree with such statements and conclusions. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
summary also does not address the tax considerations arising under the laws of any foreign, state or local jurisdiction. In addition, this discussion does not address tax
considerations applicable to an investor's particular circumstances or to investors that may be subject to special tax rules, including, without limitation: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>banks,
insurance companies, or other financial institutions;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>persons
subject to the alternative minimum tax;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>tax-exempt
organizations;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>dealers
in securities or currencies;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>traders
in securities that elect to use a mark-to-market method of accounting for their securities holdings;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>persons
that own, or are deemed to own, more than five percent of our common stock (except to the extent specifically set forth below);
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>certain
former citizens or long-term residents of the United States;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>persons
who hold our common stock as a position in a hedging transaction, "straddle," "conversion transaction" or other risk reduction transaction; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>persons
deemed to sell our common stock under the constructive sale provisions of the Code. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, if a partnership holds our common stock, the tax treatment of a partner generally will depend on the status of the partner and upon the activities of the partnership.
Accordingly, partnerships which hold our common stock, and partners in such partnerships, should consult their tax advisors. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>YOU ARE URGED TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION, AS WELL AS
ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL, FOREIGN, OR OTHER
TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.</I></FONT></P>

<P><FONT SIZE=2><B>Non-U.S. Holder Defined  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of this discussion, you are a non-U.S. holder if you are a holder that, for U.S. federal income tax purposes, is not a U.S. person. For
purposes of this discussion, you are a U.S. person if you are: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>an
individual citizen or resident of the United States; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>78</FONT></P>

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<UL>
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<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>a
corporation or other entity taxable as a corporation, or a partnership or entity taxable as a partnership, created or organized in the United States or under the laws of
the United States or any political subdivision thereof, unless in the case of a partnership, U.S. Treasury Regulations provide otherwise;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>an
estate whose income is subject to U.S. federal income tax regardless of its source; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>a
trust (x)&nbsp;whose administration is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all
substantial decisions of the trust or (y)&nbsp;which has made an election to continue to be treated as a U.S. person. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>Distributions  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not made any distributions on our common stock, and we do not plan to make any distributions for the foreseeable future. If we do make distributions on
our common stock, however, those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under United States
federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings and profits, they will constitute a return of capital and will first reduce your
basis in our common stock, but not below zero, and then will be treated as gain from the sale of stock. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
dividend paid to you generally will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an
applicable income tax treaty. In order to receive a reduced treaty rate, you must provide us with an IRS Form&nbsp;W-8BEN or other appropriate version of IRS Form&nbsp;W-8
certifying qualification for the reduced rate. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends
received by you that are effectively connected with your conduct of a U.S. trade or business are exempt from such withholding tax. In order to obtain this exemption, you must
provide us with an IRS Form&nbsp;W-8ECI properly certifying such exemption. Such effectively connected dividends, although not subject to withholding tax, are taxed at the same graduated
rates applicable to U.S. persons, net of certain deductions and credits. In addition, if you are a corporate non-U.S. holder, dividends you receive that are effectively connected with your
conduct of a U.S. trade or business may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you are eligible for a reduced rate of withholding tax pursuant to a tax treaty, you may obtain a refund of any excess amounts currently withheld if you file an appropriate claim for
refund with the IRS. </FONT></P>

<P><FONT SIZE=2><B>Gain on Disposition of Common Stock  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You generally will not be required to pay U.S. federal income tax on any gain realized upon the sale or other disposition of our common stock unless: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
gain is effectively connected with your conduct of a U.S. trade or business;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>you
are an individual who holds our common stock as a capital asset (generally, an asset held for investment purposes) and who is present in the United States for a period
or periods aggregating 183&nbsp;days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
common stock constitutes a United States real property interest by reason of our status as a "United States real property holding corporation," or USRPHC, for U.S.
federal income tax purposes at any time within the shorter of the five-year period preceding the disposition or your holding period for our common stock. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>79</FONT></P>

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<UL>
<UL>
</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe that we are not currently and will not become a USRPHC. Because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property
relative to the fair market value of our other business assets, however, there can be no assurance we will not become a USRPHC in the future. Even if we become a USRPHC, however, as long as our common
stock is regularly traded on an established securities market, such common stock will be treated as U.S. real property interests only if you actually or constructively hold more than five percent of
such regularly traded common stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you are a non-U.S. holder described in the first bullet above, you will be required to pay tax on the net gain derived from the sale under regular graduated U.S. federal
income tax rates, and corporate non-U.S. holders described in the first bullet above may be subject to the branch profits tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. If you are an individual non-U.S. holder described in the second bullet above, you will be required to pay a flat 30% tax on the gain derived from the sale,
which tax may be offset by U.S. source capital losses (even though you are not considered a resident of the United States). You should consult any applicable income tax treaties that may provide for
different rules. </FONT></P>

<P><FONT SIZE=2><B>Backup Withholding and Information Reporting  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally, we must report annually to the IRS the amount of dividends paid to you, your name and address, and the amount of tax withheld, if any. A similar report
is sent to you. Pursuant to applicable income tax treaties or other agreements, the IRS may make these reports available to tax authorities in your country of residence. Payments of dividends or of
proceeds on the disposition of stock made to you may be subject to information reporting and backup withholding unless you establish an exemption, for example by properly certifying your
non-United States status on an IRS Form&nbsp;W-8BEN or another appropriate version of IRS Form&nbsp;W-8. Notwithstanding the foregoing, backup withholding and
information reporting may apply if either we or our paying agent has actual knowledge, or reason to know, that you are a United States person. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Backup
withholding is not an additional tax; rather, the U.S. income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund or credit may be obtained, provided that the required information is furnished to the IRS in a timely manner. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>80</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ee1063_underwriting"> </A>
<A NAME="toc_ee1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>UNDERWRITING    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the terms of an Underwriting Agreement, which is filed as an exhibit to the registration statement relating to this prospectus, each of the underwriters
named below, for whom Lehman Brothers&nbsp;Inc., UBS Securities LLC (as joint bookrunners) and Deutsche Bank Securities Inc. are acting as representatives, have severally agreed to purchase from us
the respective number of shares of common stock opposite their names below: </FONT></P>

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<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Underwriter<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" ALIGN="CENTER"><FONT SIZE=1><B>Number of Shares</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Lehman Brothers Inc.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>UBS Securities LLC</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Deutsche Bank Securities Inc.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="77%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Underwriting Agreement provides that the underwriters' obligation to purchase shares of our common stock depends on the satisfaction of the conditions contained in the Underwriting
Agreement, including: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
obligation to purchase all of the shares of common stock offered hereby, if any of the shares are purchased;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
representations and warranties made by us to the underwriters are true;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>there
is no material change in the financial markets; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>we
deliver customary closing documents to the underwriters. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2><B>Commissions and Expenses  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes the underwriting discounts and commissions we will pay to the underwriters. These amounts are shown assuming both no exercise and
full exercise of the underwriters' option to purchase&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional shares. The underwriting discount is the difference between the initial price to the public and the amount the
underwriters pay to us for the shares. </FONT></P>

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<TH WIDTH="70%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>No Exercise</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Full Exercise</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="70%"><FONT SIZE=2>Per share</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="70%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="70%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
representatives of the underwriters have advised us that the underwriters propose to offer shares of common stock directly to the public at the public offering price on the cover of
this prospectus and to selected dealers, who may include the underwriters, at such offering price less a selling concession not in excess of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share. The underwriters may allow, and
the selected dealers may re-allow, a discount from the concession not in excess of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share to other dealers. After the offering, the
representatives may change the
public offering price and other selling terms. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
expenses of the offering that are payable by us are estimated to be $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(excluding underwriting discounts and commissions). </FONT></P>

<P><FONT SIZE=2><B>Option to Purchase Additional Shares  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have granted the underwriters an option exercisable for 30&nbsp;days after the date of the Underwriting Agreement to purchase, from time to time, in whole or
in part, up to an aggregate of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares at the public offering price less underwriting discounts and
commissions. The option may be exercised if the underwriters sell more than
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares in connection with the offering. To the extent that this option is exercised, each underwriter will
be obligated, subject to </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>81</FONT></P>

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<P><FONT SIZE=2>certain
conditions, to purchase its pro rata portion of these additional shares based on the underwriter's percentage underwriting commitment in the offering as indicated in the preceding table. </FONT></P>

<P><FONT SIZE=2><B>Lock-Up Agreements  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We, our directors and executive officers, and holders of more than&nbsp;&nbsp;&nbsp;&nbsp;% of our outstanding stock, have entered into lock-up agreements
with the underwriters. Under these agreements, subject to certain exceptions and limited extensions in certain circumstances, we may not issue any new shares of common stock, and those holders of
stock may not, directly or indirectly, offer, sell, contract to sell, pledge, or otherwise transfer, dispose of or hedge any shares of our common stock or securities convertible into or exchangeable
for shares of our common stock, or publicly announce the intention to do any of the foregoing, without the prior written consent of Lehman Brothers&nbsp;Inc. and UBS Securities LLC for a period of
180&nbsp;days from the date of this prospectus. This consent may be given at any time without public notice. In addition, during this 180&nbsp;day period, we have also agreed not to file any
registration statement for the registration of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock (other than on Form&nbsp;S-8)
without the prior written consent of Lehman Brothers&nbsp;Inc. and UBS Securities LLC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the purpose of underwriters to comply with NASD Rule&nbsp;2711(f)(4), if (i)&nbsp;we issue an earnings release or material news or a material event relating to us occurs during
the last 17&nbsp;days of the 180-day lock-up period, or (ii)&nbsp;prior to the expiration of the 180-day lock-up period, we announce that we will
release earnings results during the 16-day period beginning on the last day of the 180-day lock-up period, then in each case, the restrictions applicable during the
180-day lock-up period, unless otherwise waived in writing by Lehman Brothers&nbsp;Inc. and UBS Securities LLC in their sole discretion, will continue to apply until the
expiration
of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event. </FONT></P>


<P><FONT SIZE=2><B>Offering Price Determination  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to this offering, there has been no public market for our common stock. The initial public offering price will be negotiated between the representatives and
us. In determining the initial public offering price of our common stock, the representatives will consider: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
history and prospects for the industry in which we compete,
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>our
financial information,
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
ability of our management and our business potential and earning prospectus,
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
prevailing securities markets at the time of this offering, and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
recent market prices of, and the demand for, publicly traded shares of generally comparable companies. </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2><B>Indemnification  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act and to contribute to payments that the
underwriters may be required to make for these liabilities. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>82</FONT></P>

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<P><FONT SIZE=2><B>Stabilization, Short Positions and Penalty Bids  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The representatives may engage in stabilizing transactions, short sales and purchases to cover positions created by short sales, and penalty bids or purchases for
the purpose of pegging, fixing or maintaining the price of our common stock, in accordance with Regulation&nbsp;M under the Exchange Act: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Stabilizing
transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>A
short position involves a sale by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase in the offering, which creates a
syndicate short position. This short position may be either a covered short position or a naked short position. In a covered short position, the number of shares involved in the sale made by the
underwriters in excess of the number of shares they are obligated to purchase is not greater than the number of shares that they may purchase by exercising their option to purchase additional shares.
In a naked short position, the number of shares involved is greater than the number of shares in their option to purchase additional shares. The underwriters may close out any short position by either
exercising their option to purchase additional shares and/or purchasing shares in the open market. In determining the source of shares to close out the short position, the underwriters will consider,
among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through their option to purchase additional shares. A naked
short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely
affect investors who purchase in the offering.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Syndicate
covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short
positions.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Penalty
bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in
a stabilizing or syndicate covering transaction to cover syndicate short positions. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or
retarding a decline in the market price of our common stock. As a result, the price of the common stock may be higher than the price that might otherwise exist in the open market. These transactions
may be effected on the NASDAQ National Market or otherwise and, if commenced, may be discontinued at any time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of
our common stock. In addition, neither we nor any of the underwriters make representation that the representatives will engage in these stabilizing transactions or that any transaction, once
commenced, will not be discontinued without notice. </FONT></P>


<P><FONT SIZE=2><B>Electronic Distribution  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A prospectus in electronic format may be made available on the Internet sites or through other online services maintained by one or more of the underwriters
and/or selling group members participating in this offering, or by their affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter
or selling group member, prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares for sale to online brokerage account
holders. Any such allocation for online distributions will be made by the representatives on the same basis as other allocations. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>83</FONT></P>

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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
than the prospectus in electronic format, the information on any underwriter's or selling group member's website and any information contained in any other website maintained by an
underwriter or selling group member is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or
selling
group member in its capacity as underwriter or selling group member and should not be relied upon by investors. </FONT></P>

<P><FONT SIZE=2><B>NASDAQ National Market  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have applied to list our shares of common stock for quotation on the NASDAQ National Market under the symbol "AMPR." </FONT></P>

<P><FONT SIZE=2><B>Discretionary Sales  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The underwriters have informed us that they do not intend to confirm sales to discretionary accounts that exceed 5% of the total number of shares offered by them. </FONT></P>


<P><FONT SIZE=2><B>Stamp Taxes  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you purchase shares of our common stock offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of
the country of purchase, in addition to the offering price listed on the cover page of this prospectus. </FONT></P>

<P><FONT SIZE=2><B>Relationships  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The underwriters may in the future perform investment banking and advisory services for us from time to time for which they may in the future receive customary
fees and expenses. The underwriters may, from time to time, engage in transactions with or perform services for us in the ordinary course of their business. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>84</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ee1063_legal_matters"> </A>
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<BR></FONT><FONT SIZE=2><B>LEGAL MATTERS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The validity of the shares of common stock offered by this prospectus will be passed upon for us by Latham&nbsp;&amp; Watkins LLP, Los Angeles, California. Certain
legal matters in connection with this offering will be passed upon for the underwriters by Clifford Chance US LLP, New York, New York. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ee1063_experts"> </A>
<A NAME="toc_ee1063_3"> </A>
<BR></FONT><FONT SIZE=2><B>EXPERTS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ernst&nbsp;&amp; Young LLP, independent registered public accounting firm, have audited our consolidated financial statements and schedule at December&nbsp;31,
2002 and 2003, and for each of the three years in the period ended December&nbsp;31, 2003, and at September&nbsp;30, 2004 and for the nine months ended September&nbsp;30, 2004, as set forth in
their report. We've included our consolidated financial statements and schedule in the prospectus and elsewhere in the registration statement in reliance on Ernst&nbsp;&amp; Young LLP's report, given on
their authority as experts in accounting and auditing. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
financial statements for Armstrong Pharmaceuticals, Inc. as of October&nbsp;8, 2003 and December&nbsp;31, 2002 and for the period from January&nbsp;1, 2003 to October&nbsp;8,
2003 and the year ended December&nbsp;31, 2002 included in this registration statement have been so included in reliance on the report of Carlin, Charron&nbsp;&amp; Rosen,&nbsp;LLP, independent
accountants, given on the authority of said firm as experts in auditing and accounting. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ee1063_where_you_can_find_more_information"> </A>
<A NAME="toc_ee1063_4"> </A>
<BR></FONT><FONT SIZE=2><B>WHERE YOU CAN FIND MORE INFORMATION    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have filed with the SEC in Washington, D.C. a registration statement on Form&nbsp;S-1 under the Securities Act with respect to the common stock
offered in this prospectus. This prospectus, filed as part of the registration statement, does not contain all of the information set forth in the registration statement and its exhibits and
schedules, portions of which have been omitted as permitted by the rules and regulations of the SEC. For further information about us and our common stock, we refer you to the registration statement
and to its exhibits and schedules. Statements in this prospectus about the contents of any contract, agreement or other document are not necessarily complete and, in each instance, we refer you to the
copy of such contract, agreement or document filed as an exhibit to the registration statement, with each such statement being qualified in all respects by reference to the document to which it
refers. Anyone may inspect the registration statement and its exhibits and schedules without charge at the public reference facilities the SEC maintains at 450 Fifth Street, N.W., Washington, D.C.
20549. You may obtain copies of all or any part of these materials from the SEC upon the payment of certain fees prescribed by the SEC. You may obtain further information about the operation of the
SEC's Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also inspect these reports and
other information without charge at a website maintained by the SEC. The address of this site is http://www.sec.gov. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
completion of this offering, we will become subject to the informational requirements of the Exchange Act and will be required to file reports, proxy statements and other
information with the SEC. You will be able to inspect and copy these reports, proxy statements and other information at the public reference facilities maintained by the SEC and at the SEC's regional
offices at the addresses noted above. You also will be able to obtain copies of this material from the Public Reference Section of the SEC as described above, or inspect them without charge at the
SEC's website. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>85</FONT></P>

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<A NAME="toc_fa1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>Index to Combined and Consolidated Financial Statements    <BR>    </B></FONT></P>

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<TABLE WIDTH="78%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2><B>Amphastar Pharmaceuticals, Inc. Audited Consolidated Financial Statements</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2><BR>
Report of Independent Registered Public Accounting Firm</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-2</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2><BR>
Consolidated Balance Sheets as of December 31, 2002 and 2003, and September 30, 2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-3</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2><BR>
Consolidated Statements of Operations for the years ended December&nbsp;31, 2001, 2002, and 2003, and the nine months ended September&nbsp;30, 2003 (unaudited) and 2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-4</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2><BR>
Consolidated Statements of Stockholders' Equity for the years ended December&nbsp;31, 2001, 2002 and 2003, and the nine months ended September&nbsp;30, 2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-5</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2><BR>
Consolidated Statements of Cash Flows for the years ended December&nbsp;31, 2001, 2002, and 2003, and the nine months ended September&nbsp;30, 2003 (unaudited) and 2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-6</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2><BR>
Notes to Consolidated Financial Statements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-8</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><BR><FONT SIZE=2><B>Armstrong Pharmaceuticals, Inc. Audited Financial Statements</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2><BR>
Report of Independent Registered Public Accounting Firm</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-39</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2><BR>
Balance Sheets as of December 31, 2002 and October 8, 2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-40</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2><BR>
Statements of Operations for the period January 1, 2003 through October 8, 2003 and the year ended December 31, 2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-41</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2><BR>
Statements of Changes in Stockholder's Equity (Deficit) for the year ended December&nbsp;31, 2002, and for the period January&nbsp;1, 2003 through October&nbsp;8, 2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-42</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2><BR>
Statements of Cash Flows for the period January 1, 2003 through October 8, 2003 and the year ended December 31, 2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-43</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2><BR>
Notes to Consolidated Financial Statements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-44</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><BR><FONT SIZE=2><B>Amphastar Pharmaceuticals, Inc. Unaudited Pro Forma Combined Condensed Consolidated Statement of Operations</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2><BR>
Unaudited Pro Forma Combined Condensed Consolidated Statement of Operations</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-49</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2><BR>
Unaudited Pro Forma Combined Condensed Consolidated Statement of Operations for the year ended December 31, 2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-50</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="91%"><FONT SIZE=2><BR>
Notes to Unaudited Pro Forma Combined Condensed Consolidated Statement of Operations</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
F-51</FONT></TD>
</TR>
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<P ALIGN="CENTER"><FONT SIZE=2>F-1</FONT></P>

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<BR></FONT><FONT SIZE=2><B>Report of Independent Registered Public Accounting Firm    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Board of Directors and Stockholders<BR>
Amphastar Pharmaceuticals,&nbsp;Inc. </FONT></P>

<P><FONT SIZE=2>We
have audited the accompanying consolidated balance sheets of Amphastar Pharmaceuticals,&nbsp;Inc. as of December&nbsp;31, 2002 and 2003, and September&nbsp;30, 2004, and the related
consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December&nbsp;31, 2003, and for the nine months ended September&nbsp;30,
2004. Our audits also included the financial statement schedule listed at Item&nbsp;16.(b). These financial statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and schedule based on our audits. </FONT></P>

<P><FONT SIZE=2>We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing
audit procedures appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. </FONT></P>

<P><FONT SIZE=2>In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Amphastar Pharmaceuticals,&nbsp;Inc. at
December&nbsp;31, 2002 and 2003, and September&nbsp;30, 2004, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December&nbsp;31,
2003, and for the nine months ended September&nbsp;30, 2004, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related consolidated financial statement
schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. </FONT></P>

<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>

<P><FONT SIZE=2>/s/
ERNST &amp; YOUNG LLP </FONT></P>

</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>

<P><FONT SIZE=2>Orange
County, California<BR>
November&nbsp;29, 2004,<BR>
except for Notes 1, 7, and 14, as to which the date is<BR>
February&nbsp;8, 2005 </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-2</FONT></P>

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<BR></FONT><FONT SIZE=2><B>Amphastar Pharmaceuticals,&nbsp;Inc.    <BR>    <BR>    Consolidated Balance Sheets    <BR>    <BR>    (In thousands, except share and per share data)    <BR>    </B></FONT></P>

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<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>September 30,<BR>
2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 ALIGN="CENTER"><FONT SIZE=2><B>Assets</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><BR>
Current assets:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>15,543</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8,111</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>5,842</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Short-term investments ($612 is restricted in 2002 and 2003, $1,723 is restricted in 2004)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,673</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>612</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,723</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Accounts receivable, net of allowance for doubtful accounts of $257 in 2002; $433 in 2003 and $475 in 2004</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,773</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9,087</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>7,241</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Inventories, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>11,116</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>14,438</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>20,209</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Prepaid expenses and other assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>573</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,051</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,489</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Total current assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>36,678</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>33,299</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>37,504</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><BR>
Property, plant, and equipment, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
48,617</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
53,062</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
67,423</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Product rights, net of accumulated amortization of $918 in 2003 and $2,415 in 2004</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>26,217</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>26,720</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Other assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,138</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>693</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>721</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Total assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>86,433</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>113,271</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>132,368</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 ALIGN="CENTER"><BR><FONT SIZE=2><B>Liabilities and stockholders' equity</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><BR>
Current liabilities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Accounts payable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,276</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,468</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>4,718</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Accrued liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>962</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,914</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>3,895</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Accrued wholesaler chargebacks</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,449</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,982</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>3,259</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Current portion of product return accrual</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>196</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>412</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>379</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Accrued payroll and related benefits</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,434</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,106</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,525</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Current portion of deferred royalty payments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,630</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,338</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Current portion of long-term debt and capital leases</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>908</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>13,212</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>9,459</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Total current liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>7,225</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>25,724</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>26,573</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><BR>
Product return accrual, net of current portion</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
196</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
464</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
423</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Deferred royalty payments, net of current portion</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,815</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>3,614</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Long-term debt and capital leases, net of current portion</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,189</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8,392</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>18,522</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Total liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>10,610</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>39,395</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>49,132</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><BR>
Commitments and contingencies</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><BR>
Stockholders' equity:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Preferred Stock, par value $.0001, Authorized shares&#151;20,000,000, no shares outstanding</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Common stock, par value $.0001: Authorized shares&#151;100,000,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="53%"><FONT SIZE=2>Issued and outstanding shares&#151;32,830,110 in 2002 and 33,808,300 in 2003, and 35,109,740 in 2004</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Common stock to be issued</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>419</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Additional paid-in capital</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>86,839</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>88,398</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>104,758</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Receivable from stockholders</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(110</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Accumulated deficit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(11,329</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(14,526</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(21,526</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Total stockholders' equity</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>75,823</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>73,876</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>83,236</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Total liabilities and stockholders' equity</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>86,433</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>113,271</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>132,368</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See accompanying notes. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-3</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=91,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=12168,FOLIO='F-3',FILE='DISK034:[05BHL3.05BHL1063]FD1063A.;11',USER='RFARRIN',CD='11-FEB-2005;00:10' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fe1063_1_4"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fe1063_amphastar_pharmaceuticals,_inc__amp04434"> </A>
<A NAME="toc_fe1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>Amphastar Pharmaceuticals,&nbsp;Inc.    <BR>    <BR>    Consolidated Statements of Operations    <BR>    <BR>    (In thousands, except share and per share data)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Years ended December 31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Nine Months Ended<BR>
September 30,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Net revenues</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>32,373</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>33,045</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>48,197</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>31,527</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>42,622</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Cost of revenues</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>22,969</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>22,528</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>35,508</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>23,160</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>34,327</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9,404</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>10,517</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>12,689</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8,367</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>8,295</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
Operating expenses:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2>Selling, distribution, and marketing</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,332</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,289</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,194</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,427</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,571</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2>General and administrative</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6,132</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,196</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>5,349</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,406</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6,100</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2>Research and development</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,629</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,979</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6,344</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,843</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>6,241</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2>Impairment of long-lived assets</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>623</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>126</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>185</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2>Management fees and rent expense&#151;related party</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>125</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>138</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>921</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>617</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>147</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Total operating expenses</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>11,218</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>12,602</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>16,431</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>11,419</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>15,244</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Loss from operations</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,814</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(2,085</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(3,742</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(3,052</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(6,949</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2><BR>
Non-operating income (expense):</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2>Interest income</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>448</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>174</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>148</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>43</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2>Interest expense</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(104</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(59</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(767</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(444</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(648</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2>Other income (expense)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(135</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(206</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(203</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(28</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>554</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>161</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>183</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(796</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(324</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(51</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Net loss before extraordinary gain</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,653</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,902</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(4,538</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(3,376</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(7,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Extraordinary gain, net of taxes</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,341</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,653</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(1,902</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(3,197</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(3,376</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(7,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Net loss per share before extraordinary gain: basic and diluted</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.06</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.06</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.14</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.10</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.20</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Net loss per share: basic and diluted</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.06</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.06</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.10</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.10</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(0.20</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Weighted-average shares outstanding: basic and diluted</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>26,741,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>31,592,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>33,520,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>33,425,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>34,403,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-4</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=92,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=858143,FOLIO='F-4',FILE='DISK034:[05BHL3.05BHL1063]FE1063A.;8',USER='RFARRIN',CD='11-FEB-2005;00:10' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->

<P><FONT SIZE=2><A
NAME="page_ff1063_1_5"> </A> </FONT></P>

<!-- TOC_END -->

<!-- COMMAND=ROTATED_TABLE WIDTH="150%" -->

<P ALIGN="CENTER"><FONT SIZE=2><B>Amphastar Pharmaceuticals,&nbsp;Inc.<BR>
Consolidated Statements of Stockholders' Equity<BR>
(In thousands, except share and per share data)  </B></FONT></P>

<A NAME="ff1063_consolidated_statements_of_stockholders__equity"> </A>
<A NAME="toc_ff1063_1"> </A>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="150%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Common stock</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" ROWSPAN=3><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Accumulated<BR>
other<BR>
comprehensive<BR>
income (loss)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Common<BR>
stock<BR>
to be issued</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Additional<BR>
paid-in<BR>
capital</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Receivable<BR>
from<BR>
stockholders</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Accumulated<BR>
deficit</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Balance at December 31, 2000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>26,105,522</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>3</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>49,704</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(7,774</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(394</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>41,539</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Comprehensive loss:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="1%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=1>Net loss</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1,653</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>(1,653</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="1%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=1>Unrealized gain on marketable securities</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>128</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>128</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Total comprehensive loss</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>(1,525</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Common stock issued for cash</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>974,500</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>7,796</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(40</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>7,756</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Common stock issued for consulting services</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>27,600</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>138</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>138</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Common stock issued for equipment&#151;related party</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>973,986</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>1,461</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(171</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>1,290</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Exercise of stock options, net</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>996,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>1,494</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1,034</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>460</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Balance at December 31, 2001</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>29,077,608</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>3</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>60,593</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1,245</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(9,427</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>(266</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>49,658</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Comprehensive loss:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="1%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=1>Net loss</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(1,902</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>(1,902</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="1%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=1>Reclassification adjustment for net realized loss included in net loss</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>266</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>266</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Total comprehensive loss</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>(1,636</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Common stock issued for cash</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>3,130,602</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>1</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>25,044</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>25,045</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Common stock issued for consulting services</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>24,790</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>136</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>136</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Common stock to be issued for equipment and services&#151;related party</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>419</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>419</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Receivable repaid with equipment</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>171</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>171</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Stock-based compensation expense</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>170</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>170</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Repayment of notes receivable from stockholders</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>1,074</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>1,074</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Exercise of stock options, net</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>597,110</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>896</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(110</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>786</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Balance at December 31, 2002</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>32,830,110</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>4</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>419</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>86,839</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(110</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(11,329</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>75,823</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Net loss and comprehensive loss</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(3,197</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>(3,197</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Common stock issued for consulting services</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>4,200</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>33</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>33</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Common stock issued for equipment and services&#151;related party</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>973,990</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>(419</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>1,461</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>1,042</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Stock-based compensation expense</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>65</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>65</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Repayment of notes receivable from stockholders</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>110</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>110</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Balance at December 31, 2003</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>33,808,300</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>4</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>88,398</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(14,526</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>73,876</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Net loss and comprehensive loss</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(7,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>(7,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Common stock issued for cash</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>1,250,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>15,625</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>15,625</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Exercise of stock options, net</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>50,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>400</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>400</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Common stock issued for consulting services</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>1,440</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>18</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>18</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Stock-based compensation expense</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>317</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>317</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=1>Balance at September 30, 2004</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>35,109,740</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=1>4</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=1>104,758</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=1>(21,526</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>)</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=1>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>$</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=1>83,236</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See accompanying notes. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-5</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=93,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=155998,FOLIO='F-5',FILE='DISK034:[05BHL3.05BHL1063]FF1063A.;10',USER='RFARRIN',CD='11-FEB-2005;00:10' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fg1063_1_6"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fg1063_amphastar_pharmaceuticals,_inc__amp03183"> </A>
<A NAME="toc_fg1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>Amphastar Pharmaceuticals,&nbsp;Inc.    <BR>    <BR>    Consolidated Statements of Cash Flows    <BR>    <BR>    (In thousands)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="97%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Years ended<BR>
December 31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Nine months ended<BR>
September 30,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Operating activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(1,653</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,902</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(3,197</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(3,376</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(7,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Adjustments to reconcile net loss to net cash provided by (used in) operating activities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Extraordinary gain, net of tax effect</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,341</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Impairment of long-lived assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>623</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>126</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>185</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Gain on disposal of property, plant, and equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(132</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Depreciation and amortization of property, plant, and equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>651</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>941</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,541</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,612</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,928</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Accretion of product rights obligation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>420</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>214</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>524</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Amortization of product rights and patents</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>924</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>457</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,497</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Loss on marketable securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>268</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Common stock issued or to be issued in lieu of cash for consulting and other services</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>138</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>520</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>906</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>590</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>18</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Provision for doubtful accounts</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>479</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(244</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>176</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>119</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>192</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Stock-based compensation expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>170</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>65</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>25</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>317</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Changes in operating assets and liabilities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="34%"><FONT SIZE=2>Accounts receivable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(1,241</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>488</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(5,024</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(1,731</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,654</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="34%"><FONT SIZE=2>Inventories, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,277</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(3,700</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,092</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(949</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(5,771</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="34%"><FONT SIZE=2>Prepaid expenses and other assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(98</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(59</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(420</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(317</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="34%"><FONT SIZE=2>Receivable from stockholders</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(37</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>37</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(424</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="34%"><FONT SIZE=2>Accounts payable and accrued expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>779</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(538</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3,436</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,796</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>4,853</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net cash provided by (used in) operating activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>295</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(4,019</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,201</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>459</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,052</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Investing activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Sales (purchases) of marketable securities and short-term investments, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>3,645</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(481</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,061</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2,965</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,111</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Acquisition of product rights</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(16,400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(16,400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Acquisition of business</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(3,200</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Purchases of property, plant, and equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(3,735</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(3,805</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2,618</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(2,151</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(14,375</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Capitalized labor and overhead on self-constructed assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(3,363</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(3,040</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(4,298</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(3,740</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,779</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Proceeds from the sale of property, plant, and equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,443</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Other assets, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>263</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(740</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(34</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(32</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(28</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net cash used in investing activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(3,190</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(8,066</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(21,489</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(19,358</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(17,850</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- insert table folio -->
<P ALIGN="CENTER"><FONT SIZE=2>F-6</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=94,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=883830,FOLIO='F-6',FILE='DISK034:[05BHL3.05BHL1063]FG1063A.;9',USER='KSOLTER',CD='11-FEB-2005;00:37' -->
<A NAME="page_fg1063_1_7"> </A>
<!-- end of table folio -->
<TABLE WIDTH="97%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Financing activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Proceeds from issuance of common stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>7,756</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>25,045</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>15,625</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net borrowings under line of credit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,200</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,200</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Proceeds from issuance of long-term debt</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,950</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,833</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Principal payments on long-term debt</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(463</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(12,313</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(899</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(674</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,611</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Proceeds from exercise of common stock options</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>460</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>786</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>400</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Deferred offering costs</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,121</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Repayment of notes receivable from stockholders</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,074</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>110</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>110</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Due to/from affiliate</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(563</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Proceeds from deferred royalty</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>5,905</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>8,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Payments on deferred royalty</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(555</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(1,493</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net cash provided by financing activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>15,045</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>14,592</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>12,856</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10,636</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>16,633</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Net increase (decrease) in cash and cash equivalents</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>12,150</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,507</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(7,432</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(8,263</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(2,269</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Cash and cash equivalents, beginning of year</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>886</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>13,036</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>15,543</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>15,543</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>8,111</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Cash and cash equivalents, end of year</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>13,036</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>15,543</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>8,111</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,280</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,842</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Noncash investing and financing activities</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Equipment acquired in exchange for note receivable or common stock issued in 2001</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,290</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>171</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>169</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>169</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Equipment acquired under capital leases</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>32</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>568</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>22</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>22</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Property, plant, and equipment acquired under financing agreements</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,782</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,029</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>680</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2,632</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Unrealized gain on marketable securities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(128</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Common stock issued for notes receivable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>110</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Common stock to be issued for equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>35</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Purchase of product rights with financing arrangements</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(10,735</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(10,735</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2><B>Supplemental cash flow information</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Interest paid</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>654</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>481</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>767</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>233</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>396</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Income taxes paid</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>See
accompanying notes. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-7</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fi1063_1_8"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fi1063_amphastar_pharmaceuticals,_inc__amp09915"> </A>
<A NAME="toc_fi1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>Amphastar Pharmaceuticals,&nbsp;Inc.    <BR>    <BR>    Notes to Consolidated Financial Statements    <BR>    <BR>    Years Ended December&nbsp;31 2001, 2002 and 2003 and Nine Months Ended<BR>  September&nbsp;30, 2003
(Unaudited) and 2004    <BR>    <BR>    (Information pertaining to the nine months ended September 30, 2003 is unaudited)<BR>  (In thousands, except share and per share data)    <BR>
</B></FONT></P>

<P><FONT SIZE=2><B>1. Description of the Business  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amphastar Pharmaceuticals,&nbsp;Inc., a California corporation, was incorporated on February&nbsp;29, 1996 and merged with and into Amphastar
Pharmaceuticals,&nbsp;Inc., a Delaware corporation (the "Company" or "Amphastar") in July 2004. The Company is a fully integrated specialty pharmaceutical company that develops, manufactures,
markets and sells generic and proprietary injectable and inhalation products. Most of the Company's products are used in hospital or urgent care clinical settings and are primarily contracted and
distributed through group purchasing organizations and drug wholesalers. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company generated net losses for the years ended December&nbsp;31, 2001, 2002, and 2003, and the nine months ended September&nbsp;30, 2004, and has an accumulated deficit of
$21,526 as of September&nbsp;30, 2004. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
February&nbsp;4, 2005, the Company received $10,000 in cash from a private placement and on February&nbsp;8, 2005, the Company obtained a $3,440 equipment lease line
(Note&nbsp;14). The Company expects that cash received from these sources, along with additional revenues and cash flows from the re-launch of Cortrosyn in August&nbsp;2004, the launch
of Amphadase in November&nbsp;2004, and the launch of Epinephrine Mist in December&nbsp;2004 will significantly improve the profitability and cash
flows of the Company, and when combined with the cash flow from its existing products, the Company expects to continue to meet its obligations as they become due, including scheduled debt and lease
payments. The Company also expects additional cash flows in the form of upfront and milestone payments from strategic alliances. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the cash flows from operations is not sufficient to meet the Company's obligations as they come due, then the Company may seek to re-schedule debt payments and/or seek
additional equity and debt financing. No assurance can be given that alternative sources of sufficient financing would be available on acceptable terms, or at all. If the Company is not able to
re-schedule debt payments and/or obtain funding from these financing activities, the Company will consider postponing research and development expenditures and postpone the acquisition of
property, plant, and equipment. The Company expects that it will be able to meet its cash flows requirements for at least the next twelve months. </FONT></P>

<P><FONT SIZE=2><B>2. Summary of Significant Accounting Policies  </B></FONT></P>

<P><FONT SIZE=2><B>Principles of Consolidation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, International Medication Systems,
Limited ("IMS") and Armstrong Pharmaceuticals,&nbsp;Inc. ("Armstrong"). The Company acquired Armstrong in October&nbsp;2003, and the 2003 financial statements include the accounts of Armstrong
since October&nbsp;9, 2003, the date of acquisition. All significant intercompany transactions and balances have been eliminated in consolidation. </FONT></P>

<P><FONT SIZE=2><B>Unaudited Interim Results  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The accompanying financial statements for the nine months ended September&nbsp;30, 2003 are unaudited. The unaudited interim consolidated financial statements
have been prepared on the same </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-8</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_fi1063_1_9"> </A>
<BR>

<P><FONT SIZE=2>basis
as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments to present fairly the Company's
financial position at September&nbsp;30, 2003 and the results of operations and cash flows for the nine month periods ended September&nbsp;30, 2003, in accordance with U.S. generally accepted
accounting principles. The financial data and other information disclosed in these notes to the consolidated financial statements related to the nine month period ended September&nbsp;30, 2003 is
unaudited. The results for the nine month period ended September&nbsp;30, 2004 are not necessarily indicative of the results to be expected for the year ended December&nbsp;31, 2004 or for any
other interim period or for any other future year. </FONT></P>


<P><FONT SIZE=2><B>Use of Estimates  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. </FONT></P>

<P><FONT SIZE=2><B>Revenue Recognition  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's net revenues consist principally of product revenue generated from the sales of its pharmaceutical products. Product sales represented 99%, 98% and
96% of the Company's total net revenues for the years ended December&nbsp;31, 2001, 2002, and 2003, respectively. Product sales represented 97% and 97% of the Company's net revenues for the nine
months ended September&nbsp;30, 2003 (unaudited) and 2004, respectively. Remaining revenues are derived principally from contract manufacturing services, which are recognized when development and
other services are provided or manufactured third-party products are shipped to customers and customer acceptance is received. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
accordance with Securities and Exchange Commission ("SEC") Staff Accounting Bulletin ("SAB") No.&nbsp;101, </FONT><FONT SIZE=2><I>Revenue Recognition in Financial
Statements</I></FONT><FONT SIZE=2> ("SAB 101"), as well as the recently issued SAB No.&nbsp;104, </FONT><FONT SIZE=2><I>Revenue Recognition</I></FONT><FONT SIZE=2>, the Company recognizes product
revenue when the following fundamental criteria are met: (i)&nbsp;persuasive evidence, (ii)&nbsp;transfer of title has occurred, (iii)&nbsp;the price to the customer
is fixed or determinable, and (iv)&nbsp;collection of the resulting receivable is reasonably assured. In addition, the Company does not recognize revenue until all customer acceptance requirements
have been met. Generally, revenue is recognized at the time of product delivery for domestic customers and the time of product shipment for foreign customers. The Company estimates and records
reductions to revenue for estimated product returns and pricing adjustments, such as wholesaler chargebacks, in the same period that the related revenue is recorded. </FONT></P>

<P><FONT SIZE=2><B>Shipping and Handling Costs  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the years ended December&nbsp;31, 2001, 2002, and 2003, and the nine months ended September&nbsp;30, 2003 (unaudited) and 2004, the Company included
shipping and handling costs of </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-9</FONT></P>

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<P style='page-break-before:always'></p>
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<A NAME="page_fi1063_1_10"> </A>
<BR>

<P><FONT SIZE=2>approximately
$775, $897, $1,938, $1,537, and $1,541, respectively, in selling, distribution, and marketing expenses in the accompanying consolidated statements of operations. </FONT></P>

<P><FONT SIZE=2><B>Comprehensive Loss  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the years ended December&nbsp;31, 2001, 2002, and 2003, and the nine months ended September&nbsp;30, 2003 (unaudited) and 2004, the Company has
comprehensive losses as defined by Financial Accounting Standards Board ("FASB") Statement No.&nbsp;130, </FONT><FONT SIZE=2><I>Reporting Comprehensive Income,</I></FONT><FONT SIZE=2> of $(1,525),
$(1,636), $(3,197), $(3,376), and $(7,000), respectively. For the years ended December&nbsp;31, 2001 and 2002, comprehensive loss consists of the net loss and changes in unrealized gains or losses
on marketable securities. For the year ended December&nbsp;31, 2003, and the nine months ended September&nbsp;30, 2003 (unaudited) and 2004, net loss equals comprehensive loss. </FONT></P>

<P><FONT SIZE=2><B>Cash and Cash Equivalents and Short-Term Investments  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents consist of cash and highly liquid investments purchased with maturities of three months or less. The Company's short-term
investments are classified as held-to-maturity and consist of certificates of deposit purchased with maturities greater than three months, which mature within one year of the
date of purchase. Included in short-term investments are certificates of deposit, which are used either as collateral to support a line of credit for a capital lease for equipment
(Note&nbsp;10) or is required for the Company to qualify for worker's compensation self insurance. The estimated fair value of each investment approximated its amortized cost and, therefore, there
were no significant unrealized gains or losses. </FONT></P>

<P><FONT SIZE=2><B>Allowance for Doubtful Accounts Receivable  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company evaluates the collectibility of trade accounts receivable based on a combination of factors. In cases where the Company is aware of circumstances that
may impair a specific customer's ability to meet its financial obligations subsequent to the original sale, the Company will record a specific allowance against amounts due, and thereby reduce the net
recognized receivable to the amount the Company reasonably believes will be collected. For all other customers, the Company recognizes an allowance for doubtful accounts based on the length of time
the receivables are past due, industry and geographic concentrations, the current business environment and the Company's historical experience. </FONT></P>

<P><FONT SIZE=2><B>Inventories  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories are stated at the lower of cost or market, using the first-in, first-out method. Provision is made for slow moving, unsalable
or obsolete items. Inventories consist of currently marketed products, products manufactured under contract and product candidates awaiting regulatory approval (i.e., pre-launch
inventories), which are capitalized, based on management's judgment of probable near-term commercialization. As of December&nbsp;31, 2003, and in prior periods, the Company had an </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-10</FONT></P>

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<BR>

<P><FONT SIZE=2>insignificant
amount of inventory awaiting regulatory approval. At September&nbsp;30, 2004, inventory awaiting regulatory approval was $5,163. In the event regulatory approval is not obtained, the
Company will expense these inventory amounts. </FONT></P>


<P><FONT SIZE=2><B>Property, Plant, and Equipment  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property, plant, and equipment are stated at cost or in the case of assets acquired in a business combination at fair value. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the related assets as follows: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Buildings</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>31 years</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Machinery and equipment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>5-12 years</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Furniture, fixtures and automobiles</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>5 years</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Leasehold improvements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>Lesser of remaining lease term or 31 years</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Labor
and overhead costs, including those incurred in connection with initial validation to meet regulatory requirements and readying assets for their intended use, are capitalized as
part of the effort required to acquire and construct long-lived assets and are amortized over the estimated useful life. During the years ended 2001, 2002, and 2003 and nine months ended
September&nbsp;30, 2003 (unaudited) and 2004, the Company capitalized interest, labor, and overhead costs of $3,363, $3,040, $4,298, $3,740 and $1,779, respectively. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Expenditures
for repairs, maintenance and minor renewals and betterments are charged to expense as incurred. The Company capitalizes interest on financing related to
self-constructed assets during the time period required to get the asset ready for its intended use. </FONT></P>

<P><FONT SIZE=2><B>Product Rights  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product rights are amortized on a straight-line basis over their estimated useful lives ranging from 5 to 15&nbsp;years. </FONT></P>

<P><FONT SIZE=2><B>Other Assets  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Included in other assets are intangible assets, deposits for equipment, and marketable securities. Intangible assets, consisting of patents and trademarks, are
amortized on a straight-line basis over their estimated useful lives, generally ranging from 11 to 20&nbsp;years. The gross carrying amount of the patents and trademarks as of
December&nbsp;31, 2002, 2003 and September&nbsp;30, 2004 was $321, $344 and $368, respectively. The accumulated amortization of the patents and trademarks as of December&nbsp;31, 2002, 2003 and
September&nbsp;30, 2004 was $21, $29 and $32, respectively. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Marketable
equity securities, classified as available-for-sale, are carried at fair value, with the unrealized gains and losses, net of tax, reported in a
separate component of stockholders' equity. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-11</FONT></P>

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<BR>

<P><FONT SIZE=2>securities
are included in other income. The cost of securities sold is based on the specific-identification method. Interest and dividends on securities classified as
available-for-sale are included in other income. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2001, the Company held marketable securities with a recorded cost of $273, which was offset by an unrealized loss of $266, which was included as a separate component of stockholders'
equity. In 2002, the Company determined the value of the marketable securities was permanently impaired. The total realized loss of $268 on marketable securities was recognized in 2002, including the
$266 recorded as a net adjustment to unrealized loss on available-for-sale securities. There were no marketable securities purchased or sold in 2002, 2003, and 2004. Proceeds
from the sale of marketable securities in 2001 were $2,124. </FONT></P>

<P><FONT SIZE=2><B>Impairment of Long-Lived Assets  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company reviews long-lived assets and certain identifiable assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, further impairment analysis is performed.
An impairment loss is measured as the amount by which the carrying amount exceeds the fair value of the assets (assets to be held and used) or fair value less cost to sell (assets to be disposed of).
The Company recorded an impairment loss of $623, $126 and $185, respectively, for the year ended December&nbsp;31, 2003, the nine months ended September&nbsp;30, 2003 (unaudited) and the nine
months ended September&nbsp;30, 2004. </FONT></P>

<P><FONT SIZE=2><B>Accrual for Wholesaler Chargebacks  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of the Company's sales terms to wholesale customers, it agrees to reimburse wholesalers for differences between the gross sales price of products sold to
wholesalers and expected retail prices of such products under contractual arrangements with third parties such as hospitals and group purchasing organizations. The Company estimates wholesaler
chargebacks, at the time of sale based on the terms
of agreements with customers and historical experience. Accrued wholesaler chargebacks were $2,449, $3,982, and $3,259 as of December&nbsp;31, 2002 and 2003, and September&nbsp;30, 2004,
respectively. </FONT></P>

<P><FONT SIZE=2><B>Accrual for Product Returns  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company offers certain distributors the right to return qualified excess or expired stock ("qualified returns") for credit. During 2001, 2002 and up through
June&nbsp;2003, qualified returns were accepted up to six months from the date of shipment and three months before and after the expiration date for credits ranging from 50% to 75% of the original
selling price. Beginning effective as early as July&nbsp;1, 2003, pursuant to revised terms with the Company's distributors, qualified returns were expanded to include [new product
lines] and will be accepted in certain instances up to 12&nbsp;months from the date of shipment and six months before and after the expiration date for credits ranging from 80% </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-12</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=5,SEQ=100,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=648526,FOLIO='F-12',FILE='DISK034:[05BHL3.05BHL1063]FI1063A.;24',USER='RFARRIN',CD='11-FEB-2005;04:08' -->
<A NAME="page_fi1063_1_13"> </A>
<BR>

<P><FONT SIZE=2>to
90% of the current list price. The Company estimates amounts that may be incurred under its product return policies and records an accrual in the amount of such costs at the time product revenue is
recognized. The accrual for estimated product returns is based, in part, upon the historical relationship of product returns to sales, but also considers amended contract terms. The Company classifies
a portion of the accrual as a long-term obligation to reflect qualified sales, which do not become eligible for return credit under the policy until one year after the balance sheet date.
During 2002, the Company reduced the sale return percentage from approximately 0.9% of qualified sales in 2001 to 0.4% of qualified sales in 2002 based upon experience rates, resulting in a reduction
in the accrual of approximately $400, which was recorded as an increase in revenues. During 2003, the Company increased its sales return percentage from 0.4% to 0.7% of qualified sales as a result of
changes in wholesaler contract terms, resulting in an increase in the accrual of approximately $457, which was recorded as a decrease in revenues. During the nine months ended September&nbsp;30,
2004, the Company decreased it sales return percentage from 0.7% to 0.5% of qualified sales as a result of changes in wholesaler contract terms resulting in a decrease in the accrual of approximately
$299 from December&nbsp;31, 2003 to September&nbsp;30, 2004. </FONT></P>

<P><FONT SIZE=2><B>Research and Development Costs  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development costs, including clinical trial costs, are charged to expense as incurred. </FONT></P>

<P><FONT SIZE=2><B>Income Taxes  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company utilizes the liability method of accounting for income taxes as set forth in Statement of Financial Accounting Standards No.&nbsp;109, </FONT> <FONT SIZE=2><I>Income
Taxes</I></FONT><FONT SIZE=2> ("SFAS&nbsp;109"). Under the liability method, deferred taxes are determined based on the temporary differences between the financial
statements and tax bases of assets and liabilities using enacted tax rates. A valuation allowance is recorded when it is more likely than not that the deferred tax assets will not be realized. </FONT></P>

<P><FONT SIZE=2><B>Stock-based Compensation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As permitted by Statement of Financial Accounting Standards No.&nbsp;123, </FONT><FONT SIZE=2><I>Accounting for Stock-Based
Compensation</I></FONT><FONT SIZE=2>("SFAS&nbsp;123"), and as amended by No.&nbsp;148, </FONT><FONT SIZE=2><I>Accounting for Stock-Based Compensation&#151;Transition and
Disclosure</I></FONT><FONT SIZE=2>, the Company accounts for stock options granted to its employees and non-employee members of the Board of Directors in accordance with Accounting
Principles Board Opinion No.&nbsp;25, </FONT><FONT SIZE=2><I>Accounting for Stock Issued to Employees</I></FONT><FONT SIZE=2> ("APB 25"), and related interpretations. Under APB 25, no compensation
expense is recorded if the exercise price of the stock options is equal to or greater than the market price of the underlying stock on the date of grant. Options granted to nonemployees have been
accounted for at deemed fair market value in accordance with SFAS&nbsp;123. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
weighted-average minimum value of options granted to employees during the years ended 2001, 2002, 2003, and during the nine months ended September&nbsp;30, 2003 (unaudited) and
2004 was $2.22, $1.09, $0.64, $0.37 and $1.75, respectively. Had compensation cost for grants of stock-based </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-13</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=6,SEQ=101,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=659867,FOLIO='F-13',FILE='DISK034:[05BHL3.05BHL1063]FI1063A.;24',USER='RFARRIN',CD='11-FEB-2005;04:08' -->
<A NAME="page_fi1063_1_14"> </A>
<BR>

<P><FONT SIZE=2>compensation
to employees and non-employee members of the Board of Directors been determined using the fair value method of accounting as prescribed by SFAS&nbsp;123, the Company's net
loss and loss per share would have been increased to the pro forma amounts indicated below: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="89%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended December 31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Nine Months<BR>
Ended<BR>
September&nbsp;30,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Net loss, as reported</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(1,653</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(1,902</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(3,197</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(3,376</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(7,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Add: Stock-based employee compensation expenses included in reported net loss, net of related tax effects</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>169</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>65</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>25</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>317</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Deduct: Total stock-based employee compensation expense determined under the fair value based method for all awards, net of related tax effects</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(794</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(773</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(508</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(363</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(588</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Pro forma net loss</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(2,447</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(2,506</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(3,640</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(3,714</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(7,271</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Net loss per common share:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>Basic and diluted&#151;as reported</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(.06</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(.06</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(.10</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(.10</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(.20</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>Basic and diluted&#151;pro forma</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(.09</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(.08</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(.11</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(.11</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(.21</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of pro forma disclosures, the estimated fair value of the employee options is amortized to expense over the options' vesting period.
Under SFAS&nbsp;123, the fair value of stock based awards to employees is calculated through the use of option-pricing models (minimum-value option pricing model) even though such models were
developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions. Because the Company's employee options have characteristics significantly different
from those of traded options, and because changes in subjective input assumptions can materially affect fair value estimates, in management's opinion, the existing models do not necessarily provide a
single reliable measure of the fair value of its employee stock options. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
purposes of determining the pro forma effect under SFAS&nbsp;123 of stock options granted to employees and directors, the fair value of each option is estimated on the date of
grant based on the minimum value option pricing model with the following assumptions: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="81%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="52%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended<BR>
December 31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Nine Months Ended<BR>
September 30,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="52%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="52%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Risk-free interest rate</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>6&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>5&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>3&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>4&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Dividend yield</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>0&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>0&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>0&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>0&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>0&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="52%"><FONT SIZE=2>Expected life in years</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>3.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>3.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>3.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3.5</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>4.4</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<P ALIGN="CENTER"><FONT SIZE=2>F-14</FONT></P>

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<P><FONT SIZE=2><A
NAME="page_fk1063_1_15"> </A> </FONT></P>

<P><FONT SIZE=2><B>Financial Instruments  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The carrying amounts of cash and cash equivalents, short-term investments, accounts receivable, accounts payable, accrued expenses and
short-term borrowings approximate fair value due to the short maturity of these items. The carrying amount of long-term borrowings approximates fair value, as the stated
borrowing rates are comparable to rates currently offered to the Company for instruments with similar maturities. </FONT></P>

<P><FONT SIZE=2><B>Net Loss Per Share  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company computes net loss per share in accordance with Statement of Financial Accounting Standards No.&nbsp;128, </FONT><FONT SIZE=2><I>Earnings Per
Share</I></FONT><FONT SIZE=2> ("SFAS&nbsp;128"). SFAS&nbsp;128 requires the presentation of basic and diluted income (loss) per-share amounts. Basic income (loss) per share is
calculated based upon the weighted average number of common shares outstanding during the period, while diluted income (loss) per share also gives effect to all potential dilutive common shares
outstanding during the period such as options and warrants. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
the Company reported net losses for the three years ended December&nbsp;31, 2001, 2002 and 2003 and for the nine months ended September&nbsp;30, 2003 and 2004, the diluted net
loss per share, as reported, is the same as basic net loss per share. The effect of the assumed exercise of stock options and warrants is antidilutive and not included in the Company's reported net
loss per share. Total options and warrants which are not included in the net loss per share, because they are anti-dilutive, were 3,060,644, 3,970,234, 4,490,334, 4,451,834 and 5,067,654
in 2001, 2002, 2003, and the nine months ended September&nbsp;30, 2003 (unaudited) and 2004, respectively. </FONT></P>

<P><FONT SIZE=2><B>Segment Reporting  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's business is the development, manufacture and marketing of pharmaceutical products. The Company has determined that all of our operations have
similar economic characteristics and may be aggregated into a single operational segment for reporting purposes. </FONT></P>


<P><FONT SIZE=2><B>Concentrations of Business and Credit Risk  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's financial instruments that potentially subject the Company to credit risk consist principally of trade accounts receivables. Sales to the Company's
customers are generally made with net 30-day terms. The Company performs periodic credit evaluations of its ongoing customers and does not generally require collateral. For the years ended
December&nbsp;31, 2001, 2002 and 2003, and the nine months ended September&nbsp;30, 2003 and 2004, four wholesalers represented approximately 40%, 40%, 58%, 64% and 48% of net sales, respectively.
As of December&nbsp;31, 2002 and 2003 and September&nbsp;30, 2003 and 2004, 78%, 55%, 72% and 72% of net accounts receivable, respectively, were from these four wholesalers. However, there are no
sales commitments with these wholesalers and there are various other customers who could purchase these products at comparable terms. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-15</FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign
sales represent sales of products to non-U.S. customers. Revenues from foreign sales in 2001, 2002 and 2003 were approximately 15%, 13% and 5% of revenues,
respectively. Revenues from foreign sales in the nine months ended September&nbsp;30, 2003 (unaudited) and 2004 were approximately 8% and 5% of revenues, respectively. Most foreign sales are
negotiated with payment terms in U.S. dollars. Therefore, the Company has little exposure to foreign currency price fluctuations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company depends on suppliers for raw materials, active pharmaceutical ingredients, or APIs, and other components that are subject to stringent FDA requirements. Certain of these
materials may only be available from one or a limited number of sources. Establishing additional or replacement suppliers for these materials may take a substantial period of time, as suppliers must
be approved by the FDA. Further, a significant portion of raw materials may be available only from foreign sources. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the Company is unable to secure on a timely basis sufficient quantities of the materials it depends on to market its products, it could materially adversely affect the Company's
business, financial condition, and results of operations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company maintains the majority of its cash deposits and certificates of deposit at four banks. Certain bank balances exceed the amount insured by the Federal Deposit Insurance
Corporation of $100. At December&nbsp;31, 2002 and 2003 and September&nbsp;30, 2004, the Company's cash deposits and certificates of deposit at banks included in cash and cash equivalents and
short-term investments aggregated $21,216, $8,723 and $5,376, respectively. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of September&nbsp;30, 2004, approximately 5% of the Company's employees were subject to a collective bargaining agreement, assumed in connection with the acquisition of Armstrong
(Note&nbsp;3). </FONT></P>

<P><FONT SIZE=2><B>Self-Insured Claims  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective June&nbsp;1, 2004, the Company is primarily self-insured, up to certain limits, for workers' compensation claims. The Company has
purchased stop loss insurance, which will reimburse the Company for individual claims in excess of $350 annually or aggregate claims exceeding $2,100 annually. Operations are charged with the cost of
claims reported and an estimate of claims incurred but not reported. A liability for unpaid claims and the associated claim expenses, including incurred but not reported losses, is actuarially
determined and reflected in accrued liabilities in the accompanying balance sheet. Total expense under the program was approximately $340 for the nine months ended September&nbsp;30, 2004. The
self-insured claims liability includes incurred but not reported losses of $328 at September&nbsp;30, 2004. The determination of such claims and expenses and the appropriateness of the
related liability is continually reviewed and updated. It is reasonably possible that the accrued estimated liability for self-insured claims may need to be revised materially in the
future. </FONT></P>

<P><FONT SIZE=2><B>New Accounting Pronouncements  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2003, the Financial Accounting Standards Board (FASB) issued Interpretation No.&nbsp;46 (FIN&nbsp;46), "Consolidation of Variable Interest
Entities" an interpretation of Accounting Research </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-16</FONT></P>

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<BR>

<P><FONT SIZE=2>Bulletin
No.&nbsp;51, "Consolidated Financial Statements." The primary objectives of FIN 46 are to provide guidance on the identification of entities which the Company may control through means
other than through voting rights ("variable interest entities") and to determine when and which business enterprise ("primary beneficiary") should consolidate the variable interest entity. FIN 46
requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among the parties involved. Variable
interest entities that effectively disperse risks will not be consolidated unless a single party holds an interest or combination of interests that effectively recombines risks that were previously
dispersed. In addition, FIN 46 requires that the primary beneficiary, as well as all other enterprises with a significant variable interest in a variable interest entity, make additional disclosures.
Certain disclosure requirements of FIN 46 were effective for financial statements issued after January&nbsp;31, 2003. In December&nbsp;2003, the FASB revised FIN 46 (FIN 46R) to address certain
FIN 46 implementation issues. The revised provisions are applicable no later than the first reporting period ending after March&nbsp;15, 2004. The Company adopted FIN 46 and FIN 46R and determined
that it does not have any variable interest entities that require consolidation nor any material entities that require disclosure. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
September&nbsp;2004, EITF reached a final consensus on EITF Issue No.&nbsp;04-10, "Applying Paragraph&nbsp;19 of FASB Statement No.&nbsp;131, Disclosures about
Segments of an Enterprise and Related Information, in Determining Whether to Aggregate Operating Segments That Do Not Meet the Quantitative Thresholds." Under EITF Issue No.&nbsp;04-10,
operating segments that do not meet the quantitative thresholds can be aggregated into a reportable segment if aggregation is consistent with the objective and basic principles of FASB Statement
No.&nbsp;131, the segments have similar economic characteristics, and the segments share a majority of the other aggregation criteria as defined by FASB Statement No.&nbsp;131,
paragraph&nbsp;17. EITF Issue No.&nbsp;04-10 is effective for fiscal years ending after October&nbsp;13, 2004. The corresponding information for earlier periods, including interim
periods, shall be restated unless it is impractical to do so. Restatement of previously issued financial statements is required. The adoption of EITF Issue No.&nbsp;04-10 will not impact
the Company's financial statements. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
November&nbsp;2004, the Accounting Standards Board issued Statement No.&nbsp;151, </FONT><FONT SIZE=2><I>Inventory Costs&#151;an amendment of ARB
No.&nbsp;43</I></FONT><FONT SIZE=2>. This Statement clarifies the accounting for abnormal amounts of certain inventory cost components and requires the allocation of fixed production overheads to
the costs of conversion to be based on the normal capacity of the production facilities. This Statement is effective for inventory costs incurred during fiscal years beginning after June&nbsp;15,
2005. The Company is currently assessing the impact of Statement No.&nbsp;151. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
December&nbsp;16, 2004, the Financial Accounting Standards Board issued FASB Statement No.&nbsp;123 (revised 2004), Share-Based Payment. Statement 123(R) replaces FASB Statement
No.&nbsp;123, Accounting for Stock-Based Compensation, supersedes APB Opinion No.&nbsp;25, Accounting for Stock Issued to Employees and amends FASB Statement No.&nbsp;95, Statement of Cash
Flows. Generally, the approach in Statement 123(R) is similar to the approach described in Statement 123. However, Statement 123(R) requires all share-based payments to employees, including grants of
employee stock options, to be recognized in the financial statements based on their fair values (i.e., pro forma disclosure is no longer </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-17</FONT></P>

<HR NOSHADE>
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<A NAME="page_fk1063_1_18"> </A>
<BR>

<P><FONT SIZE=2>an
alternative to financial statement recognition). Statement 123(R) is effective for public companies (excluding small business issuers as defined in Regulation&nbsp;S-B) at the
beginning of the first interim or annual period beginning after June&nbsp;15, 2005. Nonpublic companies will be required to adopt the new Statement at the beginning of the first annual period
beginning after December&nbsp;15, 2005. The Company is currently assessing the impact of Statement 123(R). </FONT></P>

<P><FONT SIZE=2><B>3. Acquisition  </B></FONT></P>

<P><FONT SIZE=2><B>Armstrong Pharmaceuticals,&nbsp;Inc.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;9, 2003, the Company acquired all of the outstanding common stock of Armstrong in a purchase business combination from Andrx Corporation
("Andrx"). Armstrong is a developer and manufacturer of inhalation pharmaceutical products. Management believes that Armstrong will not only provide the Company with the ability to enter the U.S.
inhalation products market, as Armstrong is one of the few independent U.S. manufacturers of inhalation products, but also provide the Company with research and development capabilities to generate a
steady stream of new products. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
purchase price was allocated to the assets and certain liabilities assumed based on their respective fair values. Inventory was valued at its replacement cost. A total of
approximately $1,341, representing the excess of the fair value of the tangible current net assets acquired, over the purchase price, net of tax effects, has been recorded as an extraordinary gain. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
accounting for the acquisition is summarized as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="67%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="83%"><FONT SIZE=2>Accounts receivable</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>167</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="83%"><FONT SIZE=2>Due from Andrx</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>299</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="83%"><FONT SIZE=2>Inventory</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,414</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="83%"><FONT SIZE=2>Prepaid expense</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>58</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="83%"><FONT SIZE=2>Assumed liabilities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(397</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="83%"><FONT SIZE=2>Fair value of assets and liabilities acquired</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,541</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="83%"><FONT SIZE=2>Less cash paid for the acquisition, including transaction costs</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(3,200</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="83%"><FONT SIZE=2>Extraordinary gain, net of tax effect of $40</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,341</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company's consolidated results of operations include the subsidiary's activities since the acquisition date. </FONT></P>

<P><FONT SIZE=2><B>Pro Forma Data (Unaudited)  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The pro forma data of the Company set forth below gives effect to acquisition of Armstrong completed in 2003 as if it had occurred at the beginning of 2002, but
excludes the extraordinary gain and impairment charges on long-lived assets of $8,557 recorded in early 2003 as a result of continued losses at Armstrong. This pro forma data is presented
for informational purposes only and does not </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-18</FONT></P>

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<P style='page-break-before:always'></p>
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<A NAME="page_fk1063_1_19"> </A>
<BR>

<P><FONT SIZE=2>purport
to be indicative of the results of future operations of the Company or of the results that would have actually occurred had the acquisition taken place at the beginning of 2002. </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="67%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Pro forma net revenue</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>53,517</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>57,874</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Pro forma pre-tax net loss before extraordinary item</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(7,265</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(7,439</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="67%"><FONT SIZE=2>Pro forma pre-tax net loss per share before extraordinary item</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(0.23</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(0.22</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2><B>4. Product Rights  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June&nbsp;2003, the Company acquired U.S. intellectual property rights for Cortrosyn from Organon USA&nbsp;Inc. ("Organon") in exchange for consideration
of $28,000. The Company paid $16,000 in cash at closing and will pay the remaining $12,000 in cash in two equal installments. Until these two installments are paid, Organon retains a security interest
in the Cortrosyn ntellectual property. The present value of the future cash flows of $26,734 was recorded as products rights on the accompanying consolidated balance sheets and is being amortized over
its estimated useful life of 15&nbsp;years using the straight-line method. In addition, the Company acquired Cortrosyn inventory for $184 in cash at closing. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
part of the transaction, Organon agreed to manufacture finished product for the Company for three (3)&nbsp;years following the date of closing. In February&nbsp;2004, the Company
was notified that Organon's facility was flooded and would have to cease production. The Company has transfered the manufacturing from Organon's facility to a Company facility. As a result of the
supply interruption, the revenues from the sale of Cortrosyn products were adversely impacted in the second and third quarters of 2004 (Note&nbsp;14). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
August&nbsp;2003, the Company entered into a Royalty Purchase Agreement (the "RPA") with Drug Royalty USA,&nbsp;Inc. ("DRC"), whereby DRC provided $8,000 in cash to the Company in
exchange for a royalty on the future U.S. net sales of Cortrosyn. The Company has recorded the consideration received from DRC as deferred royalties on the accompanying consolidated balance sheets and
will reduce the liability as royalty payments are made. DRC has a secured interest in Cortrosyn intellectual property that is subordinate to Organon's, in addition to a secured interest in Cortrosyn
inventory and accounts receivables resulting from the sale of Cortrosyn. As of September&nbsp;30, 2004, the carrying value
of inventory and receivables securing the agreement is $1,892, and the carrying value of the intangibles securing the agreement is $24,507. Pursuant to the RPA, royalties are due quarterly through
August&nbsp;2008. During 2003 and for the nine months ended September&nbsp;30, 2004, the Company paid royalties to DRC of $555 and $1,493, respectively. Royalties to be paid to DRC are calculated
based upon net sales and may exceed the consideration received, at which time royalties will be expensed as incurred. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
September&nbsp;2003, the Company acquired Canadian intellectual property rights for Cortrosyn in exchange for cash consideration of $400. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-19</FONT></P>

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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
July, 2004, the Company acquired the product rights to Epinephrine Mist CFC from Alpharma USPD,&nbsp;Inc. for $2,000 in cash paid at closing and purchased $300 of inventory. The
purchase agreement requires the Company to pay royalties on future product sales. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
products rights are recorded at fair value and are being amortized over their estimated useful life of 5 to 15&nbsp;years, respectively (weighted average useful life of
14&nbsp;years), using the straight-line method. Included in cost of revenues for the year ended December&nbsp;31, 2003, the nine months ended September&nbsp;30, 2003 (unaudited), and
the nine months ended September&nbsp;30, 2004, is products rights amortization of $918, $452 and $1,497. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product
rights are recorded net of accumulated amortization of $2,415 in the accompanying consolidated balance sheet at September&nbsp;30, 2004. Expected amortization expense for the
next five fiscal years ended September&nbsp;30, 2004, related to the current balance of product rights is as follows: </FONT></P>

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<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2005</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,262</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2006</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,262</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2007</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,262</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2008</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,235</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="82%"><FONT SIZE=2>2009</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,982</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>5. Inventories  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories consist of the following: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="74%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="51%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="51%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>September&nbsp;30, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="51%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Raw materials and supplies</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,643</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>8,306</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>13,270</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Work-in-process</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,831</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>889</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>888</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Subassemblies</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,874</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>2,358</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,023</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Finished goods</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,190</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,904</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>6,827</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>12,538</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>17,457</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>24,008</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Less reserve for excess and obsolete inventories</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(1,422</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(3,019</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(3,799</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11,116</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>14,438</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>20,209</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-20</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=6,SEQ=108,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=723324,FOLIO='F-20',FILE='DISK034:[05BHL3.05BHL1063]FK1063A.;21',USER='KSOLTER',CD='11-FEB-2005;00:42' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->

<P><FONT SIZE=2><A
NAME="page_fm1063_1_21"> </A> </FONT></P>

<P><FONT SIZE=2><B>6. Property, Plant, and Equipment, Net  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property, plant, and equipment consists of the following: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="74%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="51%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="51%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>September&nbsp;30, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="51%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Building</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,966</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>14,876</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>19,902</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Leasehold improvements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,607</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11,085</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>11,622</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Land</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,752</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,752</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,875</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Machinery and equipment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8,184</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>31,075</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>35,178</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Furniture, fixtures, and automobiles</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>990</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,027</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,088</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Construction in progress</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>35,708</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>5,712</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>13,147</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>56,207</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>65,527</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>83,812</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>Less accumulated depreciation and amortization</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(7,590</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(12,465</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(16,389</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>48,617</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>53,062</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>67,423</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="51%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
expense capitalized for the years ended December&nbsp;31, 2001, 2002 and 2003 amounted to $550, $422 and $0, respectively. Interest expense capitalized for the nine months
ended September&nbsp;30, 2003 (unaudited) and 2004 amounted to $0 and $285, respectively. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
July, 2004, the Company purchased a 104 square foot building adjacent to its headquarters in Rancho Cucamonga for $6,624. Under the terms of the purchase agreement the Company paid
$3,992 and assumed a loan with a remaining principal balance of $2,632. The building will be converted to a manufacturing facility. As consideration for early termination of a lease, at closing, the
lessee paid the Company $500, which has been included in other income in the accompanying statements of operations for the nine months ended September&nbsp;30, 2004. </FONT></P>

<P><FONT SIZE=2><B>7. Debt  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debt consists of the following: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="85%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="61%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="61%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>September&nbsp;30, 2004</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="61%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2>Revolving line of credit payable to Cathay Bank, secured by certain of the Company's buildings and equipment (carrying value of approximately $12,479 at September&nbsp;30, 2004), bearing interest at the prime rate as
published in the </FONT><FONT SIZE=2><I>Wall Street Journal </I></FONT><FONT SIZE=2>(4.75% at September&nbsp;30, 2004), monthly interest payment is $25, principal and accrued interest are due and payable on or before November 30, 2005</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>6,200</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6,200</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- insert table folio -->
<BR>
<P ALIGN="CENTER"><FONT SIZE=2>F-21</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=109,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=50667,FOLIO='F-21',FILE='DISK034:[05BHL3.05BHL1063]FM1063A.;24',USER='RFARRIN',CD='11-FEB-2005;03:32' -->
<A NAME="page_fm1063_1_22"> </A>
<!-- end of table folio -->
<TABLE WIDTH="85%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2><BR>
Other loan payable to Cathay Bank, secured by equipment, bearing interest at the prime rate as published in </FONT><FONT SIZE=2><I>The Wall Street Journal </I></FONT><FONT SIZE=2>plus 1.00% to 1.25%, (6% at September&nbsp;30, 2004), aggregate
principal and interest payment of approximately $16 is due monthly through August 2005</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,038</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
526</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
170</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2><BR>
Contractual obligation, secured by certain of the Company's product rights (carrying value of approximately $24,507 at September&nbsp;30, 2004), implicit interest rate of 7.5%, due in two equal installments of $6,000, with the first installment due
June 2005 and the second due February 2006. Interest accretes monthly into the principal balance</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
11,155</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
11,678</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2><BR>
Mortgage note payable to Standard Savings Bank, secured by building (carrying value of approximately $2,317 at September&nbsp;30, 2004), with the interest at the bank's rate plus .25%, (4.50% at September&nbsp;30, 2004), aggregate principal and
interest payments due monthly of approximately $10 with balloon payment at maturity in December 2008</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2,463</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2,408</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,616</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2><BR>
Equipment loan due to a financial institution, secured by the equipment, bearing interest at 11%, principal and interest payments due monthly aggregating $2. Paid in full by September 2004</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
41</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
19</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2><BR>
Equipment loan due to Bank of the West, secured by equipment, (carrying value of approximately $3,727 at September&nbsp;30, 2004), bearing interest at the Bank of the West prime rate (4.75% at September&nbsp;30, 2004), principal and interest payments
due monthly ranging from $103 to $72 through September&nbsp;30, 2008</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
904</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
3,451</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2><BR>
Note payable to The Manufacturers Life Insurance Company, secured by real estate and property (carrying value of approximately $6,596 at September&nbsp;30, 2004), bearing interest at 7.63%, aggregate principal and interest payments due monthly of
approximately $21 with a balloon payment at maturity in June 2009</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2,618</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- insert table folio -->
<P ALIGN="CENTER"><FONT SIZE=2>F-22</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=110,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=31172,FOLIO='F-22',FILE='DISK034:[05BHL3.05BHL1063]FM1063A.;24',USER='RFARRIN',CD='11-FEB-2005;03:32' -->
<A NAME="page_fm1063_1_23"> </A>
<!-- end of table folio -->
<TABLE WIDTH="85%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2><BR>
Revolving line of credit payable to Bank of the West secured by equipment and working capital, bearing interest at the Bank of the West prime rate (4.75% at September&nbsp;30, 2004), monthly interest payment, principal and interest payment due on or
before April&nbsp;30, 2005</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2><BR>
Equipment under capital leases</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
555</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
392</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
248</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2><BR>
Total debt and capital leases</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4,097</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
21,604</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
27,981</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2><BR>
Less current portion of long-term debt and capital leases</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
908</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
13,212</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
9,459</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="61%"><FONT SIZE=2><BR>
Long-term debt, net of current portion and capital leases</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
3,189</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
8,392</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
18,522</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Credit Facility with Cathay Bank  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has a credit facility with Cathay Bank, a stockholder of the Company, ("CB Credit Facility"), to provide for available borrowings under a $6,200
convertible revolving line of credit ("CB convertible revolving line of credit") and equipment loans and other term loans in an amount not to exceed existing borrowings. In November&nbsp;2004, the
Company obtained an extension on the maturity date to November&nbsp;30, 2005. As of September&nbsp;30, 2004, there are no amounts available for borrowing under the CB Credit Facility. The
convertible features of the credit line facility expired as of December&nbsp;31, 2003. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
average dollar amount of borrowings under this line was $4,756 for the nine months ended September&nbsp;30, 2004 with an average interest rate of 4.34%. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
CB Credit Facility also requires the Company to maintain certain financial covenants including a minimum annual level of profitability and a minimum current ratio and maximum debt to
net worth ratio. As of September&nbsp;30, 2004, the Company was in violation of certain financial covenants. As of December&nbsp;6, 2004, the Company obtained a waiver of the noncompliance of the
financial covenants through December&nbsp;31, 2004. </FONT></P>


<P><FONT SIZE=2><B>Equipment Under Capital Leases  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company entered into leases for certain equipment under capital leasing arrangements, which expire through 2008. The cost of equipment under capital leases
approximated $730, $752 and $590 at December&nbsp;31, 2002, December&nbsp;31, 2003 and September&nbsp;30, 2004, respectively. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
accumulated depreciation of equipment under capital leases approximates $32, $185 and $88 at December&nbsp;31, 2002, December&nbsp;31, 2003 and September&nbsp;30, 2004,
respectively. Amortization of assets </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-23</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=111,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=1864,FOLIO='F-23',FILE='DISK034:[05BHL3.05BHL1063]FM1063A.;24',USER='RFARRIN',CD='11-FEB-2005;03:32' -->
<A NAME="page_fm1063_1_24"> </A>
<BR>

<P><FONT SIZE=2>recorded
under capital leases is included in depreciation and amortization expense in the accompanying consolidated financial statements. Under the terms of one of the capital lease agreements, the
Company is required to maintain a letter of credit which is supported by restricted investments, as collateral, of approximately $621 during the remainder of the lease term; this amount is included in
"Short-term investments" in the accompanying consolidated balance sheets. </FONT></P>

<P><FONT SIZE=2><B>Contractual Product Rights Obligation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company had an obligation to pay $12,000 of aggregate principal and interest related to the purchase of Cortrosyn. Due to the inability of Organon to fulfill
its commitment to provide inventory to the Company, in December&nbsp;2004 the payment amount was decreased and the due dates were extended. Under the original agreement, the payments were due in two
equal installments of $6,000 due in June&nbsp;2004 and 2005. The obligation is now due in two installments of $4,311 and $6,000 due in June&nbsp;2005 and February&nbsp;2006, respectively
(Note&nbsp;14). </FONT></P>

<P><FONT SIZE=2><B>Credit Facilities with Bank of the West  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2002, as amended April&nbsp;2003 and March&nbsp;2004, the Company obtained a $5,000 equipment purchase facility with Bank of the West (BOW),
bearing interest at the BOW prime rate, expiring December&nbsp;31, 2004. As of September&nbsp;30, 2004 the total original principal amount of notes issued pursuant to the equipment purchase
facility were $3,861. In November&nbsp;2004, the Company was advanced $1,139 under this facility leaving no further borrowing available under this line of credit. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
April&nbsp;2004, the Company obtained a $3,000 working capital revolving line of credit facility bearing interest at the BOW prime rate, expiring April&nbsp;30, 2005. The average
dollar amount of borrowings under the BOW credit line was $444 for the nine months ended September&nbsp;30, 2004 with an average interest rate of 4.38%. Available borrowing under this line of credit
is $1,000 as of September&nbsp;30, 2004. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
BOW credit facilities require IMS to maintain certain financial covenants including requirements for minimum profitability levels, tangible net worth and debt to tangible net worth,
and a ratio of cash flow to the current portion of long-term debt plus interest expense, and quick ratio. As of September&nbsp;30, 2004, the Company was in compliance with its financial
covenants. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
November&nbsp;2004, the Company borrowed $5,000 from the Bank of the West on a 5-year note with a variable interest rate linked to the London Interbank Offered Rate. The
loan is secured by a deed of trust on the Company's recently acquired building located at 11530 Sixth Street, Rancho Cucamonga. The Company received $1,900 in cash from the loan after paying off the
$2,600 existing loan due to Manufacturers Life Insurance Company on the property and a prepayment penalty of $458. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-24</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=112,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=356588,FOLIO='F-24',FILE='DISK034:[05BHL3.05BHL1063]FM1063A.;24',USER='RFARRIN',CD='11-FEB-2005;03:32' -->
<A NAME="page_fm1063_1_25"> </A>
<BR>

<P><FONT SIZE=2><B>Mortgage Notes with Standard Savings Bank  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company had three mortgage notes outstanding with Standard Savings Bank for the purchase of buildings and land. The mortgage notes were payable over terms
from two to seven years, with amortization schedules of 25 to 30&nbsp;years, with balloon payments at maturity in June&nbsp;2004 and December&nbsp;2008. In February and May&nbsp;2004,
respectively, the Company paid off two of the mortgage notes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of September&nbsp;30, 2004, the principal amounts of long-term debt and capital lease maturities, considering the effects of extensions obtained from lenders subsequent
to September&nbsp;30, 2004, during each of the next five fiscal years ending September&nbsp;30, are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="77%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="57%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Debt</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Capital Leases</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>2005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>9,309</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>169</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>2006</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>12,994</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>95</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>2007</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>2008</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>650</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>2009</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,776</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>271</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Less amount representing interest</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>23</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>27,733</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>248</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>27,981</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>8. Income Taxes  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A reconciliation of U.S. statutory federal income tax provision to the actual provision for continuing operations is as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="88%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="38%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER"><FONT SIZE=1><B>Year Ended December&nbsp;31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>Nine Months Ended September&nbsp;30,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="38%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2001</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="38%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(unaudited)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Statutory federal income tax expense</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(561</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(647</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(1,543</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(1,148</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(2,380</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Permanent differences</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(450</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(370</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>(438</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(329</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Federal valuation allowances</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,011</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,017</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>1,981</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,477</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>2,370</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="38%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-25</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=5,SEQ=113,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=823007,FOLIO='F-25',FILE='DISK034:[05BHL3.05BHL1063]FM1063A.;24',USER='RFARRIN',CD='11-FEB-2005;03:32' -->
<A NAME="page_fm1063_1_26"> </A>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Significant
components of the Company's deferred tax assets and liabilities are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="80%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>December 31,</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>September&nbsp;30, 2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Deferred tax assets:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Net operating loss carryforwards</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>5,423</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6,927</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>12,514</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Depreciation/amortization</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1,018</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>245</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Inventory capitalization and reserve</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>953</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,011</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>981</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Accrued payroll and benefits</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>212</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>354</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>374</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Product return allowance</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>156</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>387</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>359</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Accrued chargebacks</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>977</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>1,586</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,298</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Bad debt reserve</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>102</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>166</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>189</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Excess capital losses over capital gain</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>256</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>254</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>147</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>126</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>92</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,304</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>Total deferred tax assets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>9,223</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11,022</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>17,166</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Deferred tax liabilities:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Depreciation/amortization</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,464</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>Total deferred tax liabilities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,464</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Net deferred tax asset before valuation allowance</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>9,223</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>11,022</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>15,702</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Valuation allowance</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>(9,223</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(11,022</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(15,702</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Net deferred tax asset</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management
considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax-planning strategies in making this assessment. Based upon the
cumulative losses sustained, the Company recorded a valuation reserve against all net federal and state deferred tax assets. If or when recognized, the tax benefits relating to any reversal of the
valuation allowance on deferred tax assets will be accounted for as an increase in stockholders' equity of $745,
based on balances existing at September&nbsp;30, 2004, for certain deductions related to the exercise of stock options and a reduction of income tax expense for the remainder. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
September&nbsp;30, 2004, the Company had federal and California net operating loss carryforwards of approximately $33,749 and $17,830, respectively, which begin to expire in 2018
and 2008, respectively. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-26</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_fm1063_1_27"> </A>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Utilization
of the federal and state net operating loss carryforwards could be limited in future years, if the Company were to experience a greater than 50% change in ownership within a
three-year period as defined in Sections 382 and 383 of the United States Internal Revenue Code of 1986. </FONT></P>


<P><FONT SIZE=2><B>9. Stockholders' Equity  </B></FONT></P>

<P><FONT SIZE=2><B>Common and Preferred Stock  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2002, the Board of Directors approved a two-for-one stock split effective April&nbsp;30, 2002. In July, 2004, the
Company reincorporated in Delaware. The Delaware certificate of incorporation provides for two classes of shares, Common Stock and Preferred Stock, each with a par value of $.0001 per share. The
Company is authorized to issue 100,000,000 shares of Common Stock and 20,000,000 shares of Preferred Stock. The common stock and additional paid-in capital balances have been retroactively adjusted to
reflect the Company's reincorporation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to a private placement offering of nonvoting convertible preferred stock at $8.00 per share, in 2001, the Company sold 974,500 shares for $7,796 (of which $7,756 in cash was
received prior to December&nbsp;31, 2001, and $40 was received shortly thereafter). In 2002, the Company issued an additional 3,130,602 preferred shares for $25,045 in cash. The preferred stock was
convertible into common stock at a ratio of 1:1 if converted before April&nbsp;1, 2002, or a ratio of 1:0.8 if converted thereafter, but prior to January&nbsp;1, 2003. In order to obtain the
higher conversion rate, all of the shares of preferred stock were converted shortly after purchase. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2001, 2002 and 2003, the Company acquired equipment from, and utilized services of, Applied Physics&nbsp;&amp; Chemistry Laboratories ("APCL"), a company owned by the
Chief Executive Officer and Chief Operating Officer of Amphastar, in exchange for shares of common stock and issued common stock in lieu of cash for consulting services (Note&nbsp;10). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the second quarter of 2004, the Company sold 1,250,000 shares of its common stock at a purchase price of $12.50 per share for net cash proceeds of approximately $15,625. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
September&nbsp;2004, a consultant exercised options to purchase 50,000 shares of the Company's common stock at an exercise price of $8.00 per share for a total proceeds of $400. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
July&nbsp;2004, the Company entered into an employee separation agreement that included provisions to extend the contractual life of the employee's options. This modification
resulted in a charge to general and administrative expense of $300. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the years ended December 31, 2001, 2002 and 2003 and the nine months ended September&nbsp;30, 2003 (unaudited) and 2004 the Company issued options to consultants and advisory
board members for services rendered having a fair value totaling $0, $170, $65, $25, and $17 respectively. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-27</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=7,SEQ=115,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=767081,FOLIO='F-27',FILE='DISK034:[05BHL3.05BHL1063]FM1063A.;24',USER='RFARRIN',CD='11-FEB-2005;03:32' -->
<A NAME="page_fm1063_1_28"> </A>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the years ended December&nbsp;31, 2001, 2002, and 2003 and the nine months ended September&nbsp;30, 2003 (unaudited) and 2004 the Company issued stock to consultants and
advisory board members for services having a fair value totaling $138, $136, $33, $0 and $18, respectively. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company has incurred offering costs of $1,121 as of September&nbsp;30, 2004 related to its anticipated initial public offering which are included in "Prepaid expenses and other
assets" on the accompanying balance sheet. Upon successful completion of the offering, these amounts will be reclassified to stockholder's equity. In the event the offering is unsuccessful or delayed,
the Company will expense these costs. </FONT></P>

<P><FONT SIZE=2><B>Warrants  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;20, 2001, the Company granted Cathay Bank a warrant to purchase 124,000 shares of the Company's common stock at an exercise price of $7.50 per
share, subject to adjustment as defined, through January&nbsp;1, 2005. The Cathay Bank warrant had no value assigned at the grant date because the exercise price exceeded the fair value of the
warrant on the grant date. On April&nbsp;6, 2004, the Company entered into an agreement with Cathay Bank to extend the exercise date of the warrants to June&nbsp;30, 2005, in the event the Company
does not complete an initial public offering by December&nbsp;20, 2004. In November&nbsp;2004, Cathay Bank exercised its warrants to purchase 124,000 shares of the Company's common stock at an
exercise price of $7.50 per share, resulting in $930 in cash proceeds. </FONT></P>

<P><FONT SIZE=2><B>Stock Option Plans and Agreements  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has in effect several stock-based plans and agreements under which non-qualified and incentive stock options have been granted to
employees, non-employee members of the Board of Directors and other non-employees. The Company's 2002 Stock Option/Stock Issuance Plan (the "2002 Plan") is the successor equity
incentive program to the Key Employee Stock Incentive Plan, 2001 Employee Incentive Plan, 2000 Employee Incentive Plan, 1999 Employee Incentive Plan, Key Employee Incentive Plan (together, the
"Predecessor Plans"). Options have also been issued under employment, service and other agreements with officers, members of the Board of Directors, consultants and APCL (together, the "Option
Agreements"). </FONT></P>

<UL>

<P><FONT SIZE=2><I> The 2002 Plan  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2002, the Company and Board of Directors adopted, and in 2003 the stockholders approved, the 2002 Plan, whereby directors, officers, employees and consultants
of the Company are eligible to receive incentive stock options and/or non-statutory stock options or to purchase restricted Common Stock of the Company as designated by the Compensation
Committee of the Board of Directors, or in the case of stock option grants to the Chief Executive Officer and/or the Chief Operating Officer, as designated by the Board of Directors. In
July&nbsp;2004, the 2002 Plan was amended by the stockholders of the Company to increase the maximum number of shares of common stock authorized for issuance under the 2002 Plan from 2,800,000 to
6,400,000. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-28</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_fm1063_1_29"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Options
granted to the Chief Executive Officer and Chief Operating Officer are granted at 110% of fair market value and vest over a one-year period from the date of grant and
expire in six years. Options granted to other key employees vest over three-to-five-year periods, and expire in ten years. Options issued to members of the Board of
Directors or Advisory Board and consultants vest immediately after issuance and expire in seven years. During the nine months ended September&nbsp;30, 2004, the Company granted 220,000 options to
the chief executive officer and the chief operating officer. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Predecessor Plans  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Predecessor Plans provided for options to generally vest three years from the date of grant and expire in seven years. The maximum number of options for
shares of common stock which may be issued under the Predecessor Plans is 1,471,800 (which includes a net 117,800 reduction in the shares available for grant approved by the Board of Directors in
2002). </FONT></P>

<UL>

<P><FONT SIZE=2><I> The Option Agreements  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Option Agreements entered into during 2001 and 2002 generally provided for options issued to consultants for services performed and to key officers under 2001
employment agreements. Options for consultants vested immediately after issuance and expire three years from the date of grant. Options issued to key officers vested over a period of one year and
expired in seven years. At September&nbsp;30, 2004, there were 1,900,334 shares were reserved for issuance under consulting and other agreements (which includes an additional 796,000 shares approved
by the Board of Directors in 2002). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2001 and 2002, the Company granted 226,000 and 110,000 options, respectively, including an aggregate of 220,000 options granted to the chief executive officer and chief operating
officer in 2001. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
1997, in connection with the transfer of intellectual property from APCL to Amphastar, options to purchase a total of 1,200,000 shares of common stock at $1.50 per share were granted
to APCL and the Chief Executive Officer and Chief Operating Officer of the Company. The options were exercisable immediately upon grant. In 2001 and 2002, options to purchase 800,000 and 400,000
shares, respectively, were exercised at $1.50 per share. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors determines eligibility, vesting schedules and exercise prices for options granted under the Predecessor Plans and Option Agreements. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-29</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=9,SEQ=117,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=507437,FOLIO='F-29',FILE='DISK034:[05BHL3.05BHL1063]FM1063A.;24',USER='RFARRIN',CD='11-FEB-2005;03:32' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->

<P><FONT SIZE=2><A
NAME="page_fo1063_1_30"> </A> </FONT></P>


<P><FONT SIZE=2><B>Combined Option Plan Activity  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Activity under the stock option plans and agreements in 2001, 2002 and 2003 and for the nine months ended September&nbsp;30, 2004, is set forth below: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="89%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="CENTER"><FONT SIZE=1><B>Options Outstanding</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>Shares<BR>
Available for<BR>
Grant</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Exercise Price<BR>
Range per<BR>
Share</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Exercise Price<BR>
Per Share</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Balance at December 31, 2000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>523,600</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,613,444</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1.50 - $&nbsp;&nbsp;5.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2.27</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2>Increase shares reserved</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>200,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2>Options granted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(461,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>461,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1.50 -&nbsp;&nbsp;&nbsp;&nbsp;5.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3.33</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2>Options canceled</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>141,800</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(141,800</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1.75 -&nbsp;&nbsp;&nbsp;&nbsp;5.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3.81</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2>Options exercised</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(996,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1.50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1.50</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Balance at December 31, 2001</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>404,400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,936,644</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1.50 -&nbsp;&nbsp;&nbsp;&nbsp;5.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2.39</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2>Increase shares reserved</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>3,478,200</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2>Options granted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(1,722,100</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,722,100</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>8.00 -&nbsp;&nbsp;&nbsp;&nbsp;8.80</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>8.06</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2>Options canceled</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>215,400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(215,400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1.75 -&nbsp;&nbsp;&nbsp;&nbsp;5.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3.58</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2>Options exercised</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(597,110</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1.50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1.50</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Balance at December 31, 2002</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,375,900</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,846,234</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1.50 -&nbsp;&nbsp;&nbsp;&nbsp;8.80</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>5.06</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2>Options granted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(660,500</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>660,500</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>8.00 -&nbsp;&nbsp;&nbsp;&nbsp;8.80</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>8.54</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2>Options canceled</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>140,400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(140,400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1.75 -&nbsp;&nbsp;&nbsp;&nbsp;8.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>6.05</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2>Options exercised</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Balance at December 31, 2003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,855,800</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,366,334</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1.50 - $&nbsp;&nbsp;8.80</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>5.57</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2>Increase in shares available for grant</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>3,600,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2>Options granted</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(680,320</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>680,320</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>12.50 -&nbsp;&nbsp;13.75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>12.90</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2>Options canceled</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>53,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(53,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1.75 -&nbsp;&nbsp;&nbsp;&nbsp;8.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>5.44</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=2>Options exercised</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(50,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>8.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>8.00</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Balance at September 30, 2004</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>4,828,480</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,943,654</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>1.50 - $13.75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>6.56</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-30</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=118,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=55363,FOLIO='F-30',FILE='DISK034:[05BHL3.05BHL1063]FO1063A.;22',USER='RFARRIN',CD='11-FEB-2005;03:10' -->
<A NAME="page_fo1063_1_31"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
weighted-average remaining contractual life and weighted-average exercise price of options outstanding and of options exercisable as of September&nbsp;30, 2004, were as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="88%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="32%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=6 ALIGN="CENTER"><FONT SIZE=1><B>Outstanding</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>Exercisable</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="32%" ALIGN="LEFT"><FONT SIZE=1><B>Range of Exercise Prices<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Weighted-<BR>
Average<BR>
Remaining<BR>
Contractual<BR>
Life (years)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted-<BR>
Average<BR>
Exercise<BR>
Price</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted-<BR>
Average<BR>
Exercise<BR>
Price</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>$1.50 - $1.75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,504,334</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3.70</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1.58</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,504,334</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1.58</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>$5.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>523,400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>6.05</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>523,400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5.00</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>$8.00 - $8.80</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,235,600</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5.92</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8.35</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,717,340</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>8.45</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>$12.50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>460,320</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>9.80</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>12.50</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,320</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>12.50</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>$13.75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>220,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5.26</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>13.75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>4,943,654</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5.59</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6.56</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,747,394</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5.21</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>Shares Reserved for Future Issuance  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has the following shares of common stock reserved for future issuance upon the exercise of stock options and warrants as of September&nbsp;30, 2004: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="85%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="32%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=9 ALIGN="CENTER"><FONT SIZE=1><B>Number of Shares</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="32%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>2002 Plan</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Predecessor<BR>
Plans</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Option<BR>
Agreements</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Warrants</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>Outstanding</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2,855,920</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,138,400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>949,334</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>124,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5,067,654</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>Authorized for future grant</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,544,080</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>333,400</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>951,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>4,828,480</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>Balance at September 30, 2004</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>6,400,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,471,800</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,900,334</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>124,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>9,896,134</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>10. Commitments  </B></FONT></P>

<P><FONT SIZE=2><B>Consulting and Employment Agreements  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company entered into various long-term consulting agreements with Company stockholders and outside consultants. Consulting expenses are accrued as
services are rendered. Consulting services are paid in the form of common stock at the estimated deemed fair market value at the grant date or cash upon completion of all services under the agreement.
As of December&nbsp;31, 2002 and 2003 and September&nbsp;30, 2004, the Company accrued $27, $33 and $5, respectively, for consulting services under these contracts. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-31</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=119,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=577735,FOLIO='F-31',FILE='DISK034:[05BHL3.05BHL1063]FO1063A.;22',USER='RFARRIN',CD='11-FEB-2005;03:10' -->
<A NAME="page_fo1063_1_32"> </A>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company issued shares of common stock to members of the Board of Directors and consultants under consulting and other agreements are as follows for the three years ended
December&nbsp;31, 2003 and the nine months ended September&nbsp;30, 2004: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="63%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="32%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>Members of<BR>
Board of Directors</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>Consultants</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="32%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>Shares Issued</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Price Per Share</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>Shares Issued</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Price Per Share</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,440</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>12.50</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>4,200</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>8.00</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>2002</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,250</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>8.00</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>22,540</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>8.00</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>2001</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>3,600</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5.00</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>24,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5.00</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective
January&nbsp;2002, 2003 and 2004, the Company entered into one-year employment agreements with the Chief Executive Officer and Chief Operating Officer. Under the
agreements, the Company shall pay these officers base salaries and provides for the issuance of options under the 2002 Plan. Pursuant to the agreements, the Company granted the two officers options to
purchase a total of 440,000 shares of common stock in 2002 and 2003 at an exercise price of $8.80. Pursuant to the 2004 employment agreements, the Company granted the two officers options to purchase
a total 220,000 shares at an exercise price of $13.75 (Note&nbsp;9). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
July&nbsp;2004, in connection with the settlement of a severance agreement with a former employee, the Company modified the terms of stock options granted to the former employee,
which allowed for an extension of the term to exercise the options after separation. As a result of this modification, the Company recorded stock compensation expense of $300, representing the
intrinsic value of the options at the modification date, in the accompanying consolidated statements of operations for the nine months ended September&nbsp;30, 2004. </FONT></P>


<P><FONT SIZE=2><B>Equipment Agreement with APCL  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;12, 1997, as amended from time to time, the Company entered into an equipment agreement with APCL whereby the Company agreed to purchase or
lease equipment from APCL with an aggregate cost not to exceed $9,131. Under the agreement, APCL managed leasing arrangements and paid all costs associated with the purchase or lease of the equipment
on the Company's behalf. APCL purchased or leased equipment based on the Company's technical requirements. Certain equipment lease agreements made by APCL on behalf of Amphastar are guaranteed by
Amphastar. Title to the equipment passes to the Company at the end of the lease. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Annually,
the Company compensated APCL for related equipment costs plus a management fee equal to 2.5% of all related costs incurred by APCL, in the form of shares of common stock until
a total of 6,087,334 shares were to be issued. In 2001, the Company issued 973,986 shares of common stock for equipment amounting to $1,461 received under capital lease obligations of APCL. For </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-32</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=120,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=433047,FOLIO='F-32',FILE='DISK034:[05BHL3.05BHL1063]FO1063A.;22',USER='RFARRIN',CD='11-FEB-2005;03:10' -->
<A NAME="page_fo1063_1_33"> </A>
<BR>


<P><FONT SIZE=2>equipment
and services provided through December&nbsp;31, 2002, 5,113,344 shares were issued in total. At December&nbsp;31, 2002, an additional 279,313 shares valued at $419 were not issued, but
earned and, accordingly classified, as common stock to be issued under the agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2003, the Company issued the remaining 973,990 shares due under the agreement, comprised of the 279,313 shares due to be issued from 2002 and 694,677 shares earned in 2003, which were
valued at $1,042. In April&nbsp;2003, the Company amended the equipment agreement to clarify terms related to the management fee, which resulted in the Company owing APCL an additional 517,671
shares for management fees. Of the 694,677 shares issued in 2003, 517,671 shares related to the management fees and 177,006 shares related to equipment and services provided in 2003. As of
December&nbsp;31, 2003, the Company has no further obligation to APCL under the equipment agreement. </FONT></P>

<P><FONT SIZE=2><B>Operating Lease Agreements  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company leases real and personal property in the normal course of business under various noncancelable operating leases. The Company, at its option, can renew
a substantial portion of its leases, at the market rate, for various periods with renewal periods ranging from one to six years. Rental expense under these leases for the years ended
December&nbsp;31, 2001, 2002, 2003 and for the nine months ended September&nbsp;30, 2003 (unaudited) and 2004 was approximately $1,300, $1,310, $2,036, $1,413, and $2,529, respectively. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future
minimum rental payments under operating and capital leases that have initial or remaining noncancellable lease terms in excess of one-year fiscal year periods ending
September&nbsp;30, 2004, are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="68%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Operating<BR>
Leases</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Capital<BR>
Leases</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="68%"><FONT SIZE=2>2005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,401</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>169</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="68%"><FONT SIZE=2>2006</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>2,527</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>95</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="68%"><FONT SIZE=2>2007</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,790</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="68%"><FONT SIZE=2>2008</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,587</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="68%"><FONT SIZE=2>2009</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,340</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="68%"><FONT SIZE=2>Thereafter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,152</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="68%"><FONT SIZE=2>Total minimum lease payments</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>11,797</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>271</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="68%"><FONT SIZE=2>Less amount representing interest</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>23</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="68%"><FONT SIZE=2>Present value of net minimum lease payments (including current portion of approximately $150)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>248</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="68%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company also leases office and laboratory facilities and office equipment from APCL for its New Drug Research Center (the "NDRC"). The Audit Committee of the Board of Directors has
authorized the Company to continue this arrangement until the earlier of the acquisition of permanent </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-33</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_fo1063_1_34"> </A>
<BR>

<P><FONT SIZE=2>space
for the NDRC or December&nbsp;31, 2007, up to a maximum of $200. Rental expense was approximately $125, $138 and $145 for the years ended December&nbsp;31, 2001, 2002 and 2003, respectively.
Rental expense was approximately $109 and $147 for the nine months ended September&nbsp;30, 2003 (unaudited) and 2004, respectively. In November&nbsp;2004, the Audit Committee of the Board of
Directors approved an increase of the annual lease amount to $292 per year. </FONT></P>

<P><FONT SIZE=2><B>Purchase Commitments  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of September&nbsp;30, 2004, the Company has entered into commitments to purchase equipment for an aggregate of $7,515 for which payments of $2,659 have been
made through September&nbsp;30, 2004. </FONT></P>

<P><FONT SIZE=2><B>11. Litigation  </B></FONT></P>


<P><FONT SIZE=2><B>Environmental Litigation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IMS, the Company's subsidiary, is one of the approximately 39 defendants in six lawsuits brought by approximately 218 plaintiffs alleging negligence, strict
liability, wrongful death, permanent trespass, continuing trespass, public permanent nuisance, public continuing nuisance, strict liability for hazardous activity and fraudulent concealment, and
claiming personal injury and/or property damage from exposure to contaminated drinking water. Because of the similarity in the cases, they have been consolidated and are being referenced under: In Re:
Groundwater Cases (Judicial Council Coordination Proceeding No.&nbsp;4135), Superior Court for the State of California, County of Los Angeles, Central Civil West District). These cases are being
handled by the Los Angeles County Superior Court in a special forum for complex litigation. The plaintiffs have not definitely stated how much they are seeking in damages. IMS denies all substantive
allegations of the plaintiffs, and is actively defending its position to minimize any potential liability or damages. The litigation is in the discovery stage. Two of IMS's past insurance carriers are
paying all costs and the majority of fees in defending these claims. There is no limit on the dollar amount of defense coverage that the two carriers might be obligated to pay. Both insurance
companies have reserved their rights to be indemnified by IMS if IMS is later found to not merit insurance coverage, and both carriers have reserved their rights as to whether they are obligated to
indemnify IMS for underlying claims, should a judgment be rendered against IMS in the future. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company and approximately 35 other local businesses were notified by the Environmental Protection Agency ("EPA") in August&nbsp;1995 that they were deemed potentially responsible
parties ("PRPs") with respect to a groundwater contamination problem (the "Problem") in the main San Gabriel Basin (the "Basin") in the vicinity of IMS' primary manufacturing plant in South El Monte,
California. Without admitting liability, the Company entered into a private agreement with another PRP to conduct a Remedial Investigation and Feasibility Study as demanded by EPA (the "RI/FS"). The
RI/FS was performed pursuant to an Administrative Order on Consent (the "AOC") that was agreed to by EPA. In conjunction with the AOC and under the approval of the California Regional Water Quality
Control Board, Los Angeles Region, the Company performed certain subsurface </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-34</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_fo1063_1_35"> </A>
<BR>

<P><FONT SIZE=2>investigatory
work on the Company's property to determine whether any land used by the Company could be a source of the groundwater contamination. Based upon such tests, management determined that the
Company's operations did not contribute significantly to the groundwater contamination and the Company had minimal liability to clean up the Company's former leasehold or the groundwater
contamination. In 2000, the EPA drew upon the findings of the RI/FS to adopt an Interim Record of Decision ("ROD") for remediation of groundwater in the portion of the San Gabriel Basin known as the
South El Monte Operable Unit ("SEMOU"). In response, certain water purveyors in or hydrologically downgradient from the SEMOU have implemented various projects to contain, extract and/or treat eight
chemicals of concern in the groundwater in order to implement the ROD. These water purveyors then moved to obtain reimbursement for their expenses incurred in implementing the ROD. In the spring of
2002, the EPA named IMS and approximately 67 other entities as "Responsible Parties" ("RPs") relative to remediation costs in the SEMOU. In response, 13 companies, including IMS, entered into an
agreement with the water purveyors to fund certain agreed upon work that included, but was not limited to, elements of EPA's ROD. By entering into this agreement, IMS settled certain potential claims
against it that were alleged by the water purveyors. Moreover, this settlement also addressed many of the claims that EPA would have otherwise been able to bring against IMS as an RP in the SEMOU.
Collectively, the 13 settling parties raised $4,700. As part of the settlement, the 13&nbsp;settling entities also received past and future credit for all matching public monies that were triggered
as part of the settlement. During 2002, IMS paid its equal share of the settlement of $365, which had been accrued in prior years. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2003, IMS and the other PRPs were notified that another chemical of concern (outside of the eight chemicals covered by the settlement agreement), perchlorate, has been detected in the
SEMOU ground water and that it would have to be treated immediately. The PRPs are in conversations with the EPA to discuss a settlement of this liability. On April&nbsp;12, 2004, IMS and several
other of the settling companies were made third-party defendants in litigation between the water purveyors and the non-settling industrial defendants in the SEMOU. The third-party
plaintiffs allege, among other things, a failure to adequately contribute to the groundwater cleanup costs in the SEMOU. The Company denies all liability relating to any and all claims in the
Third-Party Complaints. Further, since these claims overlap with some of the EPA claims, they may be extinguished as part of any settlement with the EPA. The Company has tendered the Third-Party
Complaints to its insurance carriers and the carriers are paying all costs and the majority of fees in defending these claims. </FONT></P>

<P><FONT SIZE=2><B>Enoxaparin Sodium Litigation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2003, the Company filed an Abbreviated New Drug Application ("ANDA"), which is pending with the FDA, for enoxaparin sodium
("Lovenox&reg;"), seeking approval to engage in the commercial manufacture, sale, and use of the enoxaparin product in the United States. The Company's ANDA includes a Paragraph&nbsp;IV
certification that the existing patents in connection with Lovenox&reg;, are invalid, unenforceable or will not be infringed by the Company's generic product. Teva Pharmaceuticals </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-35</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_fo1063_1_36"> </A>
<BR>

<P><FONT SIZE=2>USA,&nbsp;Inc.
("Teva") also filed an ANDA on this product; however, the Company believes that its ANDA is the first to be filed for this drug with a Paragraph&nbsp;IV certification. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a result of the filing of the ANDAs by the Company and Teva, Aventis Pharma S.A. and Aventis Pharmaceuticals&nbsp;Inc. filed lawsuits against the Company and Teva in
August&nbsp;2003 in the United States District Court for the District of New Jersey and the United States District Court, Central District of California, Eastern Division (the "California Court")
alleging infringement of one of the two patents on the product. The Company and Teva answered the complaint brought in the California Court and filed a counterclaim, which sought a declaration that
the patents-in-suit are invalid, unenforceable and/or not infringed by the Company's and Teva's products. In February&nbsp;2004, the District of New Jersey court granted
Teva's motion to transfer jurisdiction of the lawsuit to the California Court and subsequently the New Jersey action was consolidated with the California action. The Company subsequently amended its
answer to allege patent unenforceability due to inequitable conduct and to assert a counterclaim alleging that Aventis violated the United States antitrust laws. On August&nbsp;31, 2004 the Company
filed a motion seeking summary adjudication that the Aventis patent in suit was unenforceable due to Aventis inequitable conduct in procuring the patent and seeking to dismiss the litigation. In
November&nbsp;2004, we filed a second motion seeking a summary judgment that the Aventis patent-in-suit is invalid based on indefiniteness of its claims. Our motions are currently under
consideration by the California Court. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company intends to vigorously defend each of the foregoing lawsuits, but their respective outcomes cannot be predicted. Any of such lawsuits, if determined adversely to the Company,
could have a material adverse effect on the Company's financial position, results of operations and cash flows. </FONT></P>

<P><FONT SIZE=2><B>Other Litigation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company is also subject to various other claims and lawsuits arising in the ordinary course of business. In the opinion of management, the ultimate resolution of these matters will
not have a material adverse effect on the financial position, results of operations or cash flows of the Company. </FONT></P>

<P><FONT SIZE=2><B>12. Related Party Transactions  </B></FONT></P>

<P><FONT SIZE=2><B>Affiliated Companies  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company had an equipment agreement with APCL through December&nbsp;31, 2003, whereby the Company has agreed to purchase or lease equipment from APCL with an
aggregate cost up to $9,131. In 2002 and 2003, the Company purchased equipment from APCL for approximately $171 and $169, respectively. Under this agreement, the Company accrued management fees
payable to APCL of $18 and $0 in 2002 and 2003, respectively. In 2003, the Company issued common stock to APCL for management fees of $776. Certain lease agreements of APCL are guaranteed by the
Company or the Chief Executive Officer. The lease agreements guaranteed by the Company were entered into during </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-36</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_fo1063_1_37"> </A>
<BR>

<P><FONT SIZE=2>1998
through 2002 and have aggregate future minimum lease payments of $248 at September&nbsp;30, 2004, and mature in 2004 through 2006. Payment on the leases is expected to be remote
(Note&nbsp;10). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
time to time, the Company outsources laboratory test work to APCL under an arrangement approved by the Audit Committee of the Board of Directors. The total amount paid to APCL in
2001, 2002, 2003 and for the nine months ended September&nbsp;30, 2004 was approximately $38, $14, $19 and $12, respectively. In addition, the Company leases and purchases certain equipment and
leases part of a building from APCL (Note&nbsp;10). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2001 and 2002, the Company charged APCL approximately $57 and $65, respectively, for certain labor services. No labor services were provided in 2003 and 2004. </FONT></P>


<P><FONT SIZE=2><B>Directors and Stockholders  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company engaged in consulting arrangements with a member of the Board of Directors during 2001 and 2002. At December&nbsp;31, 2002 and 2003, the Company
accrued $9 and $0, respectively, for these consulting services. The Company issued 4,800, 5,460 and 1,950 shares of common stock in 2001, 2002 and 2003, respectively, to this Director in lieu of cash
for consulting services performed. These consulting arrangements were terminated effective January&nbsp;1, 2004. </FONT></P>

<P><FONT SIZE=2><B>13. Employee Benefits  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has a defined contribution 401(k) plan ("Plan"), whereby eligible employees voluntarily contribute up to a defined percentage of their annual
compensation. The Company matches 50% of each 1% of employee contributions up to 4% of total employee contributions or 2% of their annual compensation and pays the administrative costs of the Plan.
Employer contributions vest over five years. Total employer contributions during 2001, 2002, 2003 and for the nine months ended September&nbsp;30, 2003 (unaudited) and 2004 were approximately $159,
$171, $158, $131 and $181, respectively. </FONT></P>

<P><FONT SIZE=2><B>14. Subsequent Events  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2004, the Company signed a supply agreement with a pharmaceutical company in which the Company will provide technology transfer and development
services to the customer prior to manufacturing a bronchodilator product for it. The agreement provides for aggregate payments to the Company of up to $1,200 for technology transfer to be received in
December&nbsp;2004, January&nbsp;2005 and upon shipment of the first lot of product to the customer. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective
December&nbsp;2004, the Company entered into a settlement agreement (the "Organon Agreement") with Organon arising out of an interruption in the supply of Cortrosyn to the
Company by Organon. The interruption was caused by the closure of one of Organon's manufacturing facilities. Under the Organon Agreement, the payment dates for the remaining two $6,000 installment
payments owed by the Company to Organon for the acquisition of the U.S. product rights to Cortrosyn have </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-37</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_fo1063_1_38"> </A>
<BR>

<P><FONT SIZE=2>been
extended to June&nbsp;2005 and February&nbsp;2006, respectively, and the amount of the June&nbsp;2005 payment has been reduced to $4,310. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
January&nbsp;2005, the Company entered into a subscription agreement (the "Agreement") with an institutional investor (the "Investor") whereby the investor has agreed to purchase
675,676 shares of the Common Stock of the Company (the "Shares") at a purchase price of $14.80 per share (the "Price"). The Agreement contains a price protection provision, such that, prior to the
earlier of (i)&nbsp;an initial public offering by the Company, or (ii)&nbsp;three years from the date of the Agreement, if the Company closes a private placement of Common Stock for cash proceeds
above $5,000 at a price lower than the Price (the "Subsequent Private Placement"), then the Investor will be entitled to receive additional shares of Common Stock so that the Investor's effective
purchase price per share will equal the purchase price per share of the Subsequent Private Placement. The Agreement also provides "piggyback" registration rights to the Investor allowing for the
Shares to be registered in certain circumstances subsequent to an initial public offering. On February&nbsp;4, 2005, the Company closed the private placement, receiving gross proceeds of $10,000. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
February&nbsp;8, 2005, the Company obtained $3,440 in equipment financing from a lease finance company. The lease obligation will be secured by a maximum $1,720 letter of credit. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-38</FONT></P>

<HR NOSHADE>
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<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fq1063_1_39"> </A> </FONT> <FONT SIZE=2><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  </B></FONT></P>

<P><FONT SIZE=2>To the Board of Directors and Stockholder<BR>
Armstrong Pharmaceuticals,&nbsp;Inc.<BR>
Canton, Massachusetts </FONT></P>

<P><FONT SIZE=2>We
have audited the accompanying balance sheets of Armstrong Pharmaceuticals,&nbsp;Inc. (the Company) as of October&nbsp;8, 2003 and December&nbsp;31, 2002, and the related statements of
operations, changes in stockholder's equity (deficit), and cash flows for the period January&nbsp;1, 2003 to October&nbsp;8, 2003 and the year ended December&nbsp;31, 2002. These financial
statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. </FONT></P>

<P><FONT SIZE=2>We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion. </FONT></P>

<P><FONT SIZE=2>In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Armstrong Pharmaceuticals,&nbsp;Inc. as of October&nbsp;8, 2003 and
December&nbsp;31, 2002, and the results of its operations and its cash flows for the period January&nbsp;1, 2003 to October&nbsp;8, 2003 and the year ended December&nbsp;31, 2002 in conformity
with accounting principles generally accepted in the United States of America. </FONT></P>

<P><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT
SIZE=2>CARLIN, CHARRON &amp; ROSEN, LLP</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>Carlin,
Charron &amp; Rosen, LLP </FONT></P>

<P><FONT SIZE=2>Worcester,
Massachusetts<BR>
August&nbsp;20, 2004 </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-39</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=127,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=141103,FOLIO='F-39',FILE='DISK034:[05BHL3.05BHL1063]FQ1063A.;14',USER='RFARRIN',CD='11-FEB-2005;00:10' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fr1063_1_40"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fr1063_armstrong_pharmaceuticals,_inc__arm02447"> </A>
<A NAME="toc_fr1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>ARMSTRONG PHARMACEUTICALS,&nbsp;INC.    <BR>    <BR>    Balance Sheets    <BR>    <BR>    October&nbsp;8, 2003 and December&nbsp;31, 2002    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="88%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=8 ALIGN="CENTER"><FONT SIZE=2><B>Assets</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Current assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Cash</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>624,016</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Accounts receivable, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1,610,627</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Receivable from Parent</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>166,288</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Inventories, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>3,747,374</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>7,511,705</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Prepaid expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>99,257</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>163,972</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>4,012,919</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>9,910,320</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Property and equipment, net</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Total assets</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>4,012,919</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>9,910,320</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><BR><FONT SIZE=2><B>Liabilities and Stockholder's Deficit</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Current liabilities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Bank overdraft</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>572,417</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>303,399</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Accounts payable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>94,902</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>201,009</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Accrued expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>475,491</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>517,353</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Accrued restructuring</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>5,756,771</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>7,229,703</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Payable to Parent</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>6,491,814</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>7,355,594</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>13,391,395</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>15,607,058</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Commitments and contingencies</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><BR>
Stockholder's deficit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Common stock</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Additional paid-in capital</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>18,218,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>18,218,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%"><FONT SIZE=2>Accumulated deficit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(27,596,476</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(23,914,738</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>(9,378,476</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>(5,696,738</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><B>)</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Total liabilities and stockholder's deficit</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>4,012,919</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>9,910,320</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-40</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=128,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=20915,FOLIO='F-40',FILE='DISK034:[05BHL3.05BHL1063]FR1063A.;10',USER='RFARRIN',CD='11-FEB-2005;00:10' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fs1063_1_41"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fs1063_armstrong_pharmaceuticals,_inc__arm04532"> </A>
<A NAME="toc_fs1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>ARMSTRONG PHARMACEUTICALS, INC.    <BR>    <BR>    Statements of Operations    <BR>    <BR>    For the Period January 1, 2003 to October 8, 2003<BR>  and the Year Ended December 31, 2002    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Revenues</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Third party sales Albuterol</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,158,886</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Other third party sales</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>3,801,934</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>6,985,242</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Sales to Parent</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>5,905,375</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>6,389,263</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>9,707,309</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B>15,533,391</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Cost of goods sold</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Third party Albuterol</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,293,900</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Other third party</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>3,003,402</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>6,462,436</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Parent</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>5,905,375</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>6,389,263</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Manufacturing variances</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>3,034,565</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>14,139,826</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Inventory provision</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>133,034</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,229,007</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>12,076,376</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B>31,514,432</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><BR><FONT SIZE=2> Gross margin</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><BR><FONT SIZE=2><B>(2,369,067</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B><BR>
(15,981,041</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><B><BR>)</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Operating expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>General and administrative</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>650,875</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,131,236</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Research and development</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>670,469</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>2,066,470</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Impairment of property and equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>7,818,809</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>1,321,344</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B>11,016,515</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%"><BR><FONT SIZE=2> Loss from operations</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><BR><FONT SIZE=2><B>(3,690,411</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B><BR>
(26,997,556</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><B><BR>)</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Other income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Interest income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>8,673</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>14,062</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Miscellaneous income</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3,699</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>8,673</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B>17,761</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><BR><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B><BR>
(3,681,738</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B><BR>$</B></FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><B><BR>
(26,979,795</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><B><BR>)</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-41</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=129,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=303978,FOLIO='F-41',FILE='DISK034:[05BHL3.05BHL1063]FS1063A.;7',USER='RFARRIN',CD='11-FEB-2005;00:10' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_ft1063_1_42"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ft1063_armstrong_pharmaceuticals,_inc__arm05627"> </A>
<A NAME="toc_ft1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>ARMSTRONG PHARMACEUTICALS, INC.    <BR>    <BR>    Statements of Changes in Stockholder's Equity (Deficit)    <BR>    <BR>    For the Period January 1, 2003 to October 8, 2003 and the Year Ended December 31, 2002    <BR>
</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="29%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Common Stock</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="29%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Additional<BR>
Paid-in<BR>
Capital</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Retained Earnings<BR>
(Accumulated<BR>
Deficit)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Total<BR>
Stockholder's<BR>
Equity (Deficit)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="29%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="29%"><FONT SIZE=2>Balance, January 1, 2002</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>18,218,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>3,065,057</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>21,283,057</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="29%"><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>(26,979,795</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(26,979,795</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="29%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="29%"><FONT SIZE=2>Balance, December 31, 2002</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>18,218,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>(23,914,738</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(5,696,738</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="29%"><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>(3,681,738</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(3,681,738</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="29%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="29%"><FONT SIZE=2>Balance, October 8, 2003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>100</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><B>&#151;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><B>18,218,000</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2><B>(27,596,476</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>(9,378,476</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><B>)</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="29%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-42</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=130,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=710500,FOLIO='F-42',FILE='DISK034:[05BHL3.05BHL1063]FT1063A.;7',USER='RFARRIN',CD='11-FEB-2005;00:10' -->
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fu1063_1_43"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fu1063_armstrong_pharmaceuticals,_inc__arm04505"> </A>
<A NAME="toc_fu1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>ARMSTRONG PHARMACEUTICALS, INC.    <BR>    <BR>    Statements of Cash Flows    <BR>    <BR>    For the Period January 1, 2003 to October 8, 2003 and the Year Ended December 31, 2002    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="87%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2>Cash flows from operating activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(3,681,738</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(26,979,795</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>Adjustments to reconcile net loss to net cash used for operating activities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Depreciation</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>532,891</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Provision for doubtful accounts</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>136,843</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Provision for inventory reserve</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>133,034</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>2,229,007</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Impairment charge on property and equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>7,818,809</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Changes in operating assets and liabilities:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>(Increase) decrease in:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="57%"><FONT SIZE=2>Accounts receivable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1,610,627</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>439,584</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="57%"><FONT SIZE=2>Receivable from Parent</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(166,288</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="57%"><FONT SIZE=2>Inventories</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3,631,297</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>6,787,935</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="57%"><FONT SIZE=2>Prepaid expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>64,715</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>232,728</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>Increase (decrease) in:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="57%"><FONT SIZE=2>Accounts payable</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(106,107</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(1,336,610</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="57%"><FONT SIZE=2>Accrued expenses</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(41,862</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>(95,192</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="57%"><FONT SIZE=2>Accrued restructuring</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(1,472,932</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>7,229,703</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2>Net cash used for operating activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><B>(29,254</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>(3,004,097</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><B>)</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2>Cash flows from investing activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>Acquisition of property and equipment</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><B>&#151;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>(5,598,406</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><B>)</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2>Cash flows from financing activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>Bank overdraft</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>269,018</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>6,841</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>Payments to Parent</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>(863,780</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>Advances from Parent</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>8,805,394</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2>Net cash provided by (used for) financing activities</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><B>(594,762</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>8,812,235</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2>Net increase (decrease) in cash</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><B>(624,016</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>209,732</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2>Cash&#151;beginning</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>624,016</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>414,284</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4><FONT SIZE=2>Cash&#151;ending</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><B>&#151;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>624,016</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-43</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=131,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=288825,FOLIO='F-43',FILE='DISK034:[05BHL3.05BHL1063]FU1063A.;6',USER='RFARRIN',CD='11-FEB-2005;00:10' -->
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fw1063_1_44"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fw1063_armstrong_pharmaceuticals,_inc__arm04710"> </A>
<A NAME="toc_fw1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>ARMSTRONG PHARMACEUTICALS,&nbsp;INC.    <BR>    <BR>    Notes to Financial Statements    <BR>    <BR>    For the Period January&nbsp;1, 2003 to October&nbsp;8, 2003 and the Year Ended December&nbsp;31, 2002    <BR>
</B></FONT></P>

<P><FONT SIZE=2><B>1. Nature of Operations  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Armstrong Pharmaceuticals,&nbsp;Inc. (the "Company" or "Armstrong") was incorporated in 2001 in the state of Delaware. The Company was founded in 1955 as
Armstrong Laboratories,&nbsp;Inc., a manufacturer of specialty aerosol products. The Company's principal product during the period January&nbsp;1, 2003 to October&nbsp;8, 2003 and the year ended
2002 was Albuterol, which is used to prevent and treat wheezing, shortness of breath, and troubled breathing caused by asthma, chronic bronchitis, emphysema, and other lung diseases. Armstrong also
provides contract manufacturing services for metered-dose inhalers (MDIs) and nasal spray products. In 2001, Armstrong became a wholly owned subsidiary of Andrx Corporation ("Andrx";
"Parent"), a publicly held company, after being purchased from Celltech Manufacturing,&nbsp;Inc. Armstrong is registered with the U.S. Food and Drug Administration (FDA) and the U.S. Drug
Enforcement Agency. </FONT></P>

<P><FONT SIZE=2><B>2. Summary of Significant Accounting Policies  </B></FONT></P>

<UL>

<P><FONT SIZE=2><I> Use of Estimates  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Inventories  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories are stated at the lower of cost or market value, with cost determined by the first-in, first-out method. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Property and Equipment and Depreciation  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and equipment are stated at cost. Depreciation is computed using the straight-line method at rates sufficient to write off the cost of the
assets over their estimated useful lives. Depreciation expense on property and equipment totaled $0 and $532,891 for the period January&nbsp;1, 2003 to October&nbsp;8, 2003 and the year ended
December&nbsp;31, 2002, respectively. In 2002, the Company determined that its property and equipment was impaired and accordingly recognized an impairment charge of $7,818,809. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Income Taxes  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company accounts for income taxes according to the liability method. Under this method, deferred tax assets and liabilities are determined based on
differences between the financial reporting and income tax bases of assets and liabilities and are measured using enacted tax laws and rates that will be in effect when the differences are expected to
reverse. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Deferred Rent  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company accounts for escalating rental payments on a straight line basis over the term of the lease. The difference between the straight line amounts and the
amounts actually expended is included </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-44</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=132,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=202692,FOLIO='F-44',FILE='DISK034:[05BHL3.05BHL1063]FW1063A.;9',USER='KSOLTER',CD='11-FEB-2005;03:41' -->
<A NAME="page_fw1063_1_45"> </A>

<P><FONT SIZE=2>in
accrued expenses in the accompanying balance sheets and totaled approximately $245,000 and $163,000 at October&nbsp;8, 2003 and December&nbsp;31, 2002, respectively. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Revenue Recognition  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue is recognized when products are shipped to customers. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Shipping Fees  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shipping charges to customers are included in revenues; shipping costs are included in cost of goods sold. </FONT></P>

<P><FONT SIZE=2><B>3. Concentrations  </B></FONT></P>

<UL>

<P><FONT SIZE=2><I> Major Customers and Suppliers  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's customers are concentrated in the pharmaceuticals industry. The Company reduces its credit risk on accounts receivable by only extending credit to
customers with established credit worthiness on a case-by-case basis. The Company has three customers that accounted for 100% of revenues for the period January&nbsp;1, 2003
to October&nbsp;8, 2003 and four customers that accounted for 99% of revenues for the year ended December&nbsp;31, 2002. These customers also represented 100% of accounts receivable at
October&nbsp;8, 2003 and December&nbsp;31, 2002. The Company also has three vendors that accounted for 51% of purchases in 2003 and 38% in 2002. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Collective Bargaining Agreements  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of October&nbsp;8, 2003, the Company had approximately 80 employees, of which approximately 49% were covered by collective bargaining agreements which expire
in December&nbsp;2004. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Cash Balances  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company also has a concentration of credit represented by cash balances in certain large commercial banks in amounts which occasionally exceed current federal
deposit insurance limits. The financial stability of these institutions is monitored by management. </FONT></P>


<P><FONT SIZE=2><B>4. Accounts Receivable  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable represent balances due from customers and are presented net of an allowance for doubtful collections of approximately $115,000 and $140,000 at
October&nbsp;8, 2003 and December&nbsp;31, 2002, respectively. In determining the allowance, objective evidence that a single receivable is uncollectible as well as a historical pattern of
collections of accounts receivable that indicate that the entire face amount of a portfolio of accounts receivable may not be collectible is considered at each balance sheet date. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-45</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=133,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=204637,FOLIO='F-45',FILE='DISK034:[05BHL3.05BHL1063]FW1063A.;9',USER='KSOLTER',CD='11-FEB-2005;03:41' -->
<A NAME="page_fw1063_1_46"> </A>
<BR>

<P><FONT SIZE=2><B>5. Inventories  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories consist of the following: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="72%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="61%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2002</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Raw materials</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3,123,546</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>7,638,965</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Work in process</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>1,168,026</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>670,846</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Finished goods</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>409,202</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>155,294</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>4,700,774</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>8,465,105</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>Less: Reserve for obsolescence</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>953,400</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>953,400</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>3,747,374</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>7,511,705</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="61%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>6. Restructuring  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Andrx initiated restructuring actions at the Company in the fourth quarter of 2002 to reduce costs and record impairment charges on unproductive assets. The
restructuring and related actions primarily consist of personnel reductions and the recording of a lease loss reserve for the Company's operating lease for its Canton facility. The Company reduced its
personnel by 38 employees and recorded a severance charge of approximately $405,000. All amounts related to severance were paid out during 2003. Additionally, the Company recorded a lease loss reserve
of approximately $6,825,000 which included all future lease payments as well as estimates for insurance and taxes for the remaining life of the lease. At October&nbsp;8, 2003 and December&nbsp;31,
2002, accrued restructuring costs totaled approximately $5,757,000 and $7,230,000, respectively. </FONT></P>

<P><FONT SIZE=2><B>7. Related Party Transactions  </B></FONT></P>

<UL>

<P><FONT SIZE=2><I> Sales to Parent  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company sells Albuterol to Andrx at cost. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Other Transactions with Parent  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's operating losses have been funded by Andrx. As a result, the Company has significant amounts due to Andrx at October&nbsp;8, 2003 and
December&nbsp;31, 2002. There are no set repayment terms or interest charges to the Company for this liability. Also, see Note&nbsp;12. </FONT></P>


<P><FONT SIZE=2><B>8. Stockholders' Equity  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has authorized 100 shares of common stock, which have a par value of $.001 each. As of October&nbsp;8, 2003 and December&nbsp;31, 2002, all 100
shares were issued and outstanding and owned by Andrx. </FONT></P>

<P><FONT SIZE=2><B>9. Pension Plan  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has a defined contribution pension plan available to all eligible non union employees. Employees may contribute pre-tax income up to the
maximum allowable by law. The Company matched 50% of employee contributions up to a maximum of 6% of employee pre-tax </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-46</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=134,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=612842,FOLIO='F-46',FILE='DISK034:[05BHL3.05BHL1063]FW1063A.;9',USER='KSOLTER',CD='11-FEB-2005;03:41' -->
<A NAME="page_fw1063_1_47"> </A>
<BR>

<P><FONT SIZE=2>income.
The Company also contributes $.65 per hour for its union employees to a pension plan sponsored by the International Association of Machinists and Aerospace Workers. Company contributions to
both plans totaled $44,857 and $81,247 in 2003 and 2002, respectively </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Andrx
has a stock option plan available to all eligible employees. Employees received stock option grants periodically which they were allowed to exercise once the stock options were
fully vested. As of October&nbsp;8, 2003, all Company employees who held fully vested stock options were allowed to exercise their stock options within ninety days. None of the stock options were
exercised within ninety days and thus were cancelled. </FONT></P>

<P><FONT SIZE=2><B>10. Income Taxes  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the period January&nbsp;1, 2003 to October&nbsp;8, 2003 and for the year ended December&nbsp;31, 2002, the Company had certain book and tax timing
differences and significant operating losses that would have resulted in net operating loss carryforwards. As the Company could not reasonably expect to generate sufficient net income to utilize any
net operating loss carryforwards, deferred tax assets have been fully reserved. Also, see Note&nbsp;12. </FONT></P>

<P><FONT SIZE=2><B>11. Commitments and Contingencies  </B></FONT></P>

<UL>

<P><FONT SIZE=2><I> Legal Proceedings  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is involved in various claims and legal proceedings of a nature considered normal to its business, principally product liability. In the opinion of
management, the ultimate disposition of such proceedings will not have a materially adverse effect on the Company's financial position or future results of operations. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Alpharma Breach of Contract Litigation  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September&nbsp;2003, Alpharma USPD&nbsp;Inc. ("Alpharma") filed a complaint against the Company in the United States District Court for the Southern
District of New York. Alpharma alleged that a contractual breach by Armstrong resulted in the recall of Epinephrine Mist, a product manufactured by Armstrong for Alpharma. In the complaint, Alpharma
sought to recover damages for breach of contract, damages for negligent misrepresentations, and punitive damages. On January&nbsp;22, 2004, Alpharma filed an amended complaint, which added Andrx and
Celltech Manufacturing&nbsp;Inc. (Celltech), from which Andrx purchased Armstrong in March&nbsp;2001, as additional named defendants. Management expects that any resulting liability will not be
the responsibility of Armstrong. Accordingly, no liability has been accrued for this matter. See also Note&nbsp;12. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Leases  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company rents office, laboratory, warehouse and production space in Canton, Massachusetts, under a lease agreement that expires in November&nbsp;2011. See
Note&nbsp;6. The Company also rents office, laboratory, warehouse and production space in West Roxbury, Massachusetts, under a lease agreement that expires in March&nbsp;2005. The terms of certain
lease arrangements include options to renew for additional periods and additional payments for real estate taxes, insurance, and other operating expenses applicable to the property. Rent expense under
these agreements totaled $85,670 and </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-47</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=135,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=801993,FOLIO='F-47',FILE='DISK034:[05BHL3.05BHL1063]FW1063A.;9',USER='KSOLTER',CD='11-FEB-2005;03:41' -->
<A NAME="page_fw1063_1_48"> </A>

<P><FONT SIZE=2>$1,769,733
for the period January&nbsp;1, 2003 to October&nbsp;8, 2003 and for the year ended December&nbsp;31, 2002, respectively. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company leases machinery and equipment under operating leases with various expiration dates through July&nbsp;2006. Equipment lease expense charged to operations totaled $15,036
for the period January&nbsp;1, 2003 to October&nbsp;8, 2003 and $21,904 for the year ended December&nbsp;31, 2002. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future
minimum payments under non-cancelable operating leases having remaining terms in excess of one year as of October&nbsp;8, 2003 are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="63%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="75%" ALIGN="LEFT"><FONT SIZE=1><B>Year Ending October 8,<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>2004</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>1,443,108</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>2005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>1,357,095</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>2006</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>1,218,611</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>2007</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>1,211,793</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>2008</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>1,322,874</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>Thereafter</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>2,777,026</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2>9,330,507</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="75%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2><B>12. Subsequent Events  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;9, 2003, the Company was acquired by Amphastar Pharmaceuticals, Inc (Amphastar), a specialty and generic pharmaceutical company, for $3,000,000
in cash. Amphastar acquired all outstanding stock of the Company. In accordance with the stock purchase agreement certain liabilities, including the outstanding payable to parent (net of the
receivable from parent) and any liability associated with the Alpharma lawsuit, remain with Andrx, and do not become an obligation of Amphastar. The stock purchase agreement also required that
Amphastar and Andrx join in making an election under Internal Revenue Service Code Section&nbsp;338(h)(10). The related tax return, filed by Andrx, reflected a loss with respect to Armstrong. As a
result of the 338(h)(10) election, all unused tax attributes Armstrong had accumulated were forfeited as of October&nbsp;8, 2003. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Also,
on October&nbsp;8, 2003 the Company and Andrx entered into a supply agreement. The agreement requires the Company to manufacture and supply Albuterol to Andrx based upon firm
orders. Andrx does not have an obligation to purchase any minimum quantities under this agreement except for the firm orders. The Company has agreed to sell the Albuterol to Andrx at a $1.90 per unit. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
June&nbsp;30, 2004, a settlement was reached on the Alpharma lawsuit, requiring the payment of $5,250,000 to Alpharma by Andrx and Celltech equally for the dismissal of the
complaint described in Note&nbsp;11. All parties' claims against each other in connection with this matter were released. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
July&nbsp;1, 2004, the Company acquired the product rights to Epinephrine Mist CFC from Alpharma for $2,000,000 in cash. The Company has agreed to pay royalties on future product
sales and, in the event of recertification, will acquire inventory from Alpharma valued at approximately $300,000. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-48</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=5,SEQ=136,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=482601,FOLIO='F-48',FILE='DISK034:[05BHL3.05BHL1063]FW1063A.;9',USER='KSOLTER',CD='11-FEB-2005;03:41' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fy1063_1_49"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fy1063_amphastar_pharmaceuticals,_inc__amp04217"> </A>
<A NAME="toc_fy1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>Amphastar Pharmaceuticals,&nbsp;Inc.    <BR>    <BR>    Unaudited Pro Forma Combined Condensed Consolidated    <BR>    <BR>    Statement of Operations    <BR>    </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following unaudited pro forma combined condensed consolidated statement of operations has been prepared to give effect to the acquisition of Armstrong
Pharmaceuticals,&nbsp;Inc. ("Armstrong") by Amphastar Pharmaceuticals,&nbsp;Inc. ("Amphastar") using the purchase method of accounting, and the assumptions and adjustments described in the
accompanying notes to the unaudited pro forma combined consolidated statement of operations. This unaudited pro forma statement of operations was prepared as if the acquisition had been completed at
January&nbsp;1, 2003 by combining the respective historical statements of operations for both Armstrong and Amphastar. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
unaudited pro forma combined condensed consolidated statement of operations is presented for illustrative purposes only and is not necessarily indicative of the results of operations
that would have actually been reported had the acquisition occurred on January&nbsp;1, 2003, nor are they necessarily indicative of future results of operations. The pro forma combined condensed
consolidated statement of operations includes pro forma adjustments. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable under the
circumstances. The acquisition was accounted for under the purchase method of accounting. The allocation of the purchase price was based upon the estimated fair value of the acquired assets and
liabilities in accordance with Statement of Financial Accounting Standard (SFAS) No.&nbsp;141, </FONT><FONT SIZE=2><I>Business Combinations</I></FONT><FONT SIZE=2>. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>F-49</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=137,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=678466,FOLIO='F-49',FILE='DISK034:[05BHL3.05BHL1063]FY1063A.;8',USER='RFARRIN',CD='11-FEB-2005;00:11' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_fz1063_1_50"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="fz1063_amphastar_pharmaceuticals,_inc__amp05559"> </A>
<A NAME="toc_fz1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>Amphastar Pharmaceuticals,&nbsp;Inc.    <BR>    <BR>    Unaudited Pro Forma Combined Condensed Consolidated    <BR>    <BR>    Statement of Operations    <BR>    <BR>    (In thousands, except per share data)    <BR>
</B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="98%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER"><FONT SIZE=1><B>Year ended December 31, 2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amphastar</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Armstrong(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Pro forma<BR>
Adjustments</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Pro forma<BR>
Combined</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Net revenues</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>48,197</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9,707</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>57,904</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Cost of revenues</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>35,508</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>12,076</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>47,584</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>12,689</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(2,369</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>10,320</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Operating expenses:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>Selling, distribution, and marketing</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3,194</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>3,194</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>General and administrative</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5,349</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>651</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>6,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>Research and development</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>6,344</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>670</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>7,014</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>Impairment of long-lived assets</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>623</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>623</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>Management fees and rent expense&#151;related party</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>921</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>921</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Total operating expenses</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>16,431</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,321</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>17,752</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Loss from operations</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(3,742</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(3,690</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(7,432</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Non-operating income (expense):</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>Interest income</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>174</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(29</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)(a)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>154</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>Interest expense</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(767</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(767</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>Other expense</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(203</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(203</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(796</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(29</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(816</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Net loss from continuing operations</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(4,538</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(3,681</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>(29</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(8,248</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Net loss per share before extraordinary gain basic and diluted</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(0.14</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>(0.25</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Weighted-average shares outstanding basic and diluted</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>33,520</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>33,520</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>The
Armstrong statement of operations data is for the period from January&nbsp;1, 2003 through October&nbsp;8, 2003, the date immediately prior to the acquisition. </FONT></DD></DL>

<P><FONT SIZE=2><B>Pro Forma Adjustments  </B></FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>a)</FONT></DT><DD><FONT SIZE=2>To
reflect decrease in interest income resulting from cash payment of $3.2&nbsp;million for the acquisition. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>F-50</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=138,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=723732,FOLIO='F-50',FILE='DISK034:[05BHL3.05BHL1063]FZ1063A.;10',USER='RFARRIN',CD='11-FEB-2005;00:11' -->
<UL>
<UL>
</UL>
</UL>
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_ga1063_1_51"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ga1063_amphastar_pharmaceuticals,_inc__amp05944"> </A>
<A NAME="toc_ga1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>Amphastar Pharmaceuticals,&nbsp;Inc.    <BR>    <BR>    Notes to Unaudited Pro Forma Combined Condensed Consolidated    <BR>    <BR>    Statement of Operations    <BR>    <BR>    (In thousands, except per share data)
<BR>    </B></FONT></P>

<P><FONT SIZE=2><B>1. Basis of Pro Forma Presentation  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The unaudited pro forma combined condensed statement of operations of Amphastar and Armstrong for the year ended December&nbsp;31, 2003 is presented as if the
transaction had been consummated on January&nbsp;1, 2003. The unaudited pro forma combined condensed statement of operations for the twelve months ended December&nbsp;31, 2003 combines the results
of operations of Amphastar and Armstrong for the fiscal year ended December&nbsp;31, 2003. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
total purchase price was $3,200. The purchase price was allocated to the assets and certain liabilities assumed based on their respective fair values. A total of approximately
$1,341, representing the excess of the fair value of the tangible current net assets acquired, over the purchase price, net of tax effects, has been recorded as an extraordinary gain. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
accounting for the acquisition is summarized as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="67%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="83%"><FONT SIZE=2>Accounts receivable</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>167</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="83%"><FONT SIZE=2>Due from Andrx</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>299</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="83%"><FONT SIZE=2>Inventory</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,414</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="83%"><FONT SIZE=2>Prepaid expense</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>58</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="83%"><FONT SIZE=2>Assumed liabilities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(397</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="83%"><FONT SIZE=2>Fair value of assets and liabilities acquired</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4,541</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="83%"><FONT SIZE=2>Less cash paid for the acquisition, including transaction costs</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>(3,200</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="83%"><FONT SIZE=2>Extraordinary gain, net of tax effect of $40</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1,341</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="83%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>F-51</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=139,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=24487,FOLIO='F-51',FILE='DISK034:[05BHL3.05BHL1063]GA1063A.;6',USER='RFARRIN',CD='11-FEB-2005;00:11' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=4><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B>
<IMG SRC="g61687.jpg" ALT="GRAPHIC" WIDTH="117" HEIGHT="103">
  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=5><B>Amphastar Pharmaceuticals,&nbsp;Inc.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B>Common Stock  </B></FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=140,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=68448,FOLIO='blank',FILE='DISK034:[05BHL3.05BHL1063]HO1063A.;14',USER='RFARRIN',CD='11-FEB-2005;00:11' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_ja1063_1_1"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ja1063_part_ii_information_not_required_in_prospectus"> </A>
<A NAME="toc_ja1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>PART II<BR>  INFORMATION NOT REQUIRED IN PROSPECTUS    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>Item 13. Other Expenses of Issuance and Distribution.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table indicates the expenses to be incurred in connection with the offering described in this Registration Statement, other than underwriting
discounts and commissions, all of which will be paid by us. All amounts are estimated except the Securities and Exchange Commission registration fee and the National Association of Securities
Dealers&nbsp;Inc. filing fee. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="68%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Amount</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Securities and Exchange Commission Filing Fee</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>$14,571.00</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>NASD Filing Fee</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>$12,000.00</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>NASDAQ National Market Listing Fee</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>$</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Accounting Fees and Expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>$</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Legal Fees and Expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>$</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Blue Sky Fees and Expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>$</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Transfer Agent and Registrar Fees and Expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>$</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Printing and Engraving Expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>$</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>Miscellaneous Expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>$</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="75%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>$</FONT></TD>
</TR>
</TABLE></DIV>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>To
be filed by amendment. </FONT></DD></DL>

<P><FONT SIZE=2><B>Item 14. Indemnification of Directors and Officers.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;102 of the General Corporation Law of the State of Delaware permits a corporation to eliminate the personal liability of directors of a corporation
to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except for breaches of the director's duty of loyalty to the corporation or its stockholders,
acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of a law, authorizations of the payments of a dividend or approval of a stock repurchase or
redemption in violation of Delaware corporate law or for any transactions from which the director derived an improper personal benefit. Our certificate of incorporation provides that no director will
be liable to us or our stockholders for monetary damages for breach of fiduciary duties as a director, subject to the same exceptions as described above. Prior to the completion of this offering, we
intend to enter into indemnification agreements with each of our directors which may, in some cases, be broader than the specific indemnification provisions contained under Delaware law. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;145
of the General Corporation Law of the State of Delaware provides that a corporation has the power to indemnify a director, officer, employee, or agent of the
corporation and certain other persons serving at the request of the corporation in related capacities against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlements
actually and reasonably incurred by the person in connection with a threatened, pending, or completed action, suit or proceeding to which he or she is or is threatened to be made a party by reason of
such position, if such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful, except that, in the case of actions brought by or in the right of the corporation, indemnification is limited to
expenses (including attorney fees) actually and reasonably incurred by the person in connection with defense or settlement of such action or suit and no indemnification shall be made with respect to
any claim, issue, or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court
determines that, despite the adjudication of liability but in view of </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>II-1</FONT></P>

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<P><FONT SIZE=2>all
of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. In addition, to
the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit, or proceeding described above (or claim, issue,
or matter therein), such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. Expenses (including
attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative, or investigative action, suit, or proceeding may be advanced by the corporation upon receipt of an
undertaking by such person to repay such amount if it is ultimately determined that such person is not entitled to indemnification by the corporation under Section&nbsp;145 of the General
Corporation Law of the State of Delaware. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
certificate of incorporation provides that we will, to the fullest extent permitted by law, indemnify any person made or threatened to be made a party to an action or proceeding by
reason of the fact that he or she (or his or her testators or intestate) is or was our director or officer or serves or served at any other corporation, partnership, joint venture, trust or other
enterprise in a similar capacity or as an employee or agent at our request, including service with respect to employee benefit plans maintained or sponsored by us, against expenses (including
attorneys' fees and expenses), judgments, fines, penalties, and amounts paid in settlement incurred in connection with the investigation, preparation to defend, or defense of such action, suit,
proceeding, or claim. However, we are not required to indemnify or advances expenses in connection with any action, suit, proceeding, claim, or counterclaim initiated by us or on behalf of us. Our
bylaws provide that we will indemnify and hold harmless each person who was or is a party or threatened to be made a party to any action, suit, or proceeding by reason of the fact that he or she is or
was our director or officer, or is or was serving at our request in a similar capacity of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to
employee benefit plans (whether the basis of such action, suit, or proceeding is an action in an official capacity as a director or officer or in any other capacity while serving as a director of
officer) to the fullest extent authorized by the Delaware General Corporation Law against all expense, liability and loss (including attorneys fees, judgments, fines, ERISA excise taxes, or penalties
and amounts paid in settlement) reasonably incurred or suffered by such person in connection such action, suit, or proceeding, and this indemnification continues after such person has ceased to be an
officer or director and inures to the benefit of such person's heirs, executors, and administrators. The indemnification rights also include the right generally to be
advanced expenses, subject to any undertaking required under Delaware General Corporation Law, and the right generally to recover expenses to enforce an indemnification claim or to defend specified
suits with respect to advances of indemnification expenses. </FONT></P>


<P><FONT SIZE=2><B>Item 15. Recent Sales of Unregistered Securities.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below is information regarding securities sold by the Registrant since December&nbsp;31, 2001 which were not registered under the Securities Act. </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2>Issuances
of Preferred Stock and Common Stock. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;&nbsp;&nbsp;During
the period December&nbsp;2001 through March&nbsp;2002, the Registrant issued and sold an aggregate of 4,105,102 shares of non-voting convertible
preferred stock at a price per share of $8.00 to various accredited investors. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;&nbsp;&nbsp;During
the period April through June&nbsp;2004, the Registrant issued and sold 1,250,000 shares of common stock at a price per share of $12.50 to various accredited
investors. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;&nbsp;&nbsp;In
November&nbsp;2004 a warrant to purchase 124,000 shares of the Registrant's common stock was exercised at $7.50 per share. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>II-2</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)&nbsp;&nbsp;&nbsp;In
February&nbsp;2005 the Registrant issued and sold 675,676 shares of common stock at a price per share of $14.80 to an institutional investor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
underwriters were involved in the foregoing sales of securities. The securities described in this paragraph&nbsp;(a) of Item 15 were issued to a combination of foreign and U.S.
investors in reliance upon the exemption from the registration requirements of the Securities Act, as set forth in Section&nbsp;4(2) under the Securities Act and Rule&nbsp;506 of
Regulation&nbsp;D promulgated thereunder relative to sales by an issuer not involving any public offering, to the extent an exemption from such registration was required. The purchasers of shares of
our stock described above represented to us in connection with their
purchase that they were accredited investors and were acquiring the shares for investment and not distribution, that they could bear the risks of the investment and could hold the securities for an
indefinite period of time. The purchasers received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration
or an available exemption from such registration. The sales of these securities were made without general solicitation or advertising. </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(b)</FONT></DT><DD><FONT SIZE=2>Stock
Option Grants. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;&nbsp;&nbsp;Since
December&nbsp;31, 2002, the Registrant has granted stock options under its various stock option plans to directors, officers, employees and consultants to
purchase an aggregate of 3,219,420 shares of common stock with an aggregate exercise price of $9.40 per share, and has issued 659,110 shares of common stock for an aggregate purchase price of
$1,354,500 upon exercise of such options. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
stock option grants and the common stock issuances described in this paragraph&nbsp;(b)(1) of Item 15 were made pursuant to written compensatory plans or agreements in reliance on
the exemption provided by Rule&nbsp;701 promulgated under the Securities Act. </FONT></P>

<P><FONT SIZE=2><B>Item 16. Exhibits and Financial Statement Schedules.  </B></FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2>Exhibits </FONT></DD></DL>
</UL>
<BR>

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<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="9%" ALIGN="LEFT"><FONT SIZE=1><B>Exhibit No.<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="89%" ALIGN="CENTER"><FONT SIZE=1><B>Description</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1.1*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Underwriting Agreement</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3.1*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Certificate of Incorporation</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3.2*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>By-laws</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4.1*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Specimen certificate evidencing shares of common stock</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5.1*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Opinion of Latham &amp; Watkins LLP</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Amended and Restated 2002 Stock Option/Stock Issuance Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.2*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Forms of 1998-2001 option agreements</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.3*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Lease dated January&nbsp;31, 2005 between Applied Financial of California L.P. and the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Asset Sale Agreement, dated June 26, 2003, between Organon USA Inc. and the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Security Agreement, dated June 26, 2003, between Organon USA Inc. and the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Toll Manufacturing Agreement, dated June 26, 2003, between Organon USA Inc. and the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.7*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Royalty Purchase Agreement, dated August 5, 2003, between Drug Royalty USA, Inc. and the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.8</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Security Agreement, dated August 5, 2003, between Drug Royalty USA, Inc. and the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<BR>
<P ALIGN="CENTER"><FONT SIZE=2>II-3</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.9</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Subordination Agreement, dated August 5, 2003, between Organon USA Inc., Drug Royalty USA, Inc. and the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.10*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Settlement Agreement between the Company and Organon USA Inc. dated December&nbsp;20, 2004</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.11</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Promissory Note, dated February 8, 2001, in favor of Cathay Bank</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.12</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Commercial Security Agreement, dated February 8, 2001, in favor of Cathay Bank</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.13</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Lease Agreement, dated July 24, 1990, between Dennis and Gloria Jebbia and International Medication Systems, Limited</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.14</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Lease Agreement, dated March 9, 2000, between Owen Bros. Enterprise and International Medication Systems, Limited, as amended</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.15</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Lease Agreement, dated June 11, 2001, between John C. Armstrong and Armstrong, as amended</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.16</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Stock Purchase Warrant dated March&nbsp;20, 2001</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.17*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Equipment Purchase Facility between International Medication Systems, Limited and Bank of the West dated March&nbsp;1, 2004</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.18*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Business Loan Agreement between International Medication Systems, Inc. and Bank of the West dated February&nbsp;25, 2004</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.19*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Promissory Note, dated November&nbsp;4, 2004, between International Medication Systems, Inc. and Bank of the West</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>21.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Subsidiaries of the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>23.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Consent of Ernst &amp; Young LLP, Independent Registered Public Accounting Firm</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>23.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Consent of Carlin, Charron &amp; Rosen LLP, Independent Registered Public Accounting Firm</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>23.3*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Consent of Latham &amp; Watkins LLP (included in Exhibit 5.1)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>24.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Power of Attorney (included in the signature page to this registration statement)</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>To
be filed by amendment.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#134;</FONT></DT><DD><FONT SIZE=2>Confidential
treatment requested as to certain portions, which portions have been filed separately with the Securities and Exchange Commission.
<BR><BR></FONT>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(b)</FONT></DT><DD><FONT SIZE=2>Financial
Statement Schedules. </FONT></DD></DL>
</DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Schedule&nbsp;II.
</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
other schedules are omitted because they are not required, are not applicable or the information is included in the financial statements or notes thereto. </FONT></P>

<P><FONT SIZE=2><B>Item 17. Undertakings.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>II-4</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>than
the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
undersigned registrant hereby undertakes that: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>For
purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon
Rule&nbsp;430A and contained in the form of prospectus filed by the registrant pursuant to Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>For
purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>II-5</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=5,SEQ=145,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=718772,FOLIO='II-5',FILE='DISK034:[05BHL3.05BHL1063]JA1063A.;34',USER='KSOLTER',CD='11-FEB-2005;05:08' -->
<UL>
<UL>
</UL>
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<P><FONT SIZE=2><A
NAME="page_jb1063_1_6"> </A> </FONT></P>

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<P><FONT SIZE=2><B>Schedule&nbsp;II&#151;Valuation and Qualifying Accounts  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="jb1063_amphastar_pharmaceuticals,_inc__amp03492"> </A>
<A NAME="toc_jb1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>AMPHASTAR PHARMACEUTICALS,&nbsp;INC.    <BR>    <BR>    SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS    <BR>    <BR>    (in thousands)    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="35%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Balance At<BR>
Beginning<BR>
of Period</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Charged<BR>
(Credited)<BR>
to Cost and<BR>
expenses</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Acquired<BR>
Balance</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Deductions</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Balance<BR>
At End<BR>
of Period</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2><B>Allowance for Doubtful Accounts:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2><BR>
Year ended December 31, 2001</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
22</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
488</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
501</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2><BR>
Year ended December 31, 2002</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
501</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(242</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(2</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
257</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2><BR>
Year ended December 31, 2003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
257</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
205</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(29</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
433</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2><BR>
Nine months ended September 30, 2004</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
433</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
192</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(150</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
475</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="35%"><BR><FONT SIZE=2><B>Reserve for Inventory Obsolescence:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2><BR>
Year ended December 31, 2001</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2,637</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
767</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(2,041</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,363</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2><BR>
Year ended December 31, 2002</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,363</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
646</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(587</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,422</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2><BR>
Year ended December 31, 2003</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,422</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,255</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
423</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(81</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
3,019</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2><BR>
Nine months ended September 30, 2004</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
3,019</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
961</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
(181</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
3,799</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>II-6</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=146,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="1",CHK=238530,FOLIO='II-6',FILE='DISK034:[05BHL3.05BHL1063]JB1063A.;2',USER='KSOLTER',CD='11-FEB-2005;04:56' -->
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<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="jc1063_signatures"> </A>
<A NAME="toc_jc1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>SIGNATURES    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Rancho Cucamonga, California on this 10<SUP>th</SUP> day of February, 2005. </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>AMPHASTAR PHARMACEUTICALS, INC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><BR><FONT SIZE=2>By:</FONT></TD>
<TD WIDTH="54%" ALIGN="CENTER"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>JACK ZHANG</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Jack Zhang<BR></FONT> <FONT SIZE=2><I>President and Chief Executive Officer</I></FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="jc1063_signatures_and_power_of_attorney_1"> </A>
<A NAME="toc_jc1063_2"> </A>
<BR></FONT><FONT SIZE=2><B>SIGNATURES AND POWER OF ATTORNEY    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We, the undersigned directors and officers of Amphastar Pharmaceuticals,&nbsp;Inc. hereby severally constitute and appoint Jack Zhang and David Nassif, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution for him/her and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and any subsequent registration statements pursuant to
Rule&nbsp;462 of the Securities Act of 1933, as amended and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorney-in-fact or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the
following persons in the capacities and on the dates indicated. </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="37%" ALIGN="CENTER"><FONT SIZE=1><B>Signature</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="36%" ALIGN="CENTER"><FONT SIZE=1><B>Title</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="22%" ALIGN="CENTER"><FONT SIZE=1><B>Date</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="37%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>JACK ZHANG</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Jack Zhang</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="36%" VALIGN="CENTER"><FONT SIZE=2>President, Chief Executive Officer and Director (Principal Executive Officer)</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2>February 10, 2005</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="37%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>MARY LUO</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Mary Luo</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%" VALIGN="CENTER"><FONT SIZE=2><BR>
Chairman, Chief Operating Officer and Director</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2><BR>
February 10, 2005</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="37%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>DAVID NASSIF</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> David Nassif</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%" VALIGN="CENTER"><FONT SIZE=2><BR>
Chief Financial Officer (Principal Financial and Accounting Officer)</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2><BR>
February 10, 2005</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="37%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>KENNETH CHANG</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Kenneth Chang</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%" VALIGN="CENTER"><FONT SIZE=2><BR>
Director</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2><BR>
February 10, 2005</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="37%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>FLOYD PETERSEN</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Floyd Petersen</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%" VALIGN="CENTER"><FONT SIZE=2><BR>
Director</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2><BR>
February 10, 2005</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="37%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>RICHARD KOO</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Richard Koo</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%" VALIGN="CENTER"><FONT SIZE=2><BR>
Director</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2><BR>
February 10, 2005</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="37%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>RICHARD PRINS</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Richard Prins</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%" VALIGN="CENTER"><FONT SIZE=2><BR>
Director</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2><BR>
February 10, 2005</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="37%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>GORDON TREWEEK</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Gordon Treweek</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%" VALIGN="CENTER"><FONT SIZE=2><BR>
Director</FONT></TD>
<TD WIDTH="2%" VALIGN="CENTER"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="CENTER" VALIGN="CENTER"><FONT SIZE=2><BR>
February 10, 2005</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="je1063_exhibit_index"> </A>
<A NAME="toc_je1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>EXHIBIT INDEX    <BR>    </B></FONT></P>

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<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="9%" ALIGN="LEFT"><FONT SIZE=1><B>Exhibit No.<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="89%" ALIGN="CENTER"><FONT SIZE=1><B>Description</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>1.1*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Underwriting Agreement</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3.1*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Certificate of Incorporation</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>3.2*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>By-laws</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>4.1*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Specimen certificate evidencing shares of common stock</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>5.1*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Opinion of Latham &amp; Watkins LLP</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Amended and Restated 2002 Stock Option/Stock Issuance Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.2*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Forms of 1998-2001 stock option agreements</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.3*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Lease dated January&nbsp;31, 2005 between Applied Financial of California L.P. and the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Asset Sale Agreement, dated June 26, 2003, between Organon USA Inc. and the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Security Agreement, dated June 26, 2003, between Organon USA Inc. and the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Toll Manufacturing Agreement, dated June 26, 2003, between Organon USA Inc. and the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.7*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Royalty Purchase Agreement, dated August 5, 2003, between Drug Royalty USA, Inc. and the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.8</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Security Agreement, dated August 5, 2003, between Drug Royalty USA, Inc. and the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.9</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Subordination Agreement, dated August 5, 2003, between Organon USA Inc., Drug Royalty USA, Inc. and the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.10*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Settlement Agreement between the Company and Organon USA Inc. dated December&nbsp;20, 2004</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.11</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Promissory Note, dated February 8, 2001, in favor of Cathay Bank</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.12</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Commercial Security Agreement, dated February 8, 2001, in favor of Cathay Bank</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.13</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Lease Agreement, dated July 24, 1990, between Dennis and Gloria Jebbia and IMS</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.14</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Lease Agreement, dated March 9, 2000, between Owen Bros. Enterprise and IMS, as amended</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.15</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Lease Agreement, dated June 11, 2001, between John C. Armstrong and Armstrong, as amended</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.16</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Stock Purchase Warrant dated March 20, 2001</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.17*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Equipment Purchase Facility between International Medication Systems, Limited and Bank of the West dated March&nbsp;1, 2004</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.18*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Business Loan Agreement between International Medication Systems, Inc. and Bank of the West dated February&nbsp;25, 2004</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>10.19*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Promissory Note, dated November&nbsp;4, 2004, between International Medication Systems, Inc. and Bank of the West</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>21.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Subsidiaries of the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>23.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Consent of Ernst &amp; Young LLP, Independent Registered Public Accounting Firm</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>23.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Consent of Carlin, Charron &amp; Rosen LLP, Independent Registered Public Accounting Firm</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>23.3*</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Consent of Latham &amp; Watkins LLP (included in Exhibit 5.1)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>24.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Power of Attorney (included in the signature page to this registration statement)</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>To
be filed by amendment.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#134;</FONT></DT><DD><FONT SIZE=2>Confidential
treatment requested as to certain portions, which portions have been filed separately with the Securities and Exchange Commission. </FONT></DD></DL>
<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>
<P><br><A NAME="05BHL1063_1">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_bg1063_1">TABLE OF CONTENTS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ca1063_1">PROSPECTUS SUMMARY</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ca1063_2">Amphastar Pharmaceuticals, Inc.</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ca1063_3">Corporate Information</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ca1063_4">The Offering</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ca1063_5">Summary Consolidated Financial Information</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_de1063_1">RISK FACTORS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1063_2">Risks Related to Our Business</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1063_3">Other Risks Related to Intellectual Property Rights</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1063_4">Risks Related to Our Industry</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dg1063_1">Risks Related to This Offering</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1063_2">FORWARD-LOOKING STATEMENTS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_di1063_1">USE OF PROCEEDS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_di1063_2">DIVIDEND POLICY</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_di1063_3">CAPITALIZATION</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_di1063_4">DILUTION</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dk1063_1">SELECTED CONSOLIDATED FINANCIAL DATA</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dm1063_1">MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_do1063_1">BUSINESS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_du1063_1">MANAGEMENT</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dw1063_1">Summary Compensation Table</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dy1063_1">PRINCIPAL STOCKHOLDERS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dy1063_2">CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ea1063_1">DESCRIPTION OF CAPITAL STOCK</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ea1063_2">SHARES ELIGIBLE FOR FUTURE SALE</A></FONT><BR>

<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ec1063_1">MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ee1063_1">UNDERWRITING</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ee1063_2">LEGAL MATTERS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ee1063_3">EXPERTS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ee1063_4">WHERE YOU CAN FIND MORE INFORMATION</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fa1063_1">Index to Combined and Consolidated Financial Statements</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fc1063_1">Report of Independent Registered Public Accounting Firm</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fd1063_1">Amphastar Pharmaceuticals, Inc. Consolidated Balance Sheets (In thousands, except share and per share data)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fe1063_1">Amphastar Pharmaceuticals, Inc. Consolidated Statements of Operations (In thousands, except share and per share data)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ff1063_1">Consolidated Statements of Stockholders' Equity</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fg1063_1">Amphastar Pharmaceuticals, Inc. Consolidated Statements of Cash Flows (In thousands)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fi1063_1">Amphastar Pharmaceuticals, Inc. Notes to Consolidated Financial Statements Years Ended December 31 2001, 2002 and 2003 and Nine Months Ended September 30, 2003 (Unaudited) and 2004 (Information pertaining to the
nine months ended September 30, 2003 is unaudited) (In thousands, except share and per share data)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fr1063_1">ARMSTRONG PHARMACEUTICALS, INC. Balance Sheets October 8, 2003 and December 31, 2002</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fs1063_1">ARMSTRONG PHARMACEUTICALS, INC. Statements of Operations For the Period January 1, 2003 to October 8, 2003 and the Year Ended December 31, 2002</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ft1063_1">ARMSTRONG PHARMACEUTICALS, INC. Statements of Changes in Stockholder's Equity (Deficit) For the Period January 1, 2003 to October 8, 2003 and the Year Ended December 31, 2002</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fu1063_1">ARMSTRONG PHARMACEUTICALS, INC. Statements of Cash Flows For the Period January 1, 2003 to October 8, 2003 and the Year Ended December 31, 2002</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fw1063_1">ARMSTRONG PHARMACEUTICALS, INC. Notes to Financial Statements For the Period January 1, 2003 to October 8, 2003 and the Year Ended December 31, 2002</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fy1063_1">Amphastar Pharmaceuticals, Inc. Unaudited Pro Forma Combined Condensed Consolidated Statement of Operations</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_fz1063_1">Amphastar Pharmaceuticals, Inc. Unaudited Pro Forma Combined Condensed Consolidated Statement of Operations (In thousands, except per share data)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ga1063_1">Amphastar Pharmaceuticals, Inc. Notes to Unaudited Pro Forma Combined Condensed Consolidated Statement of Operations (In thousands, except per share data)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ja1063_1">PART II INFORMATION NOT REQUIRED IN PROSPECTUS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_jb1063_1">AMPHASTAR PHARMACEUTICALS, INC. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (in thousands)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_jc1063_1">SIGNATURES</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_jc1063_2">SIGNATURES AND POWER OF ATTORNEY</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_je1063_1">EXHIBIT INDEX</A></FONT><BR>
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<DESCRIPTION>EXHIBIT 10.1
<TEXT>
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<HEAD>
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<FONT SIZE=3 ><A HREF="#05BHL1063_2">QuickLinks</A></FONT>
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<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="kg1064_exhibit_10.1"> </A>
<A NAME="toc_kg1064_1"> </A>
<BR></FONT><FONT SIZE=2><B>Exhibit&nbsp;10.1    <BR>    </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>AMPHASTAR PHARMACEUTICALS,&nbsp;INC.<BR>
AMENDED 2002 STOCK OPTION/STOCK<BR>
ISSUANCE PLAN  </B></FONT></P>

<BR>
<BR>
<BR>
<P ALIGN="CENTER"><FONT SIZE=2><I>Approved by Stockholders on July&nbsp;15, 2004  </I></FONT></P>

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<A NAME="page_kg1064_1_2"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>AMPHASTAR PHARMACEUTICALS,&nbsp;INC.<BR>
AMENDED 2002 STOCK OPTION/STOCK<BR>
ISSUANCE PLAN  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>TABLE OF CONTENTS  </B></FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Page</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>SECTION 1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ESTABLISHMENT AND PURPOSE</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
SECTION 2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ADMINISTRATION</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><BR><FONT SIZE=2> (a) Committees of the Board of Directors</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(b) Authority of the Board of Directors</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
SECTION 3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ELIGIBILITY</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><BR><FONT SIZE=2> (a) General Rule</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(b) Ten-Percent Stockholders</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
SECTION 4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;STOCK SUBJECT TO PLAN</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><BR><FONT SIZE=2> (a) Basic Limitation</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(b) Additional Shares</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(c) Section 162(m) Limitation</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
SECTION 5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TERMS AND CONDITIONS OF AWARDS OR SALES</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
5</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><BR><FONT SIZE=2> (a) Stock Purchase Agreement</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
5</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(b) Duration of Offers and Nontransferability of Rights</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(c) Purchase Price</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(d) Withholding Taxes</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(e) Restrictions on Transfer of Shares and Minimum Vesting</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
SECTION 6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TERMS AND CONDITIONS OF OPTIONS</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
6</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><BR><FONT SIZE=2> (a) Stock Option Agreement</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
6</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(b) Number of Shares</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(c) Exercise Price</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(d) Exercisability</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(e) Accelerated Exercisability</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(f) Basic Term</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(g) Termination of Service (Except by Death)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(h) Leaves of Absence</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(i) Death of Optionee</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(j) Restrictions on Transfer of Shares and Minimum Vesting</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(k) Transferability of Options</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(l) Withholding Taxes</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(m) No rights as a Stockholder</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(n) Modification, Extension and Assumption of Options</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- insert table folio -->
<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
SECTION 7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PAYMENTS FOR SHARES</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
8</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><BR><FONT SIZE=2> (a) General Rule</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
8</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(b) Surrender of Stock</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(c) Services Rendered</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(d) Exercise/Sale</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(e) Exercise/Pledge</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
SECTION 8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ADJUSTMENT OF SHARES</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
8</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><BR><FONT SIZE=2> (a) General</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
8</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(b) Mergers and Consolidations</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(c) Reservation of Rights</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
SECTION 9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECURITIES LAWS REQUIREMENTS</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
9</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><BR><FONT SIZE=2> (a) General</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
9</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(b) Financial Reports</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
SECTION 10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NO RETENTION RIGHTS</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
9</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
SECTION 11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DURATION AND AMENDMENTS</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><BR><FONT SIZE=2> (a) Term of the Plan</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(b) Right to Amend or Terminate the Plan</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="87%"><FONT SIZE=2>(c) Effect of Amendment or Termination</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
SECTION 12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DEFINITIONS</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
SECTION 13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EXECUTION</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
12</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_kg1064_1_4"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>Amphastar Pharmaceuticals,&nbsp;Inc.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> Amended 2002 Stock Option/Stock Issuance Plan  </B></FONT></P>


<P><FONT SIZE=2><B>SECTION 1.&nbsp;&nbsp;&nbsp;&nbsp;ESTABLISHMENT AND PURPOSE.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The purpose of the Plan is to offer selected persons an opportunity to acquire a proprietary interest in the success of the Company, or to increase such interest,
by purchasing Shares of the Company's Stock. The Plan provides both for the grant of Options to purchase Shares and the direct award or sale of Shares. Options granted under the Plan may include
Nonstatutory Options as well as ISOs intended to qualify under Section&nbsp;422 of the Code. Capitalized terms are defined in Section&nbsp;12. </FONT></P>

<P><FONT SIZE=2><B>SECTION 2.&nbsp;&nbsp;&nbsp;&nbsp;ADMINISTRATION.  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Committees of the Board of Directors.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Plan may be administered by a Committee of the Board of Directors.
The Committee shall consist of at least two non-employee members (Outside Directors) of the Board of Directors who have been appointed by the Board of Directors. The Committee shall have
such authority and be responsible for such functions as the Board of Directors has assigned to it. If no Committee has been appointed, the entire Board of Directors shall administer the Plan. Any
reference to the Board of Directors in the Plan shall be construed as a reference to the Committee (if any) to whom the Board of Directors has assigned a particular f[11]ction. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Solely
for the purpose of administering awards granted to Outside Directors, all employee members of the Board of Directors will be considered the Committee under the Plan. Among other
things, this
employee Committee shall be responsible for granting awards to Outside Directors and interpreting provisions of the Plan as they relate to these awards. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Authority of the Committee.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Subject to the provisions of the Plan, the Committee shall have full authority
and discretion to take any actions it deems necessary or advisable for the administration of the Plan. All decisions, interpretations and other actions of the Committee shall be final and binding on
all Purchasers, all Optionees and all persons deriving their rights from a Purchaser or Optionee. </FONT></P>

<P><FONT SIZE=2><B>SECTION 3.&nbsp;&nbsp;&nbsp;&nbsp;ELIGIBILITY.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;General Rule.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Only Employees, Outside Directors and Consultants shall be eligible for the grant of
Nonstatutory Options or the direct award or sale of Shares. Only Employees shall be eligible for the grant of ISOs. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Ten-Percent Stockholders.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;A person who owns more than 10% of the total combined voting power of
all classes of outstanding stock of the Company, its Parent or any of its Subsidiaries shall not be eligible for designation as an Optionee or Purchaser unless (i)&nbsp;the Exercise Price is at
least 110% of the Fair Market Value of a Share on the date of grant, (ii)&nbsp;the Purchase Price (if any) is at least 100% of the Fair Market Value of a Share and (iii)&nbsp;in the case of an
ISO, such ISO by its terms is not exercisable after the expiration of five years from the date of grant. For purposes of this Subsection (b), in determining stock ownership, the attribution rules of
Section&nbsp;424(d) of the Code shall be applied. </FONT></P>

<P><FONT SIZE=2><B>SECTION 4.&nbsp;&nbsp;&nbsp;&nbsp;SHARES SUBJECT TO PLAN.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Basic Limitation.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Not more than 6,400,000 Shares may be issued under the Plan (subject to Subsection
(b)&nbsp;below and Section8). The number of Shares that are subject to Options or other rights outstanding at any time under the Plan shall not exceed the number of Shares that then remain available
for issuance under the Plan. The Company, during the term of the Plan, shall at all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan. Shares offered under the
Plan shall be authorized but unissued Shares. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_kg1064_1_5"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Additional Shares.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In the event that Shares previously issued under the Plan are reacquired by the Company
pursuant to a forfeiture provision, right of repurchase or right of first refusal such Shares shall be added to the number of Shares then available for issuance under the Plan. However, the aggregate
number of Shares issued upon the exercise of IS Os (including Shares reacquired by the Company) shall in no event exceed 200% of the number specified in Subsection&nbsp;(a) above, cumulatively over
the life of the Plan. In the event that an outstanding Option or other right for any reason expires or is canceled, the Shares allocable to the unexercised portion of such Option or other right shall
not reduce the number of Shares available for issuance under the Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;162(m) Limitation.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Subject to the provisions of Section&nbsp;8 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Stock awards covering more than Four Hundred Thousand (400,000) shares of the Company's Stock in any calendar year. </FONT></P>

<P><FONT SIZE=2><B>SECTION 5.&nbsp;&nbsp;&nbsp;&nbsp;TERMS AND CONDITIONS OF AWARDS OR SALES.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Stock Purchase Agreement.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Each award or sale of Shares under the Plan (other than upon exercise of an
Option) shall be evidenced by a Stock Purchase Agreement between the Purchaser and the Company. Such award or sale shall be subject to all applicable terms and conditions of the Plan and may be
subject to any other tem1S and conditions which are not inconsistent with the Plan and which the Committee deems appropriate for inclusion in a Stock Purchase Agreement. The provisions of the various
Stock Purchase Agreements entered into under the Plan need not be identical. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Duration of Offers and Nontransferability of Rights.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any right to acquire Shares under the Plan (other than
an Option) shall automatically expire if not exercised by the Purchaser within 30&nbsp;days after the grant of such right was communicated to the Purchaser by the Company. Such right shall not be
transferable and shall be exercisable only by the Purchaser to whom such right was granted. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Purchase Price.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Purchase Price of Shares to be offered under the Plan shall not be less than 100% of the
Fair Market Value of such Shares, and a higher percentage may be required by Section&nbsp;3(b). Subject to the preceding sentence, the Committee shall determine the Purchase Price at its sole
discretion. The Purchase Price shall be payable in a form described in Section&nbsp;7. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Withholding Taxes.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As a condition to the purchase of Shares, the Purchaser shall make such arrangements as
the Committee may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such purchase. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Restrictions on Transfer of Shares and Minimum Vesting.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any Shares awarded or sold under the Plan may be
subject to such special forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Committee may determine. Such restrictions shall be set forth in the
applicable Stock Purchase Agreement and shall apply in addition to any restrictions that may apply to holders of Shares generally. In the case of a Purchaser who is not an officer of the Company, an
Outside Director or a Consultant: </FONT></P>

<UL>
<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(i)</FONT></DT><DD><FONT SIZE=2>Any
right to repurchase the Purchaser's Shares at the original Purchase Price (if any) upon termination of the Purchaser's Service shall lapse at least as rapidly as 20% after year 1
and monthly thereafter over the four-year period commencing on the date of the award or sale of the Shares;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2>Any
such right may be exercised only for cash or for cancellation of indebtedness incurred in purchasing the Shares; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(iii)</FONT></DT><DD><FONT SIZE=2>Any
such right may be exercised only within 90&nbsp;days after the termination of the Purchaser's Service. </FONT></DD></DL>
</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2><B>SECTION 6.&nbsp;&nbsp;&nbsp;&nbsp;TERMS AND CONDITIONS OF OPTIONS.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Stock Option Agreement.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Each grant of an Option under the Plan shall be evidenced by a Stock Option
Agreement between the Optionee and the Company. The Option shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Committee deems appropriate for inclusion in a Stock Option Agreement. The provisions of the various Stock Option Agreements entered into under the Plan need
not be identical. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Number of Shares.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Each Stock Option Agreement shall specify the number of Shares that are subject to the
Option and shall provide for the adjustment of such number in accordance with Section&nbsp;8. The Stock Option Agreement shall also specify whether the Option is an ISO or a Nonstatutory Option. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Exercise Price.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Each Stock Option Agreement shall specify the Exercise Price. The Exercise Price of an ISO
shall not be less than 100% of the Fair Market Value of a Share on the date of grant, and a higher percentage may be required by Section&nbsp;3(b). The Exercise Price of a Nonstatutory Option shall
not be less than 85% of the Fair Market Value of a Share on the date of grant, and a higher percentage may be required by Section&nbsp;3(b). Subject to the preceding two sentences, the Exercise
Price under any Option shall be detem1ined by the Committee at its sole discretion. The Exercise Price shall be payable in a form described in Section&nbsp;7. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Exercisability.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Each Stock Option Agreement shall specify the date when all or any installment of the Option
is to become exercisable. No Option shall be exercisable unless the Optionee has delivered an executed copy of the Stock Option Agreement to the Company. In the case of an Optionee who is not an
officer of the Company, an Outside Director or a Consultant, an Option shall become exercisable at least as rapidly as 20% per year over the five-year period commencing on the date of
grant. Subject to the preceding sentence, the Committee shall determine the exercisability provisions of the Stock Option Agreement at its sole discretion. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Accelerated Exercisability.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Unless the applicable Stock Option Agreement provides otherwise, all of an
Optionee's Options shall become immediately exercisable in full if either: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(i)</FONT></DT><DD><FONT SIZE=2>(A)
the Company is subject to a Change in Control before the Optionee's Service terminates, (B)&nbsp;the plan for the Change of Control does not allow such Options to remain
outstanding, (C)&nbsp;such Options are not assumed by the surviving corporation or its parent resulting from the Change of Control and (D)&nbsp;the surviving corporation or its parent resulting
from the Change of Control does not substitute options with substantially the same terms for such Options; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2>the
Optionee is terminated within one (1)&nbsp;year of a Change of Control. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Basic Term.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Stock Option Agreement shall specify the term of the Option. The term shall not exceed
10&nbsp;years from the date of grant, and a shorter term may be required by Section&nbsp;3(b). Subject to the preceding sentence, the Committee at its sole discretion shall determine when an
Option is to expire. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Termination of Service (Except by Death).</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If an Optionee's Service terminates for any reason other than the
Optionee's death, then the Optionee's Options shall expire on the earliest of the following occasions: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(i)</FONT></DT><DD><FONT SIZE=2>The
expiration date determined pursuant to Subsection (f)&nbsp;above;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2>The
date three months after the tem1ination of the Optionee's Service for any reason other than Disability, or such later date as the Committee may determine; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(iii)</FONT></DT><DD><FONT SIZE=2>The
date 12&nbsp;months after the termination of the Optionee's Service by reason of Disability, or such later date as the Committee may determine. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

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<P><FONT SIZE=2>The
Optionee may exercise all or part of the Optionee's Options at any time before the expiration of such Options under the preceding sentence, but only to the extent that such Options had become
exercisable before the Optionee's Service terminated (or became exercisable as a result of the termination). The balance of such Options shall lapse when the Optionee's Service terminates. In the
event that the Optionee dies after the termination of the Optionee's Service but before the expiration of the Optionee's Options, all or part of such Options may be exercised (prior to expiration) by
the executors or administrators of the Optionee's estate or by any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the
extent that such Options had become exercisable before the Optionee's Service terminated (or became exercisable as a result of the termination). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Leaves of Absence.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;For purposes of Subsection (g)&nbsp;above, Service shall be deemed to continue while
the Optionee is on a bona fide leave of absence, if such leave was approved by the Company in writing and if continued crediting of Service for this purpose is expressly required by the terms of such
leave or by applicable law (as determined by the Company). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Death of Optionee.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If an Optionee dies while the Optionee is in Service, then the Optionee's Options shall
expire on the earlier of the following dates: (i)&nbsp;The expiration date detem1ined pursuant to Subsection (f)&nbsp;above; or (ii)&nbsp;The date 12&nbsp;months after the Optionee's death, or
such later date as the Committee may determine. All or part of the Optionee's Options may be exercised at any time before the expiration of such Options under the preceding sentence by the executors
or administrators of the Optionee's estate or by any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that
such Options had become exercisable before the Optionee's death (or became exercisable as a result of the death). The balance of such Options shall lapse when the Optionee dies. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Restrictions on Transfer of Shares and Minimum Vesting.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any Shares issued upon exercise of an Option may be
subject to such special forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Committee may detem1ine. Such restrictions shall be set forth in the
applicable Stock Option Agreement and shall apply in addition to any restrictions that may apply to holders of Shares generally. In the case of an Optionee who is not an officer of the Company, an
Outside Director or a Consultant: </FONT></P>

<UL>
<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(i)</FONT></DT><DD><FONT SIZE=2>Any
Tight to repurchase the Optionee's Shares at the original Exercise Price upon termination of the Optionee's Service shall lapse at least as rapidly as 25% per year after year 1
and monthly thereafter over the four-year period commencing on the date of the option grant;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2>Any
such right may be exercised only for cash or for cancellation of indebtedness incurred in purchasing the Shares; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(iii)</FONT></DT><DD><FONT SIZE=2>Any
such right may be exercised only within 90&nbsp;days after the later of (A)&nbsp;the termination of the Optionee's Service or (B)&nbsp;the date of the option exercise. </FONT></DD></DL>
</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Transferability of Options.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;An Option shall be transferable by the Optionee only by (i)&nbsp;a beneficiary
designation, (ii)&nbsp;a will or (iii)&nbsp;the laws of descent and distribution, except as provided in the next sentence. If the stock is publicly traded, an NSO shall also be transferable by the
Optionee by (i)&nbsp;a gift to a member of the Optionee's Immediate Family or (ii)&nbsp;a gift to an inter vivos or testamentary trust in which members of the Optionee's Immediate Family have a
beneficial interest of more than 50% and which provides that such NSO is to be transferred to the beneficiaries upon the Optionee's death. An ISO may be exercised during the lifetime of the Optionee
only by the Optionee or by the Optionee's guardian or legal representative. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Withholding Taxes.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As a condition to the exercise of an Option, the Optionee shall make such arrangements as
the Committee may require for the satisfaction of any federal, state, local or </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

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<BR>

<P><FONT SIZE=2>foreign
withholding tax obligations that may arise in connection with such exercise. The Optionee shall also make such arrangements as the Committee may require for the satisfaction of any federal,
state, local or foreign withholding tax obligations that may arise in connection with the disposition of Shares acquired by exercising an Option. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;No Rights as a Stockholder.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;An Optionee, or a transferee of an Optionee, shall have no rights as a
stockholder with respect to any Shares covered by the Optionee's Option until such person becomes entitled to receive such Shares by filing a notice of exercise and paying the Exercise Price pursuant
to the terms of such Option. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Modification, Extension and Assumption of Options.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Within the limitations of the Plan, the Committee may
modify, extend or assume outstanding Options or may accept the cancellation of outstanding Options (whether granted by the Company or another issuer) in return for the grant of new Options for the
same or a different number of Shares and at the same or a different Exercise Price. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, impair the
Optionee's rights or increase the Optionee's obligations under such Option. </FONT></P>

<P><FONT SIZE=2><B>SECTION 7.&nbsp;&nbsp;&nbsp;&nbsp;PAYMENT FOR SHARES.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;General Rule.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The entire Purchase Price of Shares or Exercise Price of Options issued under the Plan shall
be payable in cash or cash equivalents at the time when such Shares are purchased, except as otherwise provided in this Section7. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Surrender of Stock.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;To the extent that a Stock Option Agreement so provides, all or any part of the Exercise
Price may be paid by surrendering, or attesting to the ownership of, Shares that are already owned for at least six months by the Optionee. Such Shares shall be surrendered to the Company in good fom1
for transfer and shall be valued at their Fair Market Value on the date when the Option is exercised. The Optionee shall not surrender, or attest to the ownership of, Shares in payment of the Exercise
Price if such action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to the Option for financial reporting purposes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Services Rendered.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;At the discretion of the Committee, Shares may be awarded under the Plan in consideration
of services rendered to the Company, a Parent or a Subsidiary prior to the award. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Exercise/Sale.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;To the extent that a Stock Option Agreement so provides, and if Stock is publicly traded,
payment may be made all or in part by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver all or
part of the sales proceeds to the Company in payment of all or part of the Exercise Price and any withholding taxes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Exercise/Pledge.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;To the extent that a Stock Option Agreement so provides, and if Stock is publicly traded,
payment may be made all or in part by the delivery (on a form prescribed by the Company) of an irrevocable direction to pledge Shares to a securities broker or lender approved by the Company, as
security for a loan, and to deliver all or part of the loan proceeds to the Company in payment of all or part of the Exercise Price and any withholding taxes. </FONT></P>

<P><FONT SIZE=2><B>SECTION 8.&nbsp;&nbsp;&nbsp;&nbsp;ADJUSTMENT OF SHARES.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;General.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In the event of a subdivision of the outstanding Stock, a declaration of a dividend payable in
Shares, a declaration of an extraordinary dividend payable in a form other than Shares in an amount that has a material effect on the Fair Market Value of the Stock, a combination or consolidation of
the outstanding Stock into a lesser number of Shares, a recapitalization, a spin-off, a reclassification or a similar occurrence, the Committee shall make appropriate adjustments in one or </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

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<P><FONT SIZE=2>more
of (i)&nbsp;the number of Shares available for future grants under Section4, (ii)&nbsp;the number of Shares covered by each outstanding Option or (iii)&nbsp;the Exercise Price under each
outstanding Option. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Mergers and Consolidations.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In the event that the Company is a party to a merger or consolidation,
outstanding Options shall be subject to the agreement of merger or consolidation. Such agreement shall provide for: </FONT></P>

<UL>
<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(i)</FONT></DT><DD><FONT SIZE=2>The
continuation of such outstanding Options by the Company (if the Company is the surviving corporation);
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2>The
assumption of the Plan and such outstanding Options by the surviving corporation or its parent;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(iii)</FONT></DT><DD><FONT SIZE=2>The
substitution by the surviving corporation or its parent of options with substantially the same terms for such outstanding Options;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(iv)</FONT></DT><DD><FONT SIZE=2>The
full exercisability of such outstanding Options and full vesting of the Shares subject to such Options, followed by the cancellation of such Options; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(v)</FONT></DT><DD><FONT SIZE=2>The
settlement of the full value of such outstanding Options (whether or not then exercisable) in cash or cash equivalents, followed by the cancellation of such Options. </FONT></DD></DL>
</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Reservation of Rights.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Except as provided in this Section&nbsp;8, an Optionee or Purchaser shall have no
rights by reason of (i)&nbsp;any subdivision or consolidation of shares of stock of any class, (ii)&nbsp;the payment of any dividend or (iii)&nbsp;any other increase or decrease in the number of
shares of stock of any class. Any issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or Exercise Price of Shares subject to an Option. The grant of an Option pursuant to the Plan shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of
its business or assets. </FONT></P>

<P><FONT SIZE=2><B>SECTION 9.&nbsp;&nbsp;&nbsp;&nbsp;SECURITIES LAW REQUIREMENTS.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;General.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Shares shall not be issued under the Plan unless the issuance and delivery of such Shares comply
with (or are exempt from) all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations, and the regulations of any stock exchange or other securities market on which the Company's securities may then be traded. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Financial Reports.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Company each year shall furnish to Optionees, Purchasers and stockholders who have
received Stock under the Plan its balance sheet and income statement, unless such Optionees, Purchasers or stockholders are key Employees whose duties with the Company assure them access to equivalent
information. Such balance sheet and income statement need not be audited. </FONT></P>


<P><FONT SIZE=2><B>SECTION 10.&nbsp;&nbsp;&nbsp;&nbsp;NO RETENTION RIGHTS.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nothing in the Plan or in any right or Option granted under the Plan shall confer upon the Purchaser or Optionee any right to continue in Service for any period
of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Purchaser or Optionee) or of the Purchaser or
Optionee, which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without cause. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

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<P><FONT SIZE=2><B>SECTION 11.&nbsp;&nbsp;&nbsp;&nbsp;DURATION AND AMENDMENTS.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Term of the Plan.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Plan, as set forth herein, shall become effective on the date of its adoption by the
Board of Directors, subject to the approval of the Company's stockholders. If the stockholders fail to approve the Plan within 12&nbsp;months after its adoption by the Board of Directors, then any
grants, exercises or sales that have already occurred under the Plan shall be rescinded and no additional
grants, exercises or sales shall thereafter be made under the Plan. The Plan shall terminate automatically 10&nbsp;years after the later of (i)&nbsp;its adoption by the Board of Directors or
(ii)&nbsp;the most recent increase in the number of Shares reserved under Section4 that was approved by the Company's stockholders. The Plan may be terminated on any earlier date pursuant to
Subsection (b)&nbsp;below. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Right to Amend or Terminate the Plan.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors may amend, suspend or terminate the Plan at any
time and for any reason; provided, however, that any amendment of the Plan shall be subject to the approval of the Company's stockholders if it (i)&nbsp;increases the number of Shares available for
issuance under the Plan (except as provided in Section&nbsp;8) or (ii)&nbsp;materially changes the class of persons who are eligible for the grant of ISOs. Stockholder approval shall not be
required for any other amendment of the Plan. If the stockholders fail to approve an increase in the number of Shares reserved under Section4 within 12&nbsp;months after its adoption by the Board of
Directors, then any grants, exercises or sales that have already occurred in reliance on such increase shall be rescinded and no additional grants, exercises or sales shall thereafter be made in
reliance on such increase. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Effect of Amendment or Termination.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;No Shares shall be issued or sold under the Plan after the termination
thereof, except upon exercise of an Option granted prior to such termination. The termination of the Plan, or any amendment thereof, shall not affect any Share previously issued or any Option
previously granted under the Plan. </FONT></P>

<P><FONT SIZE=2><B>SECTION 12.&nbsp;&nbsp;&nbsp;&nbsp;DEFINITIONS.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Board of Directors</B></FONT><FONT SIZE=2>" shall mean the Board of Directors of the Company, as constituted from time to time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Change in Control</B></FONT><FONT SIZE=2>" shall mean: </FONT></P>

<UL>
<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(i)</FONT></DT><DD><FONT SIZE=2>The
consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if persons who were less than majority stockholders of
the Company immediately prior to such merger, consolidation or other reorganization own immediately after such merger, consolidation or other reorganization 50% or more of the voting power of the
outstanding securities of each of (A)&nbsp;the continuing or surviving entity and (B)&nbsp;any direct or indirect parent corporation of such continuing or surviving entity; or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2>The
sale, transfer or other disposition of all or substantially all of the Company's assets. </FONT></DD></DL>
</UL>
</UL>

<P><FONT SIZE=2>A
transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company's incorporation or to create a holding company that will be owned in substantially the
same proportions by the persons who held the Company's securities immediately before such transaction. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Code</B></FONT><FONT SIZE=2>" shall mean the Internal Revenue Code of 1986, as amended. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Committee</B></FONT><FONT SIZE=2>" shall mean a committee of the Board of Directors, as described in Section&nbsp;2(21). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Company</B></FONT><FONT SIZE=2>" shall mean Amphastar Pharmaceuticals,&nbsp;Inc., a Delaware corporation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Consultant</B></FONT><FONT SIZE=2>" shall mean a person who performs bona fide services for the Company, a Parent or a Subsidiary as a
consultant or advisor, excluding Employees and Outside Directors. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Disability</B></FONT><FONT SIZE=2>" shall mean that the Optionee is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Employee</B></FONT><FONT SIZE=2>" sha1l mean any individual who is a common-law employee of the Company, a Parent or a Subsidiary. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Exercise Price</B></FONT><FONT SIZE=2>" shall mean the amount for which one Share may be purchased upon exercise of an Option, as specified by
the Committee in the applicable Stock Option Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Fair Market Value</B></FONT><FONT SIZE=2>" shall mean, as of any date, the value of the Stock determined as follows: </FONT></P>

<UL>
<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(i)</FONT></DT><DD><FONT SIZE=2>If
the Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of 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 Stock) on
the last market trading day prior to the day of determination, as reported in </FONT><FONT SIZE=2><I>The Wall Street Journal</I></FONT><FONT SIZE=2> or such other source as the Board deems reliable.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(ii)</FONT></DT><DD><FONT SIZE=2>In
the absence of such markets for the Stock, the Fair Market Value shall be determined in good faith by the Board. Such determination shall be conclusive and binding on all persons. </FONT></DD></DL>
</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Immediate Family</B></FONT><FONT SIZE=2>" shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-
in-law, father- in-law, son- in-law, daughter-in-law, brother-in-law or
sister-in-law and shall include adoptive relationships. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(I)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>ISO</B></FONT><FONT SIZE=2>" shall mean an employee incentive stock option described in Section&nbsp;422(b) of the Code. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Nonstatutory Option</B></FONT><FONT SIZE=2>" shall mean a stock option not described in Sections 422(b) or 423(b) of the Code. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Option</B></FONT><FONT SIZE=2>" shall mean an ISO or Nonstatutory Option granted under the Plan and entitling the holder to purchase Shares. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Optionee</B></FONT><FONT SIZE=2>" shall mean a person who holds an Option. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Outside Director</B></FONT><FONT SIZE=2>" shall mean a member of the Board of Directors who is not an Employee. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Parent</B></FONT><FONT SIZE=2>" shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the
Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date, </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Plan</B></FONT><FONT SIZE=2>" shall mean this Amphastar Pharmaceuticals,&nbsp;Inc. Amended 2002 Stock Option/Stock Issuance Plan, </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Purchase Price</B></FONT><FONT SIZE=2>" shall mean the consideration for which one Share may be acquired under the Plan (other than upon
exercise of an Option), as specified by the Board of Directors, </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Purchaser</B></FONT><FONT SIZE=2>" shall mean a person to whom the Committee Ins offered the right to acquire Shares under the Plan (other than
upon exercise of an Option). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Service</B></FONT><FONT SIZE=2>" shall mean service as an Employee, Outside Director or Consultant. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Share</B></FONT><FONT SIZE=2>" shall mean one share of Stock, as adjusted in accordance with Section&nbsp;8 (if applicable), </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w)&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Stock</B></FONT><FONT SIZE=2>" shall mean the Common Stock of the Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Stock Option Agreement</B></FONT><FONT SIZE=2>" shall mean the agreement between the Company and an Optionee that contains the terms, conditions
and restrictions pertaining to the Optionee's Option, </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Stock Purchase Agreement</B></FONT><FONT SIZE=2>" shall mean the agreement between the Company and a Purchaser who acquires Shares under the
Plan that contains the terms, conditions and restrictions pertaining to the acquisition of such Shares. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z)&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Subsidiary</B></FONT><FONT SIZE=2>" shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the
Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain, A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_kg1064_1_12"> </A>

<P><FONT SIZE=2><B>SECTION 13.&nbsp;&nbsp;&nbsp;&nbsp;Execution.  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To record the adoption of the Plan by the Board of Directors, the Company has caused its authorized officer to execute the same. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2><B>Amphastar Pharmaceuticals,&nbsp;Inc.</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="44%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="44%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>JACK ZHANG</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Jack Zhang</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2><BR>
Title:</FONT></TD>
<TD WIDTH="44%"><FONT SIZE=2><BR>
CEO/President</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2><BR>
Date:</FONT></TD>
<TD WIDTH="44%"><FONT SIZE=2><BR>
July&nbsp;15, 2004</FONT><HR NOSHADE></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>

<HR NOSHADE>
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<BR>
<P><br><A NAME="05BHL1063_2">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_kg1064_1">Exhibit 10.1</A></FONT><BR>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>3
<FILENAME>a2151158zex-10_4.htm
<DESCRIPTION>EXHIBIT 10.4
<TEXT>
<HTML>
<HEAD>
</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<BR>
<FONT SIZE=3 ><A HREF="#05BHL1063_3">QuickLinks</A></FONT>
<font size=3> -- Click here to rapidly navigate through this document</font>
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<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="kh1064_exhibit_10.4"> </A>
<A NAME="toc_kh1064_1"> </A>
<BR></FONT><FONT SIZE=2><B>Exhibit 10.4    <BR>    </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ASSET SALE AGREEMENT  </B></FONT></P>

<P><FONT SIZE=2>Made
as of the 26th day of </FONT><FONT SIZE=2><B>June</B></FONT><FONT SIZE=2>, 2003. </FONT></P>

<P><FONT SIZE=2>BETWEEN:
</FONT></P>

<UL>
<UL>

<P><FONT SIZE=2><B>AMPHASTAR PHARMACEUTICALS,&nbsp;INC.,</B></FONT><FONT SIZE=2><BR>
a company incorporated under the laws<BR>
of California,<BR>
having its principal office at<BR>
11570 Sixth Street<BR>
Cucamonga, CA 91730<BR>
(hereinafter referred to as the "</FONT><FONT SIZE=2><B>Purchaser</B></FONT><FONT SIZE=2>") </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>and </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2><B>ORGANON USA&nbsp;INC.</B></FONT><FONT SIZE=2><BR>
a company incorporated under<BR>
the laws of the State of New Jersey,<BR>
having its principal office at<BR>
375 Mt. Pleasant Ave.<BR>
West Orange, NJ 07052<BR>
(hereinafter referred to as the "</FONT><FONT SIZE=2><B>Seller</B></FONT><FONT SIZE=2>") </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>WHEREAS</B></FONT><FONT SIZE=2>, the Seller is the owner of the trademark, internet names and NDA (defined below) used in the manufacturing, packaging,
distributing and selling of the Product (defined below); </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>WHEREAS</B></FONT><FONT SIZE=2>, the Seller desires to sell and assign to the Purchaser all of its right, title and interest in certain assets as defined in this
Agreement, subject to the terms and conditions of this Agreement; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>WHEREAS</B></FONT><FONT SIZE=2>, after the Closing Date (defined below) the Purchaser desires to purchase from the Seller the Product, which shall be manufactured
by the Seller pursuant to a license from the Purchaser; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>NOW, THEREFORE</B></FONT><FONT SIZE=2>, in consideration of the rights and obligations contained herein, the parties agree as follows: </FONT></P>


<P><FONT SIZE=2><B>1.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>DEFINITIONS AND OTHER MATTERS</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.1</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Definitions</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the purposes of this Agreement, the following words shall have the following meanings unless the context requires otherwise: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.1&nbsp;"</FONT><FONT
SIZE=2><B>Active Pharmaceutical Ingredient</B></FONT><FONT SIZE=2>" shall mean the drug substance cosyntropin manufactured by Diosynth BV or its
affiliates; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.2&nbsp;"</FONT><FONT
SIZE=2><B>Bill of Sale</B></FONT><FONT SIZE=2>" shall mean the Bill of Sale in substantially the form of Exhibit&nbsp;A. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.3&nbsp;"</FONT><FONT
SIZE=2><B>Books and Records</B></FONT><FONT SIZE=2>" shall mean (a)&nbsp;all books, records and recorded information, including customer and supplier
lists, held in Seller's name exclusively related to the Product as of the Closing, if any (b)&nbsp;laboratory books, batch records for the Product lots still in the market, stability summary and
clinical studies and regulatory files, if any, related to the Product, and (c)&nbsp;documents for manufacturing process, specifications, in process controls, and test methods for the Active
Pharmaceutical Ingredient, in process control and finished Product; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.4&nbsp;"</FONT><FONT
SIZE=2><B>Closing</B></FONT><FONT SIZE=2>" shall mean the closing of the sale of the Purchased Assets, which shall take place on June&nbsp;26, 2003
(the "Closing Date"); </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.5&nbsp;"</FONT><FONT
SIZE=2><B>FDA"</B></FONT><FONT SIZE=2> shall mean the U.S. Food and Drug Administration; </FONT></P>

</UL>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.6&nbsp;"</FONT><FONT
SIZE=2><B>Internet Names</B></FONT><FONT SIZE=2>" shall mean the web addresses and domain names held in Seller's name in each case as set forth in
Schedule&nbsp;3.3, and the applications and registrations therefor, if any; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.7&nbsp;"</FONT><FONT
SIZE=2><B>knowledge</B></FONT><FONT SIZE=2>" of the Seller shall mean the actual conscious awareness of the management of the Seller; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.8&nbsp;"</FONT><FONT
SIZE=2><B>Trademark</B></FONT><FONT SIZE=2>" shall have the meaning ascribed to this term in Subsection 3.3.1; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.9&nbsp;"</FONT><FONT
SIZE=2><B>Marketing Materials</B></FONT><FONT SIZE=2>" shall mean all marketing materials, marketing research data, customer and sales information,
product literature, promotional materials and data, advertising and display materials and all training materials in whatever medium (e.g., audio, visual or print) held in Seller's name and exclusively
related to the Product or the Purchased Assets as of the Closing, if any; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.10&nbsp;"</FONT><FONT
SIZE=2><B>New Drug Application</B></FONT><FONT SIZE=2>" or "</FONT><FONT SIZE=2><B>NDA</B></FONT><FONT SIZE=2>" shall mean the application (U.S. NDA
Number 16-750) for the Product prepared pursuant to applicable FDA regulations for filing with the FDA for authorization to market the Product within the United States, including all
additions, supplements, extensions and modifications thereto; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.11&nbsp;"</FONT><FONT
SIZE=2><B>Product</B></FONT><FONT SIZE=2>" shall mean the Cortrosyn&reg; injection, which contains Active Pharmaceutical Ingredient, for the
indication as a diagnostic agent in the screening of patients presumed to have adrenocortical insufficiency in finished dosage form without diluent, which is the subject of the NDA; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.12&nbsp;"</FONT><FONT
SIZE=2><B>Product Inventories</B></FONT><FONT SIZE=2>" shall have the meaning ascribed to this term in Section&nbsp;3.2; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.13&nbsp;"</FONT><FONT
SIZE=2><B>Product Rights</B></FONT><FONT SIZE=2>" shall have the meaning ascribed to this term in Section&nbsp;3.1; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.14&nbsp;"</FONT><FONT
SIZE=2><B>Purchased Assets</B></FONT><FONT SIZE=2>" shall have the meaning ascribed to this term in Article&nbsp;3; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.15&nbsp;"</FONT><FONT
SIZE=2><B>Quality Agreement</B></FONT><FONT SIZE=2>" means the Quality Agreement between the parties in the form of Exhibit&nbsp;B. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.16&nbsp;"</FONT><FONT
SIZE=2><B>Purchase Price</B></FONT><FONT SIZE=2>" means the amount payable by the Purchaser to the Seller for the Purchased Assets, as set out in
Article&nbsp;4; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.17&nbsp;"</FONT><FONT
SIZE=2><B>Regulatory Documentation</B></FONT><FONT SIZE=2>" shall mean all (a)&nbsp;regulatory filings and supporting documents, chemistry and
manufacturing and controls data and documentation, preclinical and clinical studies and tests; (b)&nbsp;records maintained under record keeping or reporting requirements of the FDA or any other
governmental entity including without limitation the drug master file and Investigational New Drug application; and (c)&nbsp;the complete complaint, adverse event and medical inquiry filings with
respect to the Product; in each case held in the Seller's name and in each case exclusively related to the Product or the Purchased Assets; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.18&nbsp;"</FONT><FONT
SIZE=2><B>Regulatory Approvals</B></FONT><FONT SIZE=2>" means, as they relate exclusively to the Product, and to the extent owned by Seller in the
Territory; the NDA; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.19&nbsp;"</FONT><FONT
SIZE=2><B>Required Notices</B></FONT><FONT SIZE=2>" shall have the meaning ascribed to this term in Section&nbsp;10.1; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.20&nbsp;"</FONT><FONT
SIZE=2><B>Security Agreement</B></FONT><FONT SIZE=2>" means the Security Agreement between the parties in the form of Exhibit&nbsp;C; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.21&nbsp;"</FONT><FONT
SIZE=2><B>Technical Information</B></FONT><FONT SIZE=2>" means all information, data, drawings, formulas, inventions, improvements, copyrights and
know-how, whether considered as trade secrets or not, related to the Product or the Purchased Assets, including, without limitation, complete manufacturing information, including, but not
limited to, information on components used for manufacturing with product numbers and suppliers, marketing, testing and customer information, copies of existing master production work orders, master
packaging work orders, manufacturing batch records up to </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<UL>
<BR>

<P><FONT SIZE=2>and
including the last three production batches of the Product, stability data establishing current expiration dates for the Product, and current analytical test methods; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.22&nbsp;"</FONT><FONT
SIZE=2><B>Territory</B></FONT><FONT SIZE=2>" means the United States of America and its respective territories and possessions; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.23&nbsp;"</FONT><FONT
SIZE=2><B>Toll Agreement</B></FONT><FONT SIZE=2>" means the Toll Manufacturing Agreement between the parties in the form of Exhibit&nbsp;D. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.2</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Schedules</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
schedules which are attached to this Agreement are incorporated into this Agreement by reference and are deemed to be part hereof: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="66%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="13%" ALIGN="LEFT"><FONT SIZE=1><B>Schedule<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="84%" ALIGN="CENTER"><FONT SIZE=1><B>Description</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="13%"><FONT SIZE=2>3.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Description of Product</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="13%"><FONT SIZE=2>3.3</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Inventories Internet Names</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="13%"><FONT SIZE=2>11.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Required Notices</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.3</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Applicable Currency</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as otherwise stated herein, all amounts payable under this Agreement shall be in U.S. dollars. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.4</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Applicable Law</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement shall in all respects be governed by and construed in accordance with the laws of the State of New Jersey and the federal laws of the United States applicable therein
without regard to the principles of conflict of laws. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.5</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Interpretation not Affected by Headings or Party Drafting</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
division of this Agreement into articles, sections and subsections and the insertion of headings are for convenience of reference only and shall not affect the construction or
interpretation of this Agreement. The terms "this Agreement", "hereof', "herein", "hereunder" and similar expressions refer to this Agreement and the schedules hereto and not to any particular
article, section or subsection or other portion hereof. Each party acknowledges that it and its legal counsel have reviewed and participated in settling the terms of this Agreement, and the parties
hereby agree that any rule of construction to the effect that any ambiguity is to be resolved against the drafting party shall not be applicable in the interpretation of this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.6</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Number and Gender</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
this Agreement, unless there is something in the subject matter or context inconsistent therewith, (i)&nbsp;words in the singular number include the plural and such words shall be
construed as if the plural had been used, (ii)&nbsp;words in the plural include the singular and such words shall be construed as if the singular had been used, and (iii)&nbsp;words importing the
use of any gender shall include all genders where the context or party referred to so requires, and the rest of the sentence shall be construed as if the necessary grammatical and terminological
changes had been made. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.7</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Severability</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any provision of this Agreement shall for any reason be held to be excessively broad as to duration, scope, activity, subject matter or otherwise, such provision shall be construed by
limiting and reducing it so as to be enforceable to the extent compatible with any applicable laws. If, notwithstanding the foregoing, any provision of this Agreement shall for any reason be held to
be invalid, illegal or unenforceable in any respect, then such invalid, illegal or unenforceable provision shall be severable and severed from this Agreement and the other provisions of this Agreement
shall </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>remain
in effect and be construed as if such invalid, illegal or unenforceable provision had never been contained herein. </FONT></P>

<P><FONT SIZE=2><B>2.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>PURCHASE OF ASSETS AND EXCLUSION OF LIABILITIES</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>2.1</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Purchase of Assets</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Seller intends to sell and the Purchaser intends to purchase the Purchased Assets. All the Purchased Assets shall be purchased in accordance with the terms and conditions set out in
this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>2.2</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Exclusion of Liabilities</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as specifically set forth in this Agreement, the Purchaser shall not assume any liabilities of the Seller, its affiliates, licensees, distributors or agents or of any other person
in connection with the Purchased Assets or the Product or both. For more certainty, it is agreed that the Purchaser will have no liability for any of the following obligations or liabilities, whether
liquidated or unliquidated, or known or unknown, whether arising out of occurrences prior to, at or after the date hereof: (i)&nbsp;all liabilities existing up to the Closing Date, in respect of all
indebtedness of the Seller or its affiliates related to the Product to all persons; (ii)&nbsp;all product liability claims, and liabilities for warranty or product return claims relating to the
Product or any similar claims to the foregoing, sold by the Seller, its affiliates, licensees, distributors or agents prior to the Closing Date (except as stated in Article&nbsp;6); (iii)&nbsp;any
liabilities relating to the failure of Seller or its affiliates to manufacture, test, label, package, store, handle or ship the Product in accordance with written specifications set forth in the NDA,
cGMP, any other applicable laws or regulations prior to the Closing Date (except as stated in Article&nbsp;6); (iv)&nbsp;any liability to or in respect of any employees or former employees of
Seller or its affiliates under any agreement or plan; (v)&nbsp;any liability of Seller or its affiliates in respect of any tax; and (vi)&nbsp;any existing or future environmental claim against
Seller or its affiliates. </FONT></P>

<P><FONT SIZE=2><B>3.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>PURCHASED ASSETS: DELIVERABLES</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
the terms and subject to the conditions set forth in this Agreement, at the Closing the Seller shall sell and transfer to the Purchaser, and the Purchaser shall purchase from the
Seller all of the following (which are referred to in this Agreement as the "Purchased Assets"): </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;the
Product Rights, as described in Section&nbsp;3.1 hereof; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;the
Product Inventories as described in Section&nbsp;3.2 hereof. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.1</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>The Product Rights</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following rights shall be purchased by the Purchaser from the Seller and shall collectively be referred to as the "Product Rights": </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.1&nbsp;the
United States Trademark CORTROSYN, U.S. Trademark Registration No.&nbsp;779,366 (herein referred to as the "Trademark"); </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.2&nbsp;all
of Seller's rights in and to the NDA as defined in Section&nbsp;1.1.10 along with a copy of the most recent master batch record for the Product; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.3&nbsp;all
of Seller's rights in and to the Internet Names; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1.4&nbsp;copies
of Books and Records, Marketing Materials, Technical Information and Regulatory Documentation certified true and complete. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.2</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Product Inventories</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Purchaser shall purchase the Product Inventories held by or for the Seller on the Closing Date as described in </FONT><FONT SIZE=2><I>Schedule&nbsp;3.2.</I></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.3</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Deliverables</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the Closing, Seller shall deliver or cause to be delivered in each case executed by Seller, the Security Agreement, the Bill of Sale, the Toll Agreement, the Assignment of Trademark,
the Assignment of Internet Names, the Quality Agreement and the NDA transfer form. To the extent any of the foregoing require execution by Purchaser, then they shall also be deliverables of the
Purchaser. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, no later than 5 working days after the Closing, the Seller shall deliver or cause to be delivered to Purchaser at its executive offices noted below copies of the Books and
Records, Marketing Materials, Technical Information and Regulatory Documentation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.4</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Risk of Loss</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Until
delivered to the Buyer on or after the Closing, any loss of or damage to the Purchased Assets from fire, casualty or any other occurrence shall be the sole responsibility of
Seller. </FONT></P>

<P><FONT SIZE=2><B>4.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>PURCHASE PRICE AND PAYMENT FOR PURCHASED ASSETS</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>4.1</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Price of Product Rights</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Purchaser shall pay to the Seller for the purchase of the Product Rights $28,000,000.00 payable by bank wire transfer as follows: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;$16&nbsp;million
at the Closing; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;$6&nbsp;million
on the first anniversary of the Closing Date; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;$6&nbsp;million
the second anniversary of the Closing Date. </FONT></P>

<UL>

<P><FONT SIZE=2>Seller's
wire transfer instructions are as follows: </FONT></P>

<P><FONT SIZE=2>Account
name: Akzo Nobel&nbsp;Inc. </FONT></P>


<P><FONT SIZE=2>Account
number: 8090492730 </FONT></P>

<P><FONT SIZE=2>ABA
Number: 021000018 </FONT></P>

<P><FONT SIZE=2>Bank
Name: The Bank of New York </FONT></P>

<P><FONT SIZE=2>Bank
Address: New York, NY </FONT></P>

<P><FONT SIZE=2>Reference:
Organon USA&nbsp;Inc. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
payments provided for in clauses 4.1(b) and 4.l(c) will be secured as provided in the Security Agreement. Any amount not paid when due shall thereafter bear interest at the rate of
10% per annum. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>4.2</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Price of Product Inventory</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to section&nbsp;3.2, the Purchaser shall pay to the Seller for the purchase of the Seller's Product Inventories the price specified in </FONT> <FONT SIZE=2><I>Schedule&nbsp;3.2,</I></FONT><FONT SIZE=2> payable at Closing by bank wire transfer
according to the wire transfer instructions set forth in Section&nbsp;4.1. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>4.3</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Taxes and Purchase Price Allocation</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3.1&nbsp;The
Purchaser shall bear and pay, and shall reimburse the Seller for any federal, state and local sales taxes, use taxes, transfer taxes, documentary charges,
recording fees, filing fees or similar taxes, charges, fees or expenses that may become payable in connection with the sale of the Purchased Assets to the Purchaser. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3.2&nbsp;The
parties shall mutually agree in writing on the allocation of the purchase price for income tax purposes within 90&nbsp;days of the date hereof, which allocation
in all events shall comply with </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

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<P><FONT SIZE=2>applicable
requirements of the Internal Revenue Code and any regulations promulgated thereunder. The agreed upon allocation will be conclusive and binding upon the parties for tax purposes, and
neither party, nor its affiliates, agents, or representatives, shall make any statement or declaration to any taxing authority, on any tax return, or in any tax proceeding that is inconsistent with
the allocation, unless otherwise required by law. Each party shall promptly provide the other party with any additional information required to complete US Internal Revenue Service Form&nbsp;8594. </FONT></P>

<P><FONT SIZE=2><B>5.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>MANUFACTURING OF PRODUCT AND SUPPLY OF ACTIVE PHARMACEUTICAL INGREDIENT BY THE SELLER AFTER THE CLOSING
DATE</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>5.1</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Licenses</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Purchaser hereby grants the Seller a royalty free, non-assignable, non-exclusive license to use the NDA in connection with the manufacture of the Product
exclusively for the Purchaser and its affiliates and any other party designated by the Purchaser in writing (but to no other party), effective on and after the Closing Date in accordance with the Toll
Agreement. The Purchaser hereby further grants Diosynth&nbsp;Inc. and its affiliates a royalty free, non-assignable, non-exclusive license to use the NDA solely in connection
with the supplying exclusively to the Purchaser and its affiliates and any other party designated by the Purchaser in writing (but to no other party) of the active pharmaceutical ingredient, effective
on and after the Closing Date. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>5.2</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Manufacturing: Price</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to the Toll Agreement, the Seller shall manufacture the Product after the Closing and shall be responsible for testing the stability of the Product manufactured by the Seller.
The Seller's obligation to manufacture the Product shall terminate on the third anniversary of the Closing Date; provided that such obligation may be terminated upon six months' written notice from
the Purchaser to the Seller. The Seller shall sell the Product to the Purchaser at the price of $2.70 per each vial, subject to adjustment as provided in section&nbsp;3.1 of the Toll Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Notwithstanding anything herein to the contrary, the Seller retains all rights to manufacture (including, but not limited to the use of the manufacturing process
and testing methods set forth in the NDA), use and sell Product for sale outside the Territory by its affiliates, and to use "Cortrosyn" in connection with such sales, provided in each such case the
Product is approved in each such country on the date hereof.</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>For avoidance of doubt, the Seller shall not sell any Product to any party (other than the Purchaser, its affiliates and designees) in the Territory or to any
party outside the Territory for sale, distribution, or delivery into the Territory nor manufacture the Product for any party other than the Purchaser, its affiliates or designees, for sale of the
PRODUCT in the Territory.</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>5.3</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Supply of Active Pharmaceutical Ingredient</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Seller will cause Diosynth&nbsp;Inc. or its affiliates to supply to the Purchaser and its affiliates and any other party designated by the Purchaser in writing (but to no other
person) the Active Pharmaceutical Ingredient for the manufacture and sale of Product in the Territory until the fifth anniversary of the Closing Date at a price equal to $180.00 per gram. At Closing,
Purchaser shall provide a firm purchase order for Active Pharmaceutical Ingredient for each of the first 3&nbsp;years after the Closing Date. In the event Purchaser does not order sufficient Product
from Seller under the Toll Agreement to use all such Active Pharmaceutical Ingredient, Purchaser shall purchase such remaining Active Pharmaceutical Ingredient from seller on the third anniversary of
the Toll Agreement at the above price. On the second anniversary of the Closing Date, Purchaser shall give a firm order for Active Pharmaceutical Ingredient for years 4 and 5. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

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<P><FONT SIZE=2><B>6.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>RETURNS. RECALLS AND REBATES</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>6.1</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Returns</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective
as of the Closing Date, the Purchaser agrees to accept all returns of the Product, including Product sold by the Seller to customers prior to the Closing Date, and all
responsibilities associated therewith, except for any receivables, payables or credits related to returned Product that were sold or distributed by the Seller before the Closing Date. The Purchaser
shall not assume any responsibility with regard to receivables, payables or credits unless they relate to returned Product ordered from and sold by the Purchaser on or after the Closing Date, other
than to provide notice to the Seller of any such returns, including any correspondence or requests relating to the returns, and any request for reimbursement, payment or credit, as the case may be.
Following the Closing, the parties will jointly issue a letter to customers for the Product, advising such customers of each party's respective responsibilities in connection with returns and credits.
At no time before or after the Closing will the Seller actively solicit customers to return Product absent any safety or efficacy issues. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>6.2</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Recalls</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event of a Product recall, the Purchaser shall be responsible for recovering Product distributed by it. The Seller shall reimburse the Purchaser for the Purchaser's reasonable
out-of-pocket expenses, upon presentation to the Seller by the Purchaser of appropriate documentation therefor, for such recovery in connection with sales of the Product
constituting part of the Purchased Assets. The Purchaser shall be entitled to return to the Seller such Product constituting part of the Purchased Assets for a refund from the Seller equal to the
price paid by the Purchaser for such Product. If the Purchaser becomes aware of the need for a recall of the Product sold by the Seller to the Purchaser, the Purchaser shall notify the Seller not less
than three days thereafter and shall consult with the Seller concerning such recall, but the Purchaser shall not initiate any recall without the Seller's prior written consent, except as required by
law. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>6.3</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Rebates; Chargebacks</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Seller
agrees to be responsible for all rebates and chargebacks which arose or accrued due to the sale of the Product which occurred on or prior to the Closing Date. </FONT></P>

<P><FONT SIZE=2><B>7.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>COSTS AND EXPENSES OF THE TRANSACTION</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as otherwise provided herein, each party shall pay its own expenses incurred in connection with the authorization, preparation, execution and performance of this Agreement,
including, without limitation, all fees and expenses of its legal counsel, employees, agents and representatives. </FONT></P>

<P><FONT SIZE=2><B>8.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>REPRESENTATIONS AND WARRANTIES OF THE SELLER</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of the Closing Date, the Seller hereby represents and warrants as follows and hereby acknowledges and confirms that the Purchaser is relying on such representations and warranties in
connection with its entering into this Agreement: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>8.1</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;the Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of New
Jersey; Seller is duly authorized to conduct its business and is in good standing in each jurisdiction where such qualification is required except for any jurisdiction where failure to so qualify
would not have a material adverse effect upon the Seller; Seller has the full power and authority and holds all permits and authorizations to manufacture, market and sell the Product, to own and use
the assets and properties owned by it, including the Purchased Assets, except where the failure to have such power and authority or to hold such permits and authorizations would not have a material
adverse effect on Seller or the Purchased Assets; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>8.2</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;the execution and delivery of this Agreement by the Seller and the observance and performance of the terms of this
Agreement on the part of the Seller, including the execution and </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

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<BR>

<P><FONT SIZE=2>delivery
of the related agreements, assignments, instruments and documents, have been duly authorized by all necessary corporate action of the Seller, and do not constitute a violation of applicable
laws or a violation or a breach of the Seller's charter documents or by-laws, or any order, writ, injunction, decree, rule or by-law or regulation applicable to it, nor do they
constitute a default (or would with the passage of time or the giving of notice or both constitute a default) under any contract or instrument to which the Seller is a party or by which the Seller is
bound. The Required Notices are the only consents or approvals required in connection with the sale of the Purchased Assets by the Seller to the Purchaser asset forth herein. This Agreement and all
other related agreements, assignments and instruments executed by Seller hereunder, shall when executed by Purchaser, be valid and binding obligations of Seller enforceable against Seller in
accordance with their terms except (a)&nbsp;as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditor's
rights generally, and (b)&nbsp;as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>8.3</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;the Seller is not a party to or bound by any mortgage, lien, deed of trust, or any material lease, agreement or
instrument, or any order, judgment or decree which requires the consent of another to the execution of this Agreement, to transfer the Purchased Assets or fully give effect to any of the transactions
referred to in or contemplated by this Agreement; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>8.4</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;the Seller is the owner of all Purchased Assets, with good and marketable title thereto, free of any claim, lien,
security interest, charge, mortgage, option, privilege, pledge, trust or deemed trust (whether contractual, statutory or otherwise arising) or any encumbrance; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>8.5</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;Seller has not received notice of any suits, actions or legal, administrative, arbitration or other proceedings or,
governmental investigations pending, or to the Seller's knowledge threatened, affecting the Purchased Assets or the right to manufacture, market, distribute, offer to sell or sell the Product in the
Territory and, to the Seller's knowledge, no such suits, actions or legal, administrative, arbitration or other proceedings or governmental investigations affecting the Purchased Assets or the right
to sell the Product have been threatened against the Seller; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>8.6</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;the NDA is in full force and effect and, to the Seller's knowledge, has been duly and validly issued. Seller has not
received notice of any proceeding by any governmental or regulatory authority pending, nor, to the Seller's knowledge, is any governmental or regulatory authority threatening a Product recall, market
withdrawal, or the revocation or suspension of the NDA. Except as set forth herein or in correspondence between the parties dated the date hereof, all required notices, supplemental applications, and
annual or other reports, including adverse experience reports, with respect to the NDA which are required to maintain the NDA in good standing have been filed with the FDA and the copies of such
documents delivered to the Purchaser at closing are true and correct; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>8.7</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;to the Seller's knowledge, as of the Closing Date, the production, manufacture and sale of the Product in the Territory
does not, to the knowledge of the Seller, infringe any third party's intellectual property rights, and the Seller has not received any notice, complaint, threat or claim concerning the Product
alleging infringement of any patent or trademark, of any other person; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>8.8</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;the Seller has not allowed or acquiesced in the use of the Trademark in the Territory by any other person. To the best of
Seller's knowledge, the Trademark is distinctive and is not confusing with any other trade mark or trade name. The Seller has taken all commercially reasonable steps to vigilantly protect the
distinctiveness of the Trademark. The U.S. trademark registration is valid, in good standing and is not the subject of any expungement proceedings. To Seller's knowledge, the use of the Trademark does
not constitute infringement of any person's common law or statutory trade mark rights and the Seller is not aware of any infringement or passing off relating to the Trademark. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>8.9</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;the Seller is not a party to or bound by any executory agreement, contract or commitment, whether written or oral,
relating to the sale of the Product, which is not referred to in this Agreement or any Schedule hereto and of which the Purchaser was not remitted complete and correct copies (including all
amendments) before the Closing Date; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>8.10</B></FONT><FONT SIZE=2>&nbsp;no representation or warranty made by the Seller in this Agreement contains any untrue statement of a material fact or
omits to state any material fact necessary to make any such representation or warranty not misleading to a prospective purchaser seeking full information as to the Seller, the Product and the
Purchased Assets; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>8.11</B></FONT><FONT SIZE=2>&nbsp;</FONT><FONT SIZE=2><B>EXCEPT AS EXPRESSLY STATED HEREIN, THE SELLER MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY
KIND, EITHER EXPRESS OR IMPLIED, RELATED TO THE ACTIVE PHARMACEUTICAL INGREDIENT OR PRODUCT INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. THE
PURCHASER ACKNOWLEDGES THAT THE ACTIVE PHARMACEUTICAL INGREDIENT AND, PRODUCT INVENTORY ARE SOLD ON AN AS-IS, WHERE-IS BASIS.</B></FONT></P>

</UL>

<P><FONT SIZE=2><B>9.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>REPRESENTATIONS AND WARRANTIES OF THE PURCHASER</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of the Closing Date, the Purchaser hereby represents and warrants as follows and hereby acknowledges and confirms that the Seller is relying on such representations and warranties in
connection with the entering into this Agreement: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.1</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;the Purchaser is a corporation duly organized, validly existing and in good standing under the laws of California; is
duly authorized to conduct its business and is in good standing in each jurisdiction where such qualification is required except for any jurisdiction where failure to so qualify would not have a
material adverse effect upon the Purchaser; Purchaser has the full power and authority, and holds all permits and authorizations, to carry on its business and to own and use the assets and properties
owned by it, except where the failure to have such power and authority or to hold such permits and authorizations would not have a material adverse effect on Purchaser; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.2</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;the execution and delivery of this Agreement by the Purchaser and the observance and performance of the terms of this
Agreement on the part of the Purchaser, including the execution and delivery of the related agreements, assignments, instruments and documents, have been duly authorized by all necessary corporate
action of the Purchaser except where failure to obtain such authorization is not material, and do not constitute a violation of applicable laws or a violation or a breach of the Purchaser's charter
documents or by-laws, or any order, writ, injunction, decree, rule, by-law or regulation applicable to it, nor do they constitute a default (or would with the passage of time
or the giving of notice or both constitute a default) under any contract or instrument to which the Purchaser is a party or by which the Purchaser is bound. This Agreement and all other related
agreements, assignments and instruments executed by Purchaser hereunder, shall when executed by Seller, be valid and binding obligations of Purchaser enforceable against Purchaser in accordance with
their terms except (a)&nbsp;as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditor's rights generally,
and (b)&nbsp;as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.3</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;the Purchaser is not a party to or bound by any mortgage, lien, deed of trust, or any material lease, agreement or
instrument, or any order, judgment or decree which requires the consent of another to the execution of this Agreement or fully give effect to any of the transactions referred to in or contemplated by
this Agreement; and </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.4</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;there are no suits, actions or legal, administrative, arbitration or other proceedings or, to the Purchaser's knowledge,
governmental investigations affecting this Agreement and, to the Purchaser's knowledge, no such suits, actions or legal, administrative, arbitration or other proceedings or governmental investigations
have been threatened against the Purchaser. </FONT></P>

</UL>

<P><FONT SIZE=2><B>10.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>COVENANTS OF THE PARTIES</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>10.1</B></FONT><FONT SIZE=2>&nbsp;Notwithstanding anything to the contrary contained in this Agreement, the Seller shall retain and remain solely
responsible for all risks, liabilities and costs related to the Product manufactured and sold by the Seller prior to the Closing Date or based solely on a defective manufacture of Product by the
Seller or defect in the Active Pharmaceutical Ingredient supplied by Diosynth or its affiliates pursuant to Article&nbsp;5 and the Toll Agreement, or the manufacture, marketing, offer for sale or
sale of the Product outside of the Territory or the use of Cortrosyn outside of the Territory, and shall indemnify the Purchaser as provided for in article&nbsp;12. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2><A
NAME="page_ki1064_1_11"> </A> </FONT> <FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><B>10.2</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding anything to the contrary contained in this Agreement but subject to Section&nbsp;10.1,
the Purchaser shall retain and remain solely responsible for all risks, liabilities and costs related to the Product or Active Pharmaceutical Ingredient, including, but not limited to, those arising
from or relating to the manufacturing, use, distribution, marketing, promotion, offer for sale, or sale of the Product or Active Pharmaceutical Ingredient by the Purchaser on and after the Closing
Date, and shall indemnify the Seller as provided for in article&nbsp;12 except that the Seller shall assume such risks based solely on a defective manufacturing process of Product by the Seller
pursuant to Article&nbsp;5. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>10.3</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Seller agrees that, on and after the Closing Date, it will neither disclose the Technical Information
to any person other than the Purchaser nor utilize the Technical Information for its own purposes, except in manufacturing pursuant to article&nbsp;5 and except as set forth in Section&nbsp;11.5
relating to Ongoing Stability Studies. The Seller shall keep and use reasonable efforts to require its personnel to keep confidential all confidential information transferred herein and the Technical
Information, according to guidelines substantially similar to those used to protect its own confidential information, including, without limitation, written material, drawings, data (whether on paper,
electronic support or any other support), records or reports regarding the Purchased Assets. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Such
restriction shall not apply to any information (i)&nbsp;which is in or comes into the public domain through no fault of the Seller, (ii)&nbsp;which was in the possession of the
Purchaser before the commencement of negotiations leading to this Agreement, as evidenced by such party's written records, (iii)&nbsp;which, at any time, lawfully comes into the possession of the
Purchaser from third parties that have a right to disclose such information or (iv)&nbsp;which is required to be disclosed by law. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Purchaser acknowledges and agrees that the above restriction on confidential information shall in no way limit or restrict the Seller's right to in any way use any confidential
information that is (i)&nbsp;incorporated into, embodied in or used in connection with current or future products or processes of the Seller or its affiliates, other than the Product, or
(ii)&nbsp;used in the research, development, registration, promotion, testing, marketing, distribution or sale of products or processes of the Seller or its affiliates, other than the Product. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>10.4</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Seller agrees that it shall not (i)&nbsp;directly or indirectly, at any time after the Closing Date,
in any manner, question the rights of the Purchaser under the Trademark, or (ii)&nbsp;use or register, or authorize at any time the use of registration, of any trademark or trade name identical with
or confusingly similar to the Trademark in the Territory. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>10.5</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Seller shall cooperate in changing the labeling on the Product to the Purchaser's label promptly after
the Closing Date. If practicable, batches of the Product shall be unlabelled prior to the Closing Date, to facilitate using the Purchaser's label on the Closing Date and thereafter. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>10.6</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Seller shall, at any time before and after the Closing Date and upon reasonable request, provide the
Purchaser and its representatives with such additional information or documentation, except for auditors' reports, concerning the Product as may be reasonably necessary for inclusion by the Purchaser
in any necessary filing or submission to any governmental agency in order to continue the commercial exploitation of the Purchased Assets. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>10.7</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as contemplated herein and in the Toll Agreement, Seller agrees that for a period commencing at
Closing and ending seven (7)&nbsp;years later, neither it nor any of its affiliates (including Diosynth) shall develop, manufacture, market, distribute or sell a product, either for prescription or
over-the-counter sale, containing the Active Pharmaceutical Ingredient, for use in diagnosing primary or secondary adrenocortical insufficiency in the Territory. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>

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<P><FONT SIZE=2><B>11.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>CERTAIN ACTIONS SUBSEQUENT TO THE CLOSING DATE</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
parties agree to take the following actions subsequent to the Closing Date: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>11.1&nbsp;&nbsp;&nbsp;&nbsp;Regulatory Affairs</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of the Closing Date, the Purchaser shall assume the responsibility for maintaining the registrations of the Products in the Territory at its own cost. The Seller shall assist the
Purchaser in the transfer of all applicable Regulatory Approvals. To that effect, the Seller shall send to the FDA and other persons, as required, any required notice relative to the transfer of
ownership of the Purchased Assets; such required notices are set forth on </FONT><FONT SIZE=2><I>Schedule&nbsp;11.1</I></FONT><FONT SIZE=2> (the "Required Notices"). The Seller shall thereafter
provide all information and make all further filings as may be reasonably requested by the Purchaser in order for the Purchaser to confirm and perfect the ownership of the Purchaser in and to the
Purchased Assets. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>11.2&nbsp;&nbsp;&nbsp;&nbsp;Customer Complaints</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Customer
complaints for Product sold or distributed by the Seller prior to the Closing Date shall be handled by the Seller, including notification of regulatory authorities where
required, with a copy to the Purchaser. Customer complaint for Product sold or distributed on and after the Closing Date shall be the exclusive responsibility of the Purchaser. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>11.3&nbsp;&nbsp;&nbsp;&nbsp;Third Party Claims</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Third
party claims related to the Product manufactured, sold or distributed by the Seller or its affiliates, distributors, licensees or agents prior to the Closing Date or related to the
Product manufactured, sold or distributed by the Seller or its affiliates, distributors, licensees or agents outside of the Territory or solely based on a defective manufacturing process of Product by
Seller or defect in the Active Pharmaceutical Ingredient supplied by Diosynth or its affiliates pursuant to Article&nbsp;5 and the Toll Agreement shall be the responsibility of the Seller and the
Seller shall indemnify, defend and hold the Purchaser and its affiliates harmless from and against any liability related thereto to the extent set forth in article&nbsp;12. Any third party claims
related to the Purchased Assets or Product arising on and after the Closing Date other than liability based solely on a defective manufacturing process of Product by Seller or defect in the Active
Pharmaceutical Ingredient supplied by Diosynth or its affiliates pursuant to Article&nbsp;5 and the Toll Agreement shall be the exclusive responsibility of the Purchaser, and the Purchaser shall
indemnify, defend and hold the Seller harmless from and against any liability related thereto as set forth in article&nbsp;12. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>11.4&nbsp;&nbsp;&nbsp;&nbsp;Adverse Drug Experiences</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
new adverse drug experiences reported to the Seller on or after the Closing Date for Product distributed or sold by the Seller prior to the Closing Date or manufactured pursuant to
Article&nbsp;5 shall promptly be communicated by the Seller to the Purchaser. The Purchaser will be responsible for any reporting to any governmental authorities of any new adverse drug experiences
reported to the Seller and communicated by the Seller to the Purchaser for Product distributed or sold prior to the Closing Date. Any adverse drug experiences related to Product distributed or sold on
and after the Closing Date other than relating solely to a defective manufacturing process of the Product by the Seller or defect in the Active Pharmaceutical Ingredient supplied by Diosynth or its
affiliates pursuant to Article&nbsp;5 and the Toll Agreement, which shall be the exclusive responsibility of Seller, shall be the exclusive responsibility of the Purchaser. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>11.5&nbsp;&nbsp;&nbsp;&nbsp;Further Assurances and Ongoing Stability Studies</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
party shall cooperate with the other, and execute and deliver, or cause to be executed and delivered, all such other instruments, including instruments of conveyance, assignment and
transfer, and take all such other actions as such party may be reasonably requested to take by the other party from </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>

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<BR>

<P><FONT SIZE=2>time
to time, consistent with the terms of this Agreement, in order to implement the provisions and purposes of this Agreement and vest in the Purchaser all right, title and interest in and to the
Purchased Assets. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
parties acknowledge that the Seller has made commitments to the FDA to continue ongoing stability studies for the Product manufactured prior to the Closing Date and that these
commitments will continue for Product manufactured pursuant to Section&nbsp;5.2. The Seller will continue these ongoing stability studies in accordance with its commitments to the FDA and will
report the findings to the Purchaser, which agrees to report the findings to any governmental authorites in accordance with applicable law. In order to continue these ongoing stability studies, the
Seller will maintain and use the stability samples of the Product which are currently being kept by the Seller for its stability program and will keep copies of the stability reports previously
reported to the FDA. In addition, the Seller will be able to withdraw and maintain stability samples for Product manufactured pursuant to Section&nbsp;5.2. </FONT></P>

<P><FONT SIZE=2><B>12.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>SURVIVAL: INDEMNITIES: DAMAGES</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>12.1&nbsp;&nbsp;&nbsp;&nbsp;Survival</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
representations and warranties in articles 8 and 9 shall survive the sale of the Purchased Assets and, notwithstanding the completion of such sale and notwithstanding any
investigations made by or on behalf of the parties, shall continue to have full force and effect for two years following the Closing Date, except Sections 8.1, 8.2, 8.3 and 8.4 which shall survive
indefinitely subject to applicable statutes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>12.2&nbsp;&nbsp;&nbsp;&nbsp;Indemnification by Seller</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Seller shall indemnify and hold harmless the Purchaser and its stockholders,
directors, officers, employees, representatives and agents from and against any loss or damage of any kind suffered as a result of third party claims (i)&nbsp;arising from or based on the
manufacturing, use, distribution, marketing, promotion, offer for sale, or sale of any of the Product prior to the Closing Date or the Product outside of the Territory or based solely on a defective
manufacturing process of the Product by the Seller or defect in the Active Pharmaceutical Ingredient supplied by Diosynth or its affiliates pursuant to article&nbsp;5 and the Toll Agreement (save
for any claim arising out of the intentional fault or negligence of the Purchaser); (ii)&nbsp;resulting from the Seller's breach of any representation, warranty or agreement made by the Seller in
this Agreement including, without limiting the generality of the foregoing, all costs, expenses and reasonable legal and accounting fees in connection with any such loss or damage and in connection
with any claim under this section&nbsp;12.2. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>12.3&nbsp;&nbsp;&nbsp;&nbsp;Indemnification by Purchaser</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Purchaser shall indemnify and hold harmless the Seller and its stockholders, directors, officers, employees, representatives and agents from and any loss or damage of any kind
suffered as a result of any third party claims (i)&nbsp;(other than any claim arising out of the intentional fault or negligence of the Seller) arising from or based on the manufacturing, use,
distribution, marketing, promotion, offer for sale, or sale of any of the Purchased Assets or the Product in the Territory on and after the Closing Date, except for claims relating solely to a
defective manufacturing process of the Product by the Seller or defect in the Active Pharmaceutical Ingredient supplied by Diosynth or its affiliates pursuant to article&nbsp;5 and the Toll
Agreement; or (ii)&nbsp;resulting from the Purchaser's breach of any representation, warranty or agreement made by the Purchaser in this Agreement, including, without limiting the generality of the
foregoing, all costs, expenses and reasonable legal and accounting fees in connection with any such loss or damage and in connection with any claim under this section&nbsp;12.3. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>12.4&nbsp;&nbsp;&nbsp;&nbsp;Notice and Defense of Claims</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a condition to the indemnification in this article&nbsp;12, any party seeking indemnification shall give prompt and, to the extent of known facts and circumstances, complete written
notice to the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>13</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ki1064_1_14"> </A>
<BR>

<P><FONT SIZE=2>indemnifying
party of the facts and circumstances giving rise to the claim; provided that the failure to give timely notice to the indemnifying party shall not release the indemnifying party from any
liability to the indemnified party unless the ability of the indemnifying party to defend against such claim is materially and adversely affected thereby. In connection with any claim of a party
giving rise to indemnification hereunder, the indemnifying party, at its sole cost and expense, may, upon written notice to the indemnified party, assume and control the defense and disposition of any
such claim or related legal proceeding. If the indemnifying party assumes the defense of any such claim or legal proceeding, the indemnifying party shall select counsel to conduct the defense of such
claim or legal proceeding and at its sole cost and expense shall take all steps which it believes are appropriate in the defense or settlement thereof. The indemnified party shall be entitled to
participate in (but not control) the defense of any such claim with its own counsel and at its own expense, but shall not payor settle any such claim. The indemnified party shall cooperate with the
indemnifying party in the indemnifying party's defense of any such matter, including providing reasonable access at no cost to the indemnified party's employees, agents, records and facilities. The
indemnifying party shall not settle any claim the defense of which it controls unless the settlement is solely for money damages, or the indemnifying party obtains the prior written consent of the
indemnified party, which may not be unreasonably withheld. If the indemnifying party does not assume the defense of any such claim or proceeding resulting therefrom in accordance with the terms
hereof, the indemnified party may defend such claim or proceeding in a reasonable manner, including settling such claim or proceeding on such terms as the indemnified party may deem appropriate after
giving ten days' notice of the same to the indemnifying party and obtaining the consent of the indemnifying party, which may not be unreasonably withheld. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>12.5&nbsp;&nbsp;&nbsp;&nbsp;Limitation of Damages</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
no event, except in the case of third party claims, shall the Seller or the Purchaser be liable to the other for special, indirect, incidental or consequential damages (including,
without limitation, loss of profits) suffered by either the Seller or the Purchaser. </FONT></P>

<P><FONT SIZE=2><B>13.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>GENERAL CONTRACT PROVISIONS</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>13.1&nbsp;&nbsp;&nbsp;&nbsp;Force Majeure</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the performance of any part of this Agreement by either party (other than the obligation to pay money) is prevented, restricted, interfered with or delayed by reason of any cause
beyond the reasonable control of the party liable to perform, such as from fire, strike, delays in delivery of, or the unavailability of supplies or sources of energy, labor difficulties, act or
omission of any governmental authority, compliance with governmental regulations, insurrection or riot, embargo, delays or shortages in transportation or inability to obtain necessary materials,
supplies or labor, the party so affected shall, upon giving written notice to the other party, be excused from such performance to the extent of such prevention, restriction, interference or delay,
provided that the affected party shall continue to use its reasonable best efforts to avoid or remove such causes of nonperformance and shall continue performance with the utmost dispatch whenever
such causes are removed. If such cause is preventing the manufacture of either API or finished Product by Seller for Purchaser and is not removed within 90&nbsp;days of its inception, then Purchaser
shall have the right to terminate the Seller's right to manufacture the finished Product immediately by written notice to that effect delivered to Seller. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>13.2&nbsp;&nbsp;&nbsp;&nbsp;Notices</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
notices in connection with this Agreement shall be in writing and either hand-delivered, mailed by registered or certified mail, postage prepaid, or sent by telecopier.
Any such notice shall be deemed to have been received on the date of the hand-delivery, if delivered by hand, on the fifth business day following the date of mailing if sent by registered
or certified mail or on the date shown on the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>14</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=14,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="3",CHK=1031334,FOLIO='14',FILE='DISK046:[05BHL4.05BHL1064]KI1064A.;12',USER='KSOLTER',CD='11-FEB-2005;00:11' -->
<A NAME="page_ki1064_1_15"> </A>
<BR>

<P><FONT SIZE=2>telecopier
report slip if sent by telecopier. The </FONT><FONT SIZE=2><I>mu:ties'respective</I></FONT><FONT SIZE=2> addresses for the purpose of receiving such notices are as follows: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="63%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>If to the Purchaser:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="64%"><FONT SIZE=2>Amphastar Pharmaceuticals,&nbsp;Inc.<BR>
11570 Sixth Street<BR>
Rancho Cucamonga, CA 91730<BR>
Facsimile: 909-980-6139<BR>
Attention: Chief Financial Officer</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2><BR>
If to the Seller:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="64%"><FONT SIZE=2><BR>
Organon USA&nbsp;Inc.<BR>
375 Mt. Pleasant Ave.<BR>
West Orange, NJ 07052<BR>
Facsimile: 973-422-7287<BR>
Attention: Michael V. Novinski, President</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2><BR>
With a copy to:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="64%"><FONT SIZE=2><BR>
Organon USA&nbsp;Inc.<BR>
375 Mt. Pleasant Ave.<BR>
West Orange, NJ 07052<BR>
Attention: Patrick 1. Osinski, Vice President<BR>
and General Counsel<BR>
Facsimile: 973-325-4514</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Either
of the foregoing parties may, at any time, give notice of any change of address to the other and the address specified therein shall be such party's address for the purpose of
receiving notices. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>13.3&nbsp;&nbsp;&nbsp;&nbsp;No Broker</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
is understood and agreed that no broker, agent or other intermediary acted for either party in connection with the transactions contemplated herein and each party agrees to indemnify
and save harmless the other from and against any claims whatsoever for any commission or other remuneration payable or alleged to be payable to any broker, agent or other intermediary who purports to
act or have acted for the party in question. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>13.4&nbsp;&nbsp;&nbsp;&nbsp;Independent Contractors</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
is an Agreement between independent contractors and neither is the agent nor employee of the other for any purpose whatsoever. The parties do not intend to create a partnership or
joint venture
between themselves. Neither party shall have the right to bind the other to any agreement with a person or to incur any obligation or liability on behalf of the other party. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>13.5&nbsp;&nbsp;&nbsp;&nbsp;Counterparts</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>13.6&nbsp;&nbsp;&nbsp;&nbsp;Assignment: No Third Party Beneficiaries</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement shall bind and inure to the benefit of the parties named herein and their respective successors and permitted assigns. No party may assign any rights, benefits, duties or
obligations under this Agreement without the prior written consent of the other party, except that (a)&nbsp;either party may assign its rights and obligations hereunder to an affiliate or to the
transferee or successor of substantiality all of its assets or securities in the event of a change of control without the prior consent of the other party; provided that in the case of an assignment
to an affiliate, the assigning party shall remain responsible for all of its obligations and agreements set forth herein, notwithstanding such assignment and, (b)&nbsp;the Purchaser may assign the
Agreement to a third party as security without </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>15</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ki1064_1_16"> </A>
<BR>

<P><FONT SIZE=2>the
consent of the Seller. No third party shall be entitled to enforce any provision hereof and no third party is intended to benefit from this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>13.7&nbsp;&nbsp;&nbsp;&nbsp;Entire Agreement</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement, the Toll Manufacturing Agreement, the Quality Agreement and the Security Agreement shall constitute the entire agreement between the parties with respect to all of the
matters herein and shall supersede all prior oral or written agreements, understandings or arrangements between them. No amendment, modification, or discharge of this Agreement and/or waiver hereunder
shall be valid or binding unless set forth in writing and duly executed by an officer or authorized representative of the party against whom enforcement of the amendment, modification, discharge, or
waiver is sought. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, this Agreement has been executed on behalf of the parties by the following duly authorized representatives of the parties as ofthe date set forth above. </FONT></P>

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<TABLE WIDTH="80%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>ORGANON USA&nbsp;INC.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>AMPHASTAR PHARMACEUTICALS,&nbsp;INC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2><BR>
&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2><BR>
/s/</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Name: Patrick J. Osinski</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>Name: David W. Nassif</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Title: Vice President</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>Title: Chief Financial Officer and Senior Vice President of Blobal Licensing</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Name: Huib Costermans</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=3><FONT SIZE=2>Title: Vice President<BR></FONT>
</TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>16</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=6,SEQ=16,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="3",CHK=480793,FOLIO='16',FILE='DISK046:[05BHL4.05BHL1064]KI1064A.;12',USER='KSOLTER',CD='11-FEB-2005;00:11' -->
<A NAME="page_ki1064_1_17"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>SCHEDULE 3.2  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> Product Inventories  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6,797 cartons of Product at $27.00 per carton </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>17</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ki1064_1_18"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>SCHEDULE 3.3  </B></FONT></P>

<P><FONT SIZE=2><I>CORTROSYN.COM  </I></FONT></P>

<P><FONT SIZE=2><I>CORTROSYN.US  </I></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>18</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=8,SEQ=18,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="3",CHK=441900,FOLIO='18',FILE='DISK046:[05BHL4.05BHL1064]KI1064A.;12',USER='KSOLTER',CD='11-FEB-2005;00:11' -->
<A NAME="page_ki1064_1_19"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>SCHEDULE 11.1  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> Required Notices  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Letter
to FDA </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>19</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ki1064_1_20"> </A>
<P ALIGN="RIGHT"><FONT SIZE=2><B>EXHIBIT A  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>BILL OF SALE  </B></FONT></P>


<P><FONT SIZE=2>June&nbsp;26,
2003 </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
$1 and other valuable consideration, receipt of which is hereby acknowledged, Organon USA&nbsp;Inc. hereby sells all of its rights, title and interest in the following assets to
Amphastar Pharmaceuticals,&nbsp;Inc.: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2>New
Drug Application 16-750
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(b)</FONT></DT><DD><FONT SIZE=2>U.S.
Trademark #779,399 for Cortrosyn&reg;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(c)</FONT></DT><DD><FONT SIZE=2>The
internet names </FONT><FONT SIZE=2><I>www.cortrosyn.com</I></FONT><FONT SIZE=2> and </FONT><FONT SIZE=2><I>www.cortrosyn.us</I></FONT><FONT SIZE=2><BR>
(d)&nbsp;6,797 cartons of Cortrosyn&reg; containing 10 vials per carton </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
witness whereof, a duly authorized officer of Organon has executed this Bill of Sale effective as of the date written above. </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="72%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>ORGANON USA&nbsp;INC.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2>Patrick J. Osinski<BR>
Vice President</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2>Huib Costermans<BR>
Vice President</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>20</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=10,SEQ=20,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="3",CHK=680525,FOLIO='20',FILE='DISK046:[05BHL4.05BHL1064]KI1064A.;12',USER='KSOLTER',CD='11-FEB-2005;00:11' -->
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<FONT SIZE=2><A HREF="#toc_kh1064_1">Exhibit 10.4</A></FONT><BR>

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<TYPE>EX-10.5
<SEQUENCE>4
<FILENAME>a2151158zex-10_5.htm
<DESCRIPTION>EXHIBIT 10.5
<TEXT>
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<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="kk1064_exhibit_10.5"> </A>
<A NAME="toc_kk1064_1"> </A>
<BR></FONT><FONT SIZE=2><B>Exhibit 10.5    <BR>    </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>SECURITY AGREEMENT  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS
AGREEMENT, dated June </FONT><FONT SIZE=2><I>26</I></FONT><FONT SIZE=2>, 2003, is by and between AMPHASTAR PHARMACEUTICALS,&nbsp;INC., a California corporation ("Debtor"), and
ORGANON USA&nbsp;INC., a New Jersey corporation ("Secured Party"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
pursuant to an Asset Sale Agreement dated June&nbsp;&nbsp;&nbsp;&nbsp;, 2003, between Debtor and Secured Party (the "Sale Agreement"), Debtor has purchased from Secured Party, the United
States Trademark CORTROSYN, U.S. Trademark Registration No.&nbsp;779,366 (the "Trademark") and the New Drug Application, U.S. NDA No.&nbsp;16-750 (the "NDA"); and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
to induce Secured Party to enter into the Sale Agreement, Debtor has agreed to grant to Secured Party certain collateral security as set forth herein; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW,
THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Debtor and Secured Party
hereby agree as follows: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.&nbsp;&nbsp;&nbsp;&nbsp;GRANT OF SECURITY INTEREST</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
collateral security for the prompt performance, observance and indefeasible payment in full of all of the Obligations (as hereinafter defined), Debtor hereby grants to Secured Party a
continuing security interest in and a general lien upon the following (being collectively referred to herein as the "Collateral"): (a)&nbsp;all of Debtor's now existing or hereafter acquired right,
title, and interest in and to the Trademark and the NDA; (b)&nbsp;all income, fees, royalties and other payments at any time due or payable with respect thereto, including, without limitation,
payments under all licenses at any time entered into in connection with the Trademark and NDA therewith; (c)&nbsp;all reissues, extensions, continuations, renewals, supplements or amendments to the
Trademark or the NDA; (d)&nbsp;the right to sue for past, present and future infringements of the Trademark; and (e)&nbsp;all proceeds of any of the foregoing. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>2.&nbsp;&nbsp;&nbsp;&nbsp;OBLIGATIONS SECURED</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
security interest, lien and other interests granted to Secured Party pursuant to this Agreement shall secure the prompt performance, observance and payment in full of any and all
obligations, liabilities and indebtedness of every kind, nature and description owing by Debtor to Secured Party arising under this Agreement or the Sale Agreement, whether now existing or hereafter
arising, whether arising after the commencement of any case with respect to Debtor under the United States Bankruptcy Code or any similar statute (including, without limitation, the payment of
interest and other amounts which would accrue and become due but for the commencement of such case), all of the foregoing being collectively referred to herein as the "Obligations". </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.&nbsp;&nbsp;&nbsp;&nbsp;REPRESENTATIONS. WARRANTIES AND COVENANTS</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Debtor
hereby represents, warrants and covenants with and to Secured Party the following (all of such representations, warranties and covenants being continuing so long as any of the
Obligations are outstanding): </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Debtor
shall pay and perform all of the Obligations according to their terms, </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Debtor
has the right and power to grant the security interest granted hereunder. Debtor shall, at Debtor's expense, perform all acts and execute all documents necessary
to maintain the existence of the Trademark as a registered trademark and to maintain the existence of all of the Collateral as valid and subsisting, including, without limitation, the filing of any
renewal affidavits </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-1</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P><FONT SIZE=2>and
applications. The Collateral is not subject to any liens, claims, mortgages, assignments, security interests or encumbrances of any nature whatsoever, except the security interests granted
hereunder. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Debtor
shall not assign, sell, mortgage, lease, transfer, pledge, hypothecate, grant a security interest in or lien upon, encumber, grant an exclusive or
non-exclusive license relating to the Collateral, or otherwise dispose of any of the Collateral, in each case without the prior written consent of Secured Party. Notwithstanding the
foregoing, Debtor may grant a subordinate security interest in the Collateral to a third party in connection with a financing without the consent of the Secured Party; provided that the third party
enters into an inter-creditor agreement acceptable to the Secured Party. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;Debtor
shall, at Debtor's expense, promptly perform all acts and execute all documents requested at any time by Secured Party to evidence, perfect, maintain, record or
enforce the security interest in the Collateral granted hereunder or to otherwise further the provisions of this Agreement. Debtor hereby authorizes Secured Party to authenticate in the name of Debtor
and file one or more financing statements (or similar documents) with respect to the Collateral. Debtor further authorizes Secured Party to have this Agreement or any other similar security agreement
filed with the U.S. Patent and Trademark Office (the "PTO") or any other appropriate federal, state or government office. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;Debtor
shall, concurrently with the execution and delivery of this Agreement, execute and deliver to Secured Party five (5)&nbsp;originals of a Special Power of
Attorney in the form of </FONT><FONT SIZE=2><I>Annex A</I></FONT><FONT SIZE=2> annexed hereto for the implementation of the sale or other disposition of the Collateral pursuant to Secured Party's
exercise of the rights and remedies granted to Secured Party hereunder; </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, </FONT><FONT SIZE=2><I>however,</I></FONT><FONT SIZE=2> Secured Party
hereby agrees that it will not exercise its rights under such Special Power of Attorney unless an Event of Default (defined below) has occurred and is continuing. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;Secured
Party may, in its reasonable discretion, pay any amount or do any act which Debtor fails to pay or do as required hereunder or as requested by Secured Party to
preserve, defend, protect, maintain, record or enforce the Collateral or the security interest granted hereunder, including, but not limited to, all filing or recording fees, court costs, collection
charges, attorneys' fees and legal expenses. Debtor shall be liable to Secured Party for any such payment, which liability shall be part of the Obligations secured hereby. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;Debtor
shall not do any act, nor omit to do any act, whereby the Trademark may become abandoned, invalidated, unenforceable, avoided, or avoidable, except for any such
act or omission that, individually or in the aggregate, shall not have resulted in, and could not reasonably be expected to result in, a material adverse effect on the Collateral. Debtor shall notify
Secured Party immediately if it knows or has reason to know of any reason why any application, registration, or recording with respect to the Trademark may become abandoned, canceled, invalidated,
avoided or avoidable. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;Debtor
shall render any assistance, as Secured Party shall determine is necessary or advisable, to Secured Party in any proceeding before the United States Patent and
Trademark Office, any federal or state court, or any similar office or agency in the United States, any State thereof or any political subdivision thereof, to maintain the application and registration
of the Trademark as Debtor's exclusive property and to protect Secured Party's interest therein, including, without limitation, filing of renewals, affidavits of use, affidavits of incontestability
and opposition, and cancellation proceedings. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;Debtor
shall promptly notify Secured Party if Debtor learns of any use by any person of any term or design which infringes on the Trademark or is likely to cause
confusion with the Trademark. If requested by Secured Party, Debtor, at Debtor's expense, shall join with Secured </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-2</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>Party
in such action as Secured Party, in Secured Party's discretion, may deem advisable for the protection of Secured Party's interest in and to the Trademark. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp;Debtor
shall maintain the validity of the NDA, shall file all reports required in connection with the NDA, and shall comply with the requirements in the NDA. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>4.&nbsp;&nbsp;&nbsp;&nbsp;EVENTS OF DEFAULT: ACCELERATION</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
Obligations shall become immediately due and payable upon demand, at the option of Secured Party, upon the occurrence of any breach of clause&nbsp;4.1 (b)&nbsp;or 4.1
(c)&nbsp;of the Sale Agreement (each an "Event of Default" hereunder). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>5.&nbsp;&nbsp;&nbsp;&nbsp;RIGHTS AND REMEDIES</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
any time an Event of Default exists or has occurred and is continuing, in addition to all other rights and remedies of Secured Party, whether provided under this Agreement, applicable
law or otherwise, Secured Party shall have the following rights and remedies: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Secured
Party may require that neither Debtor nor any affiliate or subsidiary of Debtor make use of the Trademark or the NDA for any purpose whatsoever. Secured Party
may make use of the Trademark and the NDA for the manufacture and sale of goods, completion of work-in-process or rendering of services. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Secured
Party may grant such license or licenses relating to the Collateral for such term or terms, on such conditions, and in such manner, as Secured Party shall in its
discretion deem appropriate. Such license or licenses may be general, special or otherwise, and may be granted on an exclusive or non-exclusive basis throughout all or any part of the
United States. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Secured
Party may assign, sell or otherwise dispose of the Collateral or any part thereof, either with or without special conditions or stipulations except that if
notice to Debtor of intended disposition of Collateral is required by law, the giving often (10)&nbsp;days' prior written notice to Debtor of any proposed disposition shall be deemed reasonable
notice thereof and Debtor waives any other notice with respect thereto. Secured Party may buy the Collateral or any part thereof, and Secured Party may execute assurances and perform all other acts
which Secured Party may, in its discretion, deem appropriate or proper to complete such disposition. In any such event, Debtor shall be liable for any deficiency. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;In
addition to the foregoing, in order to implement the disposition of any of the Col1ateral pursuant to the terms hereof, Secured Party may at any time execute and
deliver on behalf of Debtor, pursuant to the authority granted in the Power of Attorney described in Section&nbsp;3(a) hereof, one or more instruments of assignment of the Trademark and the NDA (or
any application, registration, or recording relating thereto), in form suitable for filing, recording, or registration. Debtor agrees to pay Secured Party on demand all costs incurred in any such
transfer of the Collateral, including, but not limited to, any taxes, fees, and attorneys' fees and legal expenses. Debtor agrees that Secured Party has no obligation to preserve rights to the
Trademark or the NDA. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;Secured
Party may first apply the proceeds actually received from any such license or disposition of any of the Collateral to the costs and expenses thereof, including,
without limitation, attorneys' fees and all legal, travel and other expenses which may be incurred by Secured Party. Thereafter, Secured Party may apply any remaining proceeds in accordance with the
Sale Agreement. Debtor shall remain liable to Secured Party for any of the Obligations remaining unpaid after the application of such proceeds, and Debtor shall pay Secured Party on demand any such
unpaid amount. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-3</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;Nothing
contained herein shall be construed as requiring Secured Party to take any such action at any time. All of Secured Party's rights and remedies, whether provided
under this Agreement, applicable law or otherwise, shall be cumulative and none is exclusive. Such rights and remedies may be enforced alternatively, successively or concurrently. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>6.&nbsp;&nbsp;&nbsp;&nbsp;TERMINATION OF SECURITY INTEREST</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
the satisfaction of the Obligations, the Secured Party shall immediately perform at its cost and expense the following acts to terminate the security interest granted hereunder: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Provide
written notice of the termination of the security interest to Debtor and return the original of this agreement to Debtor; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Return
the five (5)&nbsp;originals of the Special Power of Attorney to Debtor; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Provide
written notice of the termination of the inter-creditor agreement; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;File
the appropriate documents with all state and federal agencies, including the PTO, terminating all previously filed agreements, documents and instruments evidencing
the security interest; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;Perform
all other reasonable acts requested by Debtor or the third party to the inter-creditor agreement in furtherance of this paragraph. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>7.&nbsp;&nbsp;&nbsp;&nbsp;GOVERNING LAW</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
validity, interpretation and enforcement of this Agreement shall be governed by the internal laws of the State of New Jersey but excluding any principles of conflicts of law. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>8.&nbsp;&nbsp;&nbsp;&nbsp;MISCELLANEOUS</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;All
notices, requests and demands hereunder shall be in writing and deemed to have been given or made: if delivered in person, immediately upon delivery; if by telex,
telegram or facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next business day,
one (1)&nbsp;business day after sending; and if by certified mail, return receipt requested, five (5)&nbsp;days after mailing. All notices, requests and demands upon the parties are to be given to
the following addresses (or to such other address as any party may designate by notice in accordance with this Section): </FONT></P>
</UL>
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<DIV ALIGN="CENTER"><TABLE WIDTH="63%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>If to Debtor:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>Amphastar Pharmaceuticals,&nbsp;Inc.<BR>
11570 Sixth Street<BR>
Rancho Cucamonga, CA 91730<BR>
Facsimile: 909-980-6139<BR>
Attention: Chief Financial Officer</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2><BR>
If to the Secured Party:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2><BR>
Organon USA&nbsp;Inc.<BR>
375 Mt. Pleasant Ave.<BR>
West Orange, NJ 07052<BR>
Facsimile: 973-422-7287<BR>
Attention: Michael V. Novinski, President</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2><BR>
With a copy to:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2><BR>
Organon USA&nbsp;Inc.<BR>
375 Mt. Pleasant Ave.<BR>
West Orange, NJ 07052<BR>
Attention: Patrick J. Osinski, Vice President and General Counsel<BR></FONT>
</TD>
</TR>
</TABLE></DIV>
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<P ALIGN="CENTER"><FONT SIZE=2>A-4</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;All
references to the plural herein shall also mean the singular and to the singular shall also mean the plural. The words "hereof," "herein," "hereunder," "this
Agreement" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not any particular provision of this Agreement and as this Agreement now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;This
Agreement shall be binding upon Debtor and its successors and assigns, and shall inure to the benefit of and be enforceable by Secured Party and its successors and
assigns. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;If
any provision of this Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole, but this
Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced
only to such extent as shall be permitted by applicable law. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;Neither
this Agreement nor any provision hereof shall be amended, modified, waived or discharged orally or by course of conduct, but only by a written agreement signed
by an authorized officer of Secured Party. A waiver by Secured Party of any right, power or remedy on anyone occasion shall not be construed as a bar to or waiver of any such right, power or remedy
which Secured Party would otherwise have on any future occasion, whether similar in kind or otherwise. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, Debtor and Secured Party have executed this Agreement as of the day and year first above written. </FONT></P>

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<TD WIDTH="46%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>AMPHASTAR PHARMACEUTICALS,&nbsp;INC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>By:</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>DAVID W. NASSIF</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Name:</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>David W. Nassif</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Title:</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>Chief Financial Officer and Senior Vice President of Global Licensing</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>ORGANON USA&nbsp;INC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>By:</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>PATRICK J. OSINSKI</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>Name: Patrick J. Osinski</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>Title: Vice President</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>HUIB COSTERMANS</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>Name: Huib Costermans</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="46%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>Title: Vice President</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>A-5</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<TD WIDTH="26%" VALIGN="TOP"><FONT SIZE=2>STATE OF NEW JERSEY</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="73%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="26%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="73%" VALIGN="TOP"><FONT SIZE=2>ss.:</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="26%" VALIGN="TOP"><FONT SIZE=2>COUNTY OF ESSEX</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="73%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
this 26 day of June, 2003, before me personally came David W. Nassif, to me known, who being duly sworn, did depose and say, that he is the Chief Financial Officer and Senior Vice
President of Global Licensing of AMPHASTAR PHARMACEUTICALS,&nbsp;INC., the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the
Board of Directors of said corporation. </FONT></P>

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<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>JOYCE A. VENEZIA</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Joyce A. Venezia<BR>
Notary Public<BR></FONT>
</TD>
</TR>
</TABLE>
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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="36%" ALIGN="CENTER"><FONT SIZE=2>JOYCE A. VENEZIA Notary Public<BR>
State of New Jersey No.&nbsp;2187917</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="26%" VALIGN="TOP"><FONT SIZE=2>STATE OF NEW JERSEY</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="36%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="36%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2>Qualified in Essex County</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2>ss.:</FONT></TD>
<TD WIDTH="36%" ALIGN="CENTER"><FONT SIZE=2>Commission Expires April&nbsp;4, 2006</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="26%" VALIGN="TOP"><FONT SIZE=2>COUNTY OF ESSEX</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="36%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="36%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
this 26 day of June, 2003, before me personally came Patrick J. Osinski, to me known, who being duly sworn, did depose and say, that he is the Vice President of ORGANON
USA&nbsp;INC., the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the Board of Directors of said corporation. </FONT></P>

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<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>JOYCE A. VENEZIA</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Joyce A. Venezia<BR>
Notary Public<BR></FONT>
</TD>
</TR>
</TABLE>
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<TD WIDTH="26%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="36%" ALIGN="CENTER"><FONT SIZE=2>JOYCE A. VENEZIA<BR>
Notary Public State of New Jersey</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="26%" VALIGN="TOP"><FONT SIZE=2>STATE OF NEW JERSEY</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="36%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="36%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2>No.&nbsp;2187917</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2>ss.:</FONT></TD>
<TD WIDTH="36%" ALIGN="CENTER"><FONT SIZE=2>Qualified in Essex County</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2>COUNTY OF ESSEX</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="36%" ALIGN="CENTER"><FONT SIZE=2>Commission Expires April&nbsp;4, 2006</FONT></TD>
</TR>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
this 26 day of June, 2003, before me personally came Huib Costermans, to me known, who being duly sworn, did depose and say, that he is the Vice President of ORGANON USA&nbsp;INC.,
the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the Board of Directors of said corporation. </FONT></P>

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<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2>JOYCE A. VENEZIA<BR>
Notary Public State of New Jersey<BR>
No.&nbsp;2187917<BR>
Qualified in Essex County<BR>
Commission Expires April&nbsp;4, 2006</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>JOYCE A. VENEZIA</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Joyce A. Venezia<BR>
Notary Public</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>A-6</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><B>ANNEX A<BR>
TO<BR>
SECURITY AGREEMENT  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> SPECIAL POWER OF ATTORNEY  </B></FONT></P>

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<TD WIDTH="17%"><FONT SIZE=2>STATE OF</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>ss.:</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>COUNTY OF</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KNOW
ALL MEN BY THESE PRESENTS, that AMPHAST AR PHARMACEUTICALS,&nbsp;INC., a California corporation ("Debtor"), hereby appoints and constitutes ORGANON USA&nbsp;INC., A New Jersey
corporation "Secured Party"), and each of its officers, its true and lawful attorney, with full power of substitution and with full power and authority to perform the following acts on behalf of
Debtor: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Execution
and delivery of any and all agreements, documents, instrument of assignment or other papers which Secured Party, in its discretion, deems necessary or advisable
for the purpose of assigning, selling, or otherwise disposing of all right, title, and interest of Debtor in and to the Trademark and NDA (as defined in the Security Agreement referred to below) and
all registrations, recordings, reissues, extensions, and renewals thereof; or for the purpose of recording, registering and filing of, or accomplishing any other formality with respect to the
foregoing. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Execution
and delivery of any and all documents, statements, certificates or other papers which Secured Party, in its discretion, deems necessary or advisable to further
the purposes described in paragraph&nbsp;1 hereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Power of Attorney is made pursuant to a Security Agreement, dated of even date herewith, between Debtor and Secured Party (the "Security Agreement") and is subject to the terms and
provisions thereof. This Power of Attorney, being coupled with an interest, is irrevocable until all "Obligations", as such term is defined in the Security Agreement, are indefeasibly paid in full and
the Security Agreement is terminated in writing by Secured Party. </FONT></P>

<P><FONT SIZE=2>Dated:
June&nbsp;&nbsp;&nbsp;&nbsp;, 2003 </FONT></P>

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<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=4><FONT SIZE=2>AMPHASTAR PHARMACEUTICALS,&nbsp;INC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><BR><FONT SIZE=2>By:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Name:</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Title:</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>ss.:</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>STATE OF</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>COUNTY OF</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="41%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
this&nbsp;&nbsp;&nbsp;&nbsp;day of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2003, before me personally
came&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, to me known, who being duly sworn, did depose and say, that he is
the&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
AMPHASTAR </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-7</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P><FONT SIZE=2>PHARMACEUTICALS,&nbsp;INC.,
the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the Board of Directors of said corporation. </FONT></P>

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<TD WIDTH="60%" ALIGN="CENTER"><HR NOSHADE><FONT SIZE=2> Notary Public</FONT></TD>
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<P ALIGN="CENTER"><FONT SIZE=2>A-8</FONT></P>

<HR NOSHADE>
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<BR>
<P><br><A NAME="05BHL1063_4">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_kk1064_1">Exhibit 10.5</A></FONT><BR>

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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>5
<FILENAME>a2151158zex-10_6.htm
<DESCRIPTION>EXHIBIT 10.6
<TEXT>
<HTML>
<HEAD>
</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<BR>
<FONT SIZE=3 ><A HREF="#05BHL1063_5">QuickLinks</A></FONT>
<font size=3> -- Click here to rapidly navigate through this document</font>
<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="page_km1064_1_1"> </A> </FONT></P>

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<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="km1064_exhibit_10.6"> </A>
<A NAME="toc_km1064_1"> </A>
<BR></FONT><FONT SIZE=2><B>Exhibit 10.6    <BR>    </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>TOLL MANUFACTURING AGREEMENT  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS AGREEMENT effective this 26 day of June, 2003 (hereinafter referred to as the "effective date") by and between Amphastar Pharmaceuticals,&nbsp;Inc., a
corporation organized under the law of the State of California, having its principal office at 11570 Sixth St., Rancho Cucamonga, CA 91730 (hereinafter "AMPHASTAR"), and ORGANON USA&nbsp;INC., a
corporation organized under that laws of New Jersey, having its principal office at 375 Mt.&nbsp;Pleasant Avenue, West Orange, New Jersey 07052 (hereinafter "ORGANON"). </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>WITNESSETH: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
AMPHASTAR will be commercially marketing the pharmaceutical compound Cortrosyn&reg; for Injection (vials only) in the USA; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
ORGANON has the necessary facilities, equipment, personnel, and professional experience to Gonvert bulk quantities of cosyntropin into finished vials of Cortrosyn&reg;
for sale in the USA; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
AMPHASTAR is interested in retaining and ORGANON is interested in being retained by AMPHAST AR, as a manufacturer of vials of Cortrosyn&reg; for sale in the USA. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW,
THEREFORE, ORGANON and AMPHASTAR agree as follows: </FONT></P>

<P><FONT SIZE=2><I>ARTICLE 1&#151;DEFINITIONS  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1&nbsp;&nbsp;&nbsp;"FDA"
means the United States Food and Drug Administration. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2&nbsp;&nbsp;&nbsp;"NDA"
shall mean the application (U.S. NDA Number 16-750) for the Product prepared pursuant to applicable FDA regulations for filing with the FDA for
authorization to market the Product within the United States, including all additions, supplements, extensions and modifications thereto. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3&nbsp;&nbsp;&nbsp;"PRODUCT"
shall mean the Cortrosyn&reg; injection which contains Active Pharmaceutical Ingredient for the indication as a diagnostic agent in the screening of
patients presumed to have adrenocortical insufficiency in finished dosage form without diluent which is the subject of the NDA. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4&nbsp;&nbsp;&nbsp;"Asset
Sale Agreement" means the Asset Sale Agreement dated the date of this Agreement between AMPHASTAR and ORGANON. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5&nbsp;&nbsp;&nbsp;"Active
Pharmaceutical Ingredient" shall mean the drug substance cosyntropin manufactured by Diosynth BV or its affiliates. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6&nbsp;&nbsp;&nbsp;"Quality
Agreement" means the Quality Agreement dated the date of this Agreement between AMPHASTAR and ORGANON. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7&nbsp;&nbsp;&nbsp;"Security
Agreement" means the Security Agreement dated the date of this Agreement between AMPHASTAR and ORGANON. </FONT></P>


<P><FONT SIZE=2><I>ARTICLE 2&#151;DESCRIPTION OF WORK  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1&nbsp;&nbsp;&nbsp;ORGANON
will manufacture for and supply to AMPHAST AR quantities of PRODUCT that conform in all respects to PRODUCT as specified in certain sections of the NDA attached
hereto as Exhibit&nbsp;A, the Quality Agreement and the master batch 2 record. AMPHASTAR agrees to obtain ORGANON'S written consent, which may not be unreasonably withheld or delayed, prior to the
submission to the FDA of any modifications to the NDA affecting the manufacture and/or packaging of </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>1</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>the
PRODUCT. AMPHASTAR agrees to discuss any proposed modifications with ORGANON before seeking approval by FDA of a modification. Unless ordered by FDA, any such modification must be within ORGANON's
capability. If such modifications would affect the cost of producing finished PRODUCT and/or would require an investment in fixed assets, the financial consequences would be borne by AMPHASTAR.
AMPHASTAR acknowledges that its Product rights are limited to the United States. Pursuant to the NDA, AMPHASTAR agrees to sell PRODUCT only in the USA. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2&nbsp;&nbsp;&nbsp;As
part of its services hereunder (and included in the Initial Price and Price defined in 3.1 hereunder,), AMPHASTAR wants ORGANON to supply, or to have supplied to it
all raw materials including API, glass vials, stoppers, vial labels, package inserts, carton labels and cartons necessary to manufacture PRODUCT in the quantities specified in this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3&nbsp;&nbsp;&nbsp;ORGANON
agrees to manufacture for and supply to AMPHAST AR, and AMPHASTAR agrees to purchase from ORGANON, "PRODUCT in batches of 70,000 vials, packaged in cartons of 10
labeled vials per carton with a package insert. At least sixty (60)&nbsp;days before each calendar year, AMPHASTAR will give ORGANON an annual forecast for PRODUCT to be manufactured in the
following calendar year. AMPHASTAR will give ORGANON a quarterly projection for PRODUCT to be manufactured during the upcoming quarter at least ninety (90)&nbsp;days before each calendar quarter.
Such projections shall include delivery dates. AMPHASTAR will provide ORGANON a firm purchase order no less than ninety (90)&nbsp;days prior to the delivery date of PRODUCT to AMPHASTAR. In the
event AMPHASTAR wishes to have more than one batch (70,000 units) of PRODUCT manufactured and supplied by ORGANON in any thirty (30)&nbsp;day period, AMPHAST AR shall give ORGANON a purchase order
for such PRODUCT at least ninety (90)&nbsp;days prior to the first delivery date in said purchase order. However, in no event shall ORGANON be obligated to manufacture, supply and deliver to
AMPHASTAR more than 2 batches (140,000 units) of PRODUCT, in any thirty (30)&nbsp;day period. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4&nbsp;&nbsp;&nbsp;Notwithstanding
anything herein to the contrary, ORGANON retains all rights to manufacture, use and sell PRODUCT for sale outside the USA by its affiliates in those
countries where "Cortrosyn" product is currently approved. ORGANON may use "Cortrosyn" in connection with such sales. ORGANON agrees to use best efforts to ensure that no such sales by its foreign
affiliates involve re-sales into the United States. </FONT></P>

<P><FONT SIZE=2><I>ARTICLE 3&#151;PRICE AND PAYMENT  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1&nbsp;&nbsp;&nbsp;The
price to be paid by AMPHASTAR to ORGANON for quantities of PRODUCT manufactured by ORGANON and supplied to AMPHAST AR according to this Agreement will be $2.70 per
vial or $27.00 per carton of 10 vials (inclusive of all labels and package inserts) (hereinafter "Initial Price") during the first year of this Agreement. Thereafter, the Initial Price will be subject
to an upward adjustment on an annual basis of five percent (5%) during the term of this Agreement (the "Price"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Stability Studies and Validation.</I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ORGANON
shall perform stability studies on PRODUCT in accordance with ORGANON's commitments to the FDA, the cost of which shall be included in the Initial Price and the Price. ORGANON
will also perform validation studies of processes involving PRODUCT, consistent with the FDA's current Good Manufacturing Practices ("cGMPs"). AMPHASTAR will pay for PRODUCT made for these validation
studies at $2.70 per vial. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3&nbsp;&nbsp;&nbsp;ORGANON
will issue invoices for the PRODUCT shipped F.O.B. ORGANON's plant, Allentown, Pennsylvania, to AMPHASTAR or pursuant to its instructions during the previous
month. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4&nbsp;&nbsp;&nbsp;The
payment of each invoice is to be made to ORGANON by AMPHAST AR within thirty (30)&nbsp;days after the date of said invoice. It is agreed that ORGANON will not date
or mail any invoice </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

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<P><FONT SIZE=2>to
AMPHAST AR prior to actual shipment of PRODUCT covered by said invoice. Further, ORGANON will not ship a lot to AMPHAST AR until the release procedures described in the Quality Agreement have been
met. Any amount not paid in such 30-day period shall thereafter bear interest at the rate of ten percent (10%) per annum. It is agreed that ORGANON will invoice AMPHAST AR for any
validation batches at the initiation of such work. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5&nbsp;&nbsp;&nbsp;The
payment of each invoice is to be made to ORGANON by AMPHASTAR within thirty (30)&nbsp;days after the date of said invoice. Any amount not paid in such
30-day period shall thereafter bear interest at the rate of ten percent (10%) per annum. </FONT></P>

<P><FONT SIZE=2><I>ARTICLE 4&#151;QUALITY AND REGULATORY MATTERS  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1&nbsp;&nbsp;&nbsp;ORGANON
will maintain in-process quality control procedures in accordance with FDA cGMPs and will otherwise comply in all respects with the Quality
Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2&nbsp;&nbsp;&nbsp;AMPHAST
AR shall have the right, but not the obligation, to inspect ORGANON's quality control procedures and records and to obtain specimens of PRODUCT from ORGANON's
production for analysis to confirm quality. Any AMPHASTAR employees who inspect ORGANON's facilities shall abide by all of ORGANON's policies, procedures and rules and shall enter into an appropriate
confidentiality agreement. AMPHAST AR shall assume all risk of loss and indemnify and hold ORGANON harmless from all liability and expenses (including legal fees and expenses) directly and proximately
resulting from their presence at ORGANON's facilities. Section&nbsp;12.4 of the Asset Sale Agreement shall apply to such indemnification. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3&nbsp;&nbsp;&nbsp;ORGANON
shall be responsible for all communications with any governmental entity relating to its manufacturing and packaging activities, including facility inspections,
and AMPHASTAR shall be responsible for all communications with any governmental entity concerning the marketing, sale and distribution of the PRODUCT in the United States. Notwithstanding the
foregoing, communications concerning the NDA shall be submitted by AMPHASTAR as owner of the NDA. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4&nbsp;&nbsp;&nbsp;ORGANON
will, at its sole expense, comply with all laws applicable to production, packaging, testing, storage, shipment and recordkeeping by ORGANON of the PRODUCT and
its performance of its obligations hereunder, including all applicable laws or requirements under any applicable product registrations or manufacturing facility registrations. As long as ORGANON
manufactures PRODUCT for AMPHAST AR, it will pay any fees necessary to obtain and maintain manufacturing facility registrations and any other licenses, registrations, permits, exemptions, allowances,
authorizations, or approvals from a government entity which are applicable to its facilities used to manufacture and package the PRODUCT. </FONT></P>

<P><FONT SIZE=2><I>ARTICLE 5&#151;REPRESENTATIONS; INDEMNIFICATIONS; DAMAGES  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1&nbsp;&nbsp;&nbsp;ORGANON
represents that PRODUCT manufactured for and supplied to AMPHASTAR hereunder will comply in all respects with the specifications and product definition.
Additionally, the PRODUCT shall be free from defects in material, manufacturing and workmanship when delivered by ORGANON to the common carrier; provided that ORGANON makes no representation with
respect to any defects or nonconformity that cannot be readily tested or seen. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2&nbsp;&nbsp;&nbsp;In
connection with this Agreement and transactions pursuant hereto, AMPHASTAR shall indemnify and hold ORGANON and its stockholders, directors, officers, employees,
representatives and agents harmless pursuant to Sections 12.3 and 12.4 of the Asset Sale Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3&nbsp;&nbsp;&nbsp;In
connection with this Agreement and transactions pursuant hereto, ORGANON shall indemnify and hold AMPHASTAR and its stockholders, directors, officers, employees,
representatives and agents harmless pursuant to Sections 12.2 and 12.4 of the Asset Sale Agreement. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4&nbsp;&nbsp;&nbsp;In
no event, except in the case of third party claims, shall AMPHASTAR or ORGANON be liable to the other for special, indirect, incidental or consequential damages
(including, without limitation, loss of profits) suffered by either AMPHASTAR or ORGANON. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>5.5&nbsp;&nbsp;&nbsp;EXCEPT AS EXPRESSLY STATED HEREIN, ORGANON MAKES NO REPRESENTATIONS OR WARRANTIES. OF ANY KIND, EITHER EXPRESS OR IMPLIED, RELATED TO THE PRODUCT
INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.</B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.6&nbsp;&nbsp;&nbsp;Both
parties agree to maintain property, general liability and products liability insurance policies with minimum coverages of $5,000,000 per occurrence and in the
aggregate and to produce proof of such coverage immediately upon request of the other party. </FONT></P>

<P><FONT SIZE=2><I>ARTICLE 6&#151;TERM  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1&nbsp;&nbsp;&nbsp;This
Agreement shall commence on the.effective date and shall continue in effect for three (3)&nbsp;years from the effective date, unless terminated earlier pursuant
to Section&nbsp;18.2 or at AMPHASTAR's election on six months' written notice to ORGANON. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2&nbsp;&nbsp;&nbsp;Termination
of this Agreement shall not affect in any way whatsoever the parties' obligations set forth in Article&nbsp;13 or Sections 5.2 and 5.3. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3&nbsp;&nbsp;&nbsp;Upon
termination, AMPHAST AR, shall have the right to purchase all or some of the raw materials, glass vials, stoppers, vial labels, package inserts, carton labels and
cartons held pursuant to this Agreement, at cost. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4&nbsp;&nbsp;&nbsp;In
advance of termination upon request of AMPHAST AR, ORGANON shall provide reasonable assistance to AMPHAST AR in the transfer of the manufacturing process for the
PRODUCT. </FONT></P>

<P><FONT SIZE=2><I>ARTICLE 7&#151;NOTICES  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No notice, consent, acceptance, approval, waiver, or claim shall be valid or validly made or given unless in writing and hand-delivered or sent by
registered mail to the addresses of the parties as hereinafter set forth: </FONT></P>

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<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>ORGANON USA&nbsp;INC.<BR>
375 Mt. Pleasant Avenue<BR>
West Orange, NJ 07052<BR>
Attention: Michael Novinski, President<BR>
with a copy addressed to Patrick J. Osinski,<BR>
Vice President and General Counsel</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2><BR>
AMPHASTAR, PHARMACEUTICALS,&nbsp;INC.<BR>
11570 Sixth Street<BR>
Rancho Cucamonga, CA 91730<BR>
Attention: Chief Financial Officer</FONT></TD>
</TR>
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<P><FONT SIZE=2><I>ARTICLE 8&#151;WAIVER  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exercise by any party of any of its rights under this Agreement shall not be deemed to limit any other right or remedy that such party may have in law or equity.
The failure of either party at any time to require performance by the other party of any provision hereof shall in no way affect the full right to require such performance at any time thereafter; nor
shall the waiver by either party of a breach of </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

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<P><FONT SIZE=2>any
provision hereof be taken or held to be a waiver of any prior or succeeding breach of such provision or as a waiver of the provision itself. </FONT></P>

<P><FONT SIZE=2><I>ARTICLE 9&#151;ASSIGNMENT OF AGREEMENT  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither this Agreement nor any rights or obligations hereunder may be assigned by AMPHASTAR or ORGANON, either in whole or in part, without the prior written
consent of the other party which shall not be unreasonably withheld; provided, however, either party may make said assignment to an affiliate of that party, without releasing the assigning party of
any obligations under this Agreement. Further, either party may assign its rights and obligations to a successor (whether by merger, consolidation, reorganization or other similar event) or a
purchaser of all or substantially all of its assets without the consent of the other party or to a party who has a security interest in the Trademark or the NDA~ An attempt by either party to assign
the rights or obligations of this Agreement in violation of this Article shall give the other party the right to terminate this Agreement except for the provisions of Article&nbsp;13 and
Sections&nbsp;5.2 and 5.3 which shall remain in full force and effect, in addition to any other right, remedy, or claim which such party may have because of the other's failure to comply with this
Article. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

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<P><FONT SIZE=2><A
NAME="page_kn1064_1_6"> </A> </FONT> <FONT SIZE=2><I>ARTICLE 10&#151;APPLICABLE LAW  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The validity, interpretation, and performance of this Agreement, its Exhibit, and each of its provisions, shall be determined and governed by the laws of the
State of New Jersey. </FONT></P>

<P><FONT SIZE=2><I>ARTICLE 11&#151;SEVERABILITY  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any provision of this Agreement is found by a court of competent jurisdiction to be contrary to, or inconsistent with, any applicable law, regulation or
executive order, then the parties hereto shall negotiate in good faith in an attempt to agree upon a revised provision which departs from the original provision to the minimum extent necessary to
bring it into compliance with any such law, regulation or order. In the event that the parties cannot agree to a revised provision, the other provisions of this Agreement shall not be affected and
this Agreement shall remain in full force and effect and shall be construed in all respects as if such invalid provision were omitted. </FONT></P>

<P><FONT SIZE=2><I>ARTICLE 12&#151;FORCE MAJEURE  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1&nbsp;Neither
party shall be responsible or liable for failure to perform any part of this Agreement, or for any delay in the performance of any part of this Agreement,
directly or indirectly resulting from any foreign or dC1mestic embargoes, Acts of God, fires, floods, explosions, sabotage, riots, strikes or other labor disruptions, orders of governmental
authorities, shortages of labor, fuel, power or raw material, unavailability of equipment or supplies, unavailability or delays in transportation, or any other event (similar or dissimilar to the
foregoing) beyond the reasonable control of the party affected thereby. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event that ORGANON is unable to meet the production commitments specified in this Agreement for a period greater than ninety (90)&nbsp;consecutive days ("Production Failure"),
then, ORGANON with the cooperation of AMPHASTAR will choose another company to make PRODUCT (which may be AMPHASTAR) and will release all production processes, procedures, information, and
other data to a company chosen by mutual agreement of the parties in order to allow that company to manufacture the PRODUCT subject to this Agreement (including adhering to the Initial Price or the
Price, as the case maybe). The company so chosen shall agree to be bound by the requirements of Article&nbsp;13 as if such company were a party to this Agreement. In such case(s), ORGANON agrees to
furnish at least one (1)&nbsp;appropriately qualified employee, at ORGANON's cost and expense, as technical assistant, to be present during the manufacture of PRODUCT. The commitment contained in
this Section shall expire forty-five (45)&nbsp;days after ORGANON has again started producing the PRODUCT for AMPHAST AR under this Agreement. Also in the case of a. Production Failure,
AMPHASTAR'S liability to make any remaining payments to ORGANON under the Asset Sale Agreement shall be excused until re-supply of the PRODUCT has begun from the other company. ()f ORGANON
whichever comes first and a period of time has elapsed equal to the period of time in which no PRODUCT was being made. </FONT></P>

<P><FONT SIZE=2><I>ARTICLE 13&#151;CONFIDENTIALITY  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.1&nbsp;Except
as provided in Section&nbsp;13.3 and as required by law, all information made available under this Agreement on behalf of either party including, but not
limited to, all information contained in the Exhibit to this Agreement shall be kept confidential by the other party and shall not be disclosed by such other party other than to directors, officers,
employees, and its consultants who have a need to know such information and who have first agreed to maintain such information in confidence and not to use same (except as provided by this Agreement). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.2&nbsp;ORGANON
and AMPHASTAR shall take all such steps as are reasonably necessary to insure that their directors, officers, and employees, and those of their consultants, to
whom they disclose any </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

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<P><FONT SIZE=2>confidential
information of the other party, will not disclose the same to any unauthorized person or use said information in any way except as provided by this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.3&nbsp;The
provisions of this Article shall not apply to information which: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)&nbsp;&nbsp;&nbsp;&nbsp;was
already known by the receiving party at the time of its receipt, as evidenced by written records kept in the ordinary course of business; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)&nbsp;&nbsp;&nbsp;&nbsp;was
in the public domain at the time of its receipt, or entered the public domain thereafter through no fault of either party; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;is
subsequently obtained from a third person who is lawfully in possession of such information, and not in violation of any contractual, legal, or fiduciary obligation to
ORGANON or AMPHASTAR as the case may be; or </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d)&nbsp;&nbsp;&nbsp;&nbsp;is
independently (without knowledge of or reference to information about PRODUCT) developed by another as evidenced by written records kept in the ordinary course of
business. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.4&nbsp;The
provisions of this Article shall remain in force during the period of this Agreement and for all time after the termination thereof. Upon the termination of this
Agreement for any reason, each party shall either destroy or return to the other party all copies of any writings subject to this Article except that one copy may be retained for record purposes only
for reference in the event of a dispute concerning this Agreement or for compliance with governmental regulations. </FONT></P>

<P><FONT SIZE=2><I>ARTICLE 14&#151;TITLE TO GOODS  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Title to and risk of loss of the finished PRODUCT, and all other items relating to the manufacture of PRODUCT, while in the possession of ORGANON is in ORGANON at
all times. AMPHASTAR shall obtain full coverage insurance covering its interest in such goods while in transit. </FONT></P>

<P><FONT SIZE=2><I>ARTICLE 15&#151;ENTIRE AGREEMENT  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Agreement including the Exhibit hereto and amendments thereto and AMPHASTAR's subsequent purchase orders and the Asset Sale Agreement, Quality Agreement, and
Security Agreement, to which ORGANON and AMPHASTAR are parties, dated the date of this Agreement, constitute the entire agreement between the parties with respect to the subject matter hereof and
supersede any and all prior oral or written agreements, commitments, or understandings with respect to the matters provided for herein. Except for Exhibit&nbsp;A hereto which may be amended or
modified according to Section&nbsp;2.1 from time to time and AMPHASTAR's purchase orders, no amendment, modification, or discharge of this Agreement and/or waiver hereunder shall be valid or binding
unless set forth in writing and duly executed by an officer or authorized representative of the party against whom enforcement of the amendment, modification, discharge, or waiver is sought. </FONT></P>


<P><FONT SIZE=2><I>ARTICLE 16&#151;HEADINGS  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Article headings used herein are not to be deemed or construed to be part of this Agreement, but are for convenience only and shall not limit or be deemed or
construed in any way to affect or limit the meaning of this Agreement. </FONT></P>

<P><FONT SIZE=2><I>ARTICLE 17&#151;FURTHER ASSURANCES  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each party hereto agrees to execute and deliver such further papers or agreements as may be necessary or desirable to effectuate the purpose of this Agreement and
carry out its provisions, including, but not limited to, papers or agreements that would facilitate AMPHASTAR's relationship with Diosynth or its affiliates in the manufacturing of the Active
Pharmaceutical Ingredient. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

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<P><FONT SIZE=2><I>ARTICLE 18&#151;DEFAULT  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.1&nbsp;Each
of the following shall constitute an Event of Default under this Agreement: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)&nbsp;&nbsp;&nbsp;&nbsp;The
failure of either party to perform its obligations under this Agreement, and the continuation of such failure after the non-defaulting party gives notice
to the defaulting party of such default and describes the default with reasonable particularity, if the defaulting party fails to cure such default within the "applicable cure period." The "applicable
cure period" will be as follows: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;&nbsp;in
the case of non-payment of money, ten (10)&nbsp;days after the giving of such notice; and </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;&nbsp;for
all other defaults, thirty (30)&nbsp;days after the giving of such notice, except that if such other default is curable but the cure requires action by the
defaulting party, which, by its nature, cannot be
accomplished within such 30-day period, then the cure period shall be extended for such additional period&#151;but only up to an additional ninety (90)&nbsp;days in any
event&#151;as may be reasonably required to allow the defaulting party to fully accomplish the cure, but such extension shall only be made available if the defaulting party has started to take
appropriate action to accomplish such cure immediately after receiving notice of the default and if the defaulting party diligently continues taking such appropriate action until the cure is fully
accomplished. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)&nbsp;&nbsp;&nbsp;&nbsp;The
entry of an "Order for Relief' naming a party as a "Debtor" under Title 11 of the United States Code or upon the entry of a decree or order by a court having
competent jurisdiction in respect to any petition filed or action respecting a party directly involved in a reorganization, arrangement, creditors' composition, readjustment, liquidation, dissolution,
bankruptcy, or similar relief under any other present or future United States or other statute, law or regulation, whether or not resulting in the appointment of a receiver, liquidator, assignee,
trustee, custodian, sequestrator, or other similar official, and any such decree or order is in effect for a period of thirty (30)&nbsp;consecutive days. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
making by a party of an assignment for the benefit of creditors, or the admission by such party in writing of its inability to pay its debts generally as they become
due, or the taking of action by a party in furtherance of any such action. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d)&nbsp;&nbsp;&nbsp;&nbsp;The
failure of AMPHASTAR to make any payment when due in the Asset Sale Agreement. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.2&nbsp;Upon
the occurrence of an Event of Default, the non-defaulting party shall have the right to terminate this Agreement upon notice to the defaulting party.
In addition, any default by either party under this Agreement shall entitle the non-defaulting party to all other remedies available at law or in equity. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.3&nbsp;Termination
of this Agreement pursuant to this Section will not relieve either party from any obligations in this Agreement which survive termination. </FONT></P>

<P><FONT SIZE=2><I>ARTICLE 19&#151;DISPUTE RESOLUTION  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.1&nbsp;Any
dispute or claim arising out of or relating to this Agreement, including disputes or claims, arising out of or relating to the parties' decision to enter into this
Agreement, shall be settled by arbitration in accordance with the commercial arbitration rules of the American Arbitration Association, and judgment upon the award rendered in the arbitration
proceeding may be entered in any court of competent jurisdiction. Notwithstanding the preceding sentence, either party, solely for the purpose of seeking injunctive relief, may submit to any court of
competent jurisdiction, without first </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_kn1064_1_9"> </A>

<P><FONT SIZE=2>resorting
to arbitration, any claim arising out of the other party's failure to comply with any confidentiality obligations. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.2&nbsp;The
arbitration shall be conducted in Roseland, NJ by a panel of three arbitrators, one appointed by each party and the third appointed by the first two arbitrators. If
the first two arbitrators cannot agree on the third arbitrator, then each party shall nominate a proposed third arbitrator, and the third shall be selected from the two nominees by a coin flip. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.3&nbsp;The
arbitrators shall apply substantive legal principles equivalent to those applicable under the laws of New Jersey (without regard to its principles of conflicts of
laws), except that the interpretation and enforcement of this Article shall be governed by the Federal Arbitration Act. The parties shall seek to agree on the discovery and hearing procedures as well
as time limits such that the arbitrators shall issue their decision in the dispute no later than six months after the selection of the third arbitrator. Failing such agreement between the parties, the
arbitrators will provide for such procedures and will commit to resolution of the dispute within six months after selection of the third arbitrator. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.4&nbsp;The
arbitrators shall be bound by the express terms of this Agreement and may not amend or modify such terms. Any award rendered by the arbitrators shall be consistent
with the terms of this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.5&nbsp;The
arbitrators may grant any remedy or relief that the arbitrators deem just and equitable, including injunctive relief and specific performance. The arbitrators shall
not award either party punitive damages, and the parties shall be deemed to have waived any right to such damages. The arbitrators shall issue written findings of fact and conclusions of law. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.6&nbsp;The
arbitration proceedings shall be confidential, and the arbitrators shall issue appropriate protective orders to safeguard both parties' confidential information. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.7&nbsp;Both
parties hereby irrevocably consent to the exercise of jurisdiction by the arbitral panel in Roseland, NJ. Both parties waive personal service of any summons,
complaint and other process, and agree that service may be made by registered mail to their addresses for notices set forth in this Agreement. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, the parties have hereto set their hands and seals: </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
ORGANON USA&nbsp;INC.</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
AMPHASTAR PHARMACEUTICALS,&nbsp;INC.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>PATRICK J. OSINSKI</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>DAVID W. NASSIF</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%"><FONT SIZE=2><BR>
Name:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2><BR>
Patrick J. Osinski</FONT><HR NOSHADE></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
Name:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2><BR>
David W. Nassif</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%"><FONT SIZE=2><BR>
Title:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2><BR>
Vice President</FONT><HR NOSHADE></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
Title:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2><BR>
Chief Financial Officer and Senior Vice President of Global Licensing</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>HUIB COSTERMANS</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%"><FONT SIZE=2><BR>
Name:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2><BR>
Huib Costermans</FONT><HR NOSHADE></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%"><FONT SIZE=2><BR>
Title:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2><BR>
Vice President</FONT><HR NOSHADE></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_kn1064_1_11"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>TOLL MANUFACTURING AGREEMENT<BR>
EXHIBIT A  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> APPROVED SPECIFICATIONS*  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#151;</FONT></DT><DD><FONT SIZE=2>Supplement
S-002, Supplemental NDA for revised manufacturing procedure and updated manufacwring and controls section of the NDA 16-750
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#151;</FONT></DT><DD><FONT SIZE=2>Supplement
S-013; Supplemental NDA for change in the specification of the UV absorbance ratio of the drug substance
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#151;</FONT></DT><DD><FONT SIZE=2>Supplement
S-017, Supplemental NDA CBE-30 for a change in the in process specific gravity specification
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#151;</FONT></DT><DD><FONT SIZE=2>Supplement
S-018, Supplemental NDA for labeling changes to market product without diluent
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<BR>
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>Part
of Regulatory Documentation File (see 1.1.18 of Asset Sale Agreement) to be delivered to Purchaser pursuant to Section&nbsp;3.3 Deliverables. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>
<P><br><A NAME="05BHL1063_5">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_km1064_1">Exhibit 10.6</A></FONT><BR>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.8
<SEQUENCE>6
<FILENAME>a2151158zex-10_8.htm
<DESCRIPTION>EXHIBIT 10.8
<TEXT>
<HTML>
<HEAD>
</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<BR>
<FONT SIZE=3 ><A HREF="#05BHL1063_6">QuickLinks</A></FONT>
<font size=3> -- Click here to rapidly navigate through this document</font>
<!-- TOC_END -->
<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="ku1064_exhibit_10.8"> </A>
<A NAME="toc_ku1064_1"> </A>
<BR></FONT><FONT SIZE=2><B>Exhibit 10.8    <BR>    </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>SECURITY AGREEMENT  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>BETWEEN </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>AMPHASTAR PHARMACEUTICALS,&nbsp;INC.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>AND </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>DRUG ROYALTY USA,&nbsp;INC.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> DATED as of the 5th day of August&nbsp;2003  </B></FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ku1064_1_1"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>TABLE OF CONTENTS  </B></FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="4%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="15%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="71%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Page</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="4%"><FONT SIZE=2>1.</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2>GRANT OF SECURITY</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="4%"><FONT SIZE=2><BR>
2.</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
OBLIGATIONS SECURED</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="4%"><FONT SIZE=2><BR>
3.</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
REPRESENTATIONS, WARRANTIES AND COVENANTS</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="4%"><FONT SIZE=2><BR>
4.</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
INDEMNITY</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="4%"><FONT SIZE=2><BR>
5.</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
EVENTS OF DEFAULT</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
4</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="4%"><FONT SIZE=2><BR>
6.</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
RIGHTS AND REMEDIES UPON AN EVENT OF DEFAULT</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
5</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="4%"><FONT SIZE=2><BR>
7.</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
GENERAL PROVISIONS</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
7</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><BR>
SCHEDULE A</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="71%"><FONT SIZE=2><BR>
LIST OF EXISTING SECURITY ON THE COLLATERAL</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
12</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><BR>
SCHEDULE B</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="71%"><FONT SIZE=2><BR>
INTELLECTUAL PROPERTY</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
13</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><BR>
ANNEX 1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="71%"><FONT SIZE=2><BR>
DEFINITIONS</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
14</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><BR>
EXHIBIT A</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="71%"><FONT SIZE=2><BR>
SPECIAL POWER OF ATTORNEY</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
17</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>i</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_kv1064_1_1"> </A> </FONT> <FONT SIZE=2><B>SECURITY AGREEMENT  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS SECURITY AGREEMENT is made and entered into as of the 5th day of August, 2003 (this "</FONT><FONT SIZE=2><B>Agreement</B></FONT><FONT SIZE=2>"), between </FONT> <FONT
SIZE=2><B>AMPHASTAR PHARMACEUTICALS,&nbsp;INC.</B></FONT><FONT SIZE=2>, a California corporation ("</FONT><FONT SIZE=2><B>Amphastar</B></FONT><FONT SIZE=2>" or the
"</FONT><FONT SIZE=2><B>Grantor</B></FONT><FONT SIZE=2>"), with and in favor of </FONT><FONT SIZE=2><B>DRUG ROYALTY USA,&nbsp;INC.</B></FONT><FONT SIZE=2>, a Nevada corporation
("</FONT><FONT SIZE=2><B>DRC</B></FONT><FONT SIZE=2>"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>WHEREAS</B></FONT><FONT SIZE=2>, the Grantor is entering into a Royalty Purchase Agreement dated as of even date herewith (as amended, supplemented or otherwise
modified from time to time, the "</FONT><FONT SIZE=2><B>RP Agreement</B></FONT><FONT SIZE=2>") with DRC, pursuant to which DRC has agreed to provide funds to the Grantor in return for a royalty
interest in the Net Sales of Cortrosyn, subject to the terms and conditions set forth in the RP Agreement and this Agreement; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>AND WHEREAS</B></FONT><FONT SIZE=2>, unless as otherwise defined herein, capitalized terms shall have the meaning ascribed to them in Annex 1 attached hereto; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>AND WHEREAS</B></FONT><FONT SIZE=2>, under the RP Agreement, the Grantor has agreed to grant to DRC a security interest in and lien on the Product Rights,
Intellectual Property, the Grantor's interest in and rights under the Acquisition Agreements, the accounts relating to the Sales of Cortrosyn and associated contracts and inventory and proceeds; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>AND WHEREAS</B></FONT><FONT SIZE=2>, it is a condition precedent to the closing under the RP Agreement that the Grantor shall have executed and delivered this
Agreement and granted a security interest in all of the Grantor's right, title and interest in and to all of the Collateral (as hereinafter defined) in favor of DRC, as contemplated hereby. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>NOW, THEREFORE</B></FONT><FONT SIZE=2>, in consideration of the premises hereof and to induce DRC to enter into the RP Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: </FONT></P>

<P><FONT SIZE=2><B>1.</B></FONT><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;GRANT OF SECURITY</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
secure the full and prompt payment and performance when due of all of the Obligations (as defined below) of the Grantor pursuant to the RP Agreement, the Grantor hereby grants and
conveys to DRC a valid security interest in all of the Grantor's now existing or hereafter acquired right, title and interest in and to (being hereinafter collectively referred to as the
"Collateral"): (a)&nbsp;the Product Rights, including but not limited to the NDA, all reissues, extensions, continuations, renewals, supplements or amendments to the NDA, and all copies of all FDA
files, regulatory files and formulae for Cortrosyn and the master batch records for Cortrosyn; (b)&nbsp;the Intellectual Property, including but not limited to the Trade Mark and all Intellectual
Property set forth on Schedule&nbsp;B, and all reissues, extensions, continuations, renewals, supplements or amendments to the Trade Mark and such Intellectual Property; (c)&nbsp;the rights,
benefits and entitlements under the Acquisition Agreements; (d)&nbsp;all income, royalties, damages and payments now or hereafter due or payable with respect to any of the foregoing, including all
Accounts relating to the Sales of Cortrosyn; (e)&nbsp;all Inventory of Cortrosyn in any form, including but not limited to all packaging for Cortrosyn and all other Inventory relating to Cortrosyn;
(f)&nbsp;all General Intangibles with respect to any of the foregoing, including but not limited to all contracts, books, records and customer lists with respect to any of the foregoing;
(g)&nbsp;all Commercial Tort Claims relating to Cortrosyn or any of the Product Rights or Intellectual Property, including but not limited to any and all claims for infringement of the Trade Mark or
any other misuse or misappropriation of the Intellectual Property or the Product Rights; and (h)&nbsp;all Proceeds and Supporting Obligations of any of the foregoing. </FONT></P>

<P><FONT SIZE=2><B>2.</B></FONT><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;OBLIGATIONS SECURED</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
security interest, lien and other interests granted to DRC pursuant to this Agreement shall secure the prompt performance, observance and payment in full of any and all obligations,
liabilities </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>1</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=3,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="6",CHK=554254,FOLIO='1',FILE='DISK046:[05BHL4.05BHL1064]KV1064A.;6',USER='RFARRIN',CD='10-FEB-2005;04:01' -->
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<BR>

<P><FONT SIZE=2>and
indebtedness of every kind, nature and description owing by the Grantor to DRC arising under this Agreement, the RP Agreement, or any applicable Closing Documents, whether now existing or
hereafter arising, whether arising after the commencement of any case with respect to the Grantor under the United States Bankruptcy Code or any similar statute (including, without limitation, the
payment of interest and other amounts which would accrue and become due but for the commencement of such case), including without limitation the amounts described in Section&nbsp;7(i), all of the
foregoing being collectively referred to herein as the "Obligations". </FONT></P>


<P><FONT SIZE=2><B>3.</B></FONT><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;REPRESENTATIONS, WARRANTIES AND COVENANTS</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Grantor hereby represents, warrants and covenants with and to DRC the following: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;The
Grantor shall pay and perform all of the Obligations according to their terms. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
Grantor is and will continue to be the owner of all of the Collateral, free from any adverse claim, security interest, lien, mortgage, assignment or encumbrance of
any nature whatsoever in favor of any Person except the security interests granted to DRC, the security granted under the security agreement dated June&nbsp;26, 2003 (the "Organon Security
Agreement") executed by the Grantor in favor of Organon USA&nbsp;Inc. and the security described in Schedule "A" hereto, all of the holders of such security listed in Schedule "A" have released
their security to the security granted to DRC hereunder. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;The
Grantor has the right and power to grant the security interest granted hereunder. The Grantor shall, at the Grantor's expense, perform all acts and execute all
documents necessary to maintain the existence of the Trade Mark as a registered trademark and to maintain the existence of all of the Collateral as valid and subsisting, including, without limitation,
the filing of any renewal affidavits and applications. The Grantor shall take all actions necessary to create and maintain the security interest granted hereunder as a valid and perfected security
interest, subject to no Encumbrances other than as permitted pursuant to Section&nbsp;4.1(m) of the RP Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;The
Grantor shall not assign, sell, mortgage, lease, transfer, pledge, hypothecate, grant a security interest in or lien upon, encumber, grant an exclusive or
nonexclusive license relating to the Collateral, or otherwise dispose of any of the Collateral, in each case without the prior written consent of DRC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;The
Grantor's chief executive office is located at 11570 6th Street, Rancho Cucamonga, California 91730. Except as listed on Schedule&nbsp;A hereto, the Grantor has
not maintained its chief executive office at any other location during the last five (5)&nbsp;years. The Grantor is organized solely in the State of California, and its (i)&nbsp;California
organizational identification number is C1779272 and (ii)&nbsp;federal tax identification number is 33-0702205. There is no financing statement or other document or instrument now signed
or on file in any public of1ice granting a security interest in or otherwise encumbering any part of the Collateral, except those showing DRC as secured party and those listed on Schedule&nbsp;A
hereto. So long as any Obligations remain outstanding, the Grantor will not execute, and there will not be on file in any public office, any such financing statement or other document or instruments,
except financing statements filed or to be filed in favor of DRC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;The
Grantor hereby authorizes DRC to authenticate in the name of the Grantor and file one or more financing statements (or similar documents) with respect to the
Collateral. The Grantor further authorizes DRC to have this Agreement or any other similar security agreement filed with the United States Patent and Trademark Office (the "USPTO") or any other
appropriate federal, state or government office. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;The
Grantor shall not do any act, nor omit to do any act, whereby the Intellectual Property (including the Trade Mark) may become abandoned, invalidated, unenforceable,
avoided, or avoidable, except for any such act or omission that, individually or in the aggregate, shall not </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

<HR NOSHADE>
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<UL>
<BR>

<P><FONT SIZE=2>have
resulted in, and could not reasonably be expected to result in, a material adverse effect on the Collateral. The Grantor shall notify DRC immediately if it knows or has reason to know of any
reason why any application, registration, or recording with respect to the Intellectual Property (including the Trade Mark) may become abandoned, canceled, invalidated, avoided or avoidable. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;The
Grantor shall render any assistance, as DRC shall determine is necessary or advisable, to DRC in any proceeding before the USPTO, any federal or state court, or any
similar office or agency in the United States, any State thereof or any political subdivision thereof, to maintain the application and registration of the Intellectual Property (including the Trade
Mark) as the Grantor's exclusive property and to protect DRC's interest therein, including, without limitation, filing of renewals, affidavits of use, affidavits of incontestability and opposition,
and cancellation proceedings. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;The
Grantor shall promptly notify DRC if the Grantor learns of any infringement of the Intellectual Property, including any use by any Person of any word, term or design
which infringes on the Trade Mark or is likely to cause confusion with the Trade Mark. If requested by DRC, the Grantor, at DRC's expense, shall (i)&nbsp;join with DRC in such action as DRC, in
DRC's discretion, may deem advisable for the protection of DRC's interest in and to such Intellectual Property and (ii)&nbsp;execute such documents or take such other actions as DRC may reasonably
request to perfect and protect DRC's security interest in such claim. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp;The
Grantor shall maintain the validity of the NDA, shall file all reports required in connection with the NDA, and shall comply with the requirements in or relating to
the NDA. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;&nbsp;&nbsp;The
Grantor shall promptly notify DRC, in writing, of any suit, action, proceeding, claim or counterclaim brought against the Grantor or against any other Person that
could reasonably be expected to affect adversely the Collateral, and shall, on request, deliver to DRC a copy of all pleadings, papers, orders or decrees theretofore and thereafter filed in any such
suit, action or proceeding, and shall keep DRC duly advised in writing of the progress of any such suit. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;&nbsp;&nbsp;&nbsp;To
the best knowledge and belief of the Grantor after due inquiry, no infringement or unauthorized use presently is being made of any Collateral. In the event of any
material infringement of the Collateral by others or in the event of any other conduct detrimental to the Collateral by others known or brought to the attention of the Grantor, the Grantor shall
promptly notify DRC in writing of such infringement or other conduct and the full nature, extent, evidence and facts of such infringement or other conduct known to the Grantor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;&nbsp;In
the event the Grantor files a patent application in respect of Cortrosyn with the USPTO (such patent application shall be included in the Collateral), then upon the
receipt of an official filing receipt indicating that a patent application included in the Collateral has been received by the USPTO and upon the issuance of any patent registration included in the
Collateral, the Grantor shall notify DRC promptly in writing, which notice shall identify such patent application or patent registration, and the Grantor shall execute all documents necessary or
reasonably requested by ORC to perfect a security interest in such patent application or such patent registration, and the Grantor shall annually, or more frequently as DRC shall request, cause an
instrument sufficient to perfect, protect or establish any Encumbrance hereunder to be recorded in the USPTO with respect to all United States patent applications filed by it or patents issued to it
during the prior calendar year. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;&nbsp;&nbsp;If
requested by ORC, the Grantor shall provide to DRC with a complete status report of all Collateral; provided that the Grantor shall not be required to provide such a
status report more frequently than once a year during the term of this Agreement, unless DRC, in its sole discretion, reasonably believes that a Material Adverse Financial Change has occurred or is
reasonably likely to occur or that the Collateral has been or is reasonably likely to be impaired or otherwise </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_kv1064_1_4"> </A>
<UL>
<BR>

<P><FONT SIZE=2>adversely
effected, in which case the Grantor shall provide DRC a complete status report of all Collateral at DRC's request (which request may be made more than annually). Upon request by DRC, the
Grantor shall deliver to counsel for DRC copies of any documents concerning or related to the prosecution, protection, maintenance, enforcement and issuance of the Collateral. All information
furnished to DRC concerning the Collateral and proceeds thereof is and will be accurate and correct in all material respects. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)&nbsp;&nbsp;&nbsp;The
Grantor agrees, upon the reasonable request by DRC, during the term of this Agreement: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;to
execute, acknowledge and deliver all additional instruments and documents necessary or desirable to effect the purposes and intents of this Agreement, in a form
reasonably acceptable to counsel for DRC; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;to
do all such other acts as may be necessary or appropriate to carry out the purposes and intents of this Agreement, and to create, evidence, perfect and continue the
security interests of DRC in the Collateral. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)&nbsp;&nbsp;&nbsp;The
Grantor shall notify DRC in writing at least sixty days prior to any proposed voluntary abandonment of any Intellectual Property and obtain the prior written consent
of DRC to such abandonment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)&nbsp;&nbsp;&nbsp;The
Grantor shall, concurrently with the execution and delivery of this Agreement, execute and deliver to DRC five (5)&nbsp;originals of a Special Power of Attorney in
the form of </FONT><FONT SIZE=2><I>Exhibit&nbsp;A </I></FONT><FONT SIZE=2>annexed hereto for the implementation of the sale or other disposition of the Collateral pursuant to DRC's exercise of the
rights and remedies granted to DRC hereunder; </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, </FONT><FONT SIZE=2><I>however, </I></FONT><FONT SIZE=2>DRC hereby agrees that it will not
exercise its rights under such Special Power of Attorney unless an Event of Default (defined below) has occurred and is continuing. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)&nbsp;&nbsp;&nbsp;If
at any time the Grantor acquires a Letter-of-Credit Right relating to the Accounts included in the Collateral, the Grantor shall
(i)&nbsp;promptly notify DRC thereof and (ii)&nbsp;take such actions as DRC may reasonably request to perfect DRC's security interest in such Letter-of-Credit Right. </FONT></P>

</UL>

<P><FONT SIZE=2><B>4.</B></FONT><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;INDEMNITY</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Grantor agrees to indemnify DRC from and against any and all claims, losses and liabilities arising out of or resulting from this Agreement (including, without limitation,
enforcement of this Agreement and any actions taken pursuant to Section&nbsp;6 or any failure to act thereunder). </FONT></P>


<P><FONT SIZE=2><B>5.</B></FONT><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;EVENTS OF DEFAULT</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
of the following constitutes an Event of Default (each an "Event of Default"): </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;forthwith
in the event of a failure by the Grantor to make any payment of the balance of the purchase price under Section&nbsp;4.1(b) or 4.1(c) of the Sale Agreement
or in the event of a breach of any of the covenants in Section&nbsp;4.1(m) of the RP Agreement; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;upon
ten (10)&nbsp;days written notice in the event of a failure to make any payment of the Royalty Interest to DRC when due under the RP Agreement if the Grantor
fails to cure such failure to pay within the ten (10)&nbsp;day period; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;upon
thirty (30)&nbsp;days written notice in the event of any material breach by the Grantor of any covenant in this Agreement, the RP Agreement, in any applicable
Closing Document, or in the Acquisition Agreements, as the case may be (other than the covenants described in Sections 5(a) and (b)&nbsp;herein), if the Grantor fails to cure the material breach
within the thirty (30)&nbsp;day period; </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;forthwith
upon notice in the event of a material breach by the Grantor of any representation and warranty provided for in this Agreement, the RP Agreement, or in any
applicable Closing Documents; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;in
the event of the entry of an order for relief with respect to the Grantor under the U.S. Bankruptcy Code, and rejection of any Acquisition Agreement by or on behalf
of the Grantor under Section&nbsp;365 of the U.S. Bankruptcy Code; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;forthwith
upon notice if the Grantor makes an assignment for the benefit of creditors or if a voluntary or involuntary petition in bankruptcy or insolvency shall be
filed by or against the Grantor or for any of the Collateral or any of its other material property or if a receiver, receiver and manager, liquidator, or trustee or person with similar powers is
appointed for the Grantor or if any proceeding, voluntary or involuntary, is commenced respecting the Grantor pursuant to any statute relating to bankruptcy, insolvency, reorganization of debts,
liquidation, winding-up or dissolution; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;the
Grantor passes any resolution for its liquidation, winding-up or dissolution or ceases to carryon its business; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;any
seizure, execution, sequestration, distress, attachment or other equivalent process is issued or levied against any of the Collateral or any other material property
of the Grantor; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;upon
the occurrence of an Event of Default under the terms and conditions of the Organon Security Agreement or under any security agreement encumbering all or any
portion of the Collateral. </FONT></P>

</UL>

<P><FONT SIZE=2><B>6.</B></FONT><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;RIGHTS AND REMEDIES UPON AN EVENT OF DEFAULT</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;If
any Event of Default shall have occurred and be continuing, then and in every such case, subject to any mandatory requirements of law, DRC, in addition to other
rights and remedies provided for herein and any rights now or hereafter existing under applicable law, shall have all rights and remedies as a secured creditor under the Uniform Commercial Code in all
relevant jurisdictions and may: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;personally,
or by agents or attorneys, immediately take possession of the Collateral or any part thereof, from the Grantor or any other Person who then has possession
of any part thereof, with or without notice or process of law, and for that purpose may enter upon the Grantor's premises where any of the Collateral is located and remove the same and use in
connection with such removal any and all services, supplies, aids and other facilities of the Grantor; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;sell,
assign or otherwise liquidate, or direct the Grantor to sell, assign or otherwise liquidate, any or all of the Collateral or any part thereof, and take possession
of the proceeds of any such sale or liquidation; </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Any
collateral repossessed by DRC under or pursuant to Section&nbsp;6(a) and any other Collateral whether or not so repossessed by DRC, may be sold, assigned, leased
or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time
or times, at such place or places and on such terms as DRC may, in compliance with any requirements of law, determine to be commercially reasonable. Any such disposition which shall be a private sale
or other private proceedings permitted by such requirements shall be made upon not less than 10&nbsp;days' written notice to the Grantor specifying the time at which such disposition is to be made
and the intended sale price or other consideration therefor, and shall be subject, for the 10&nbsp;days after the giving of such notice, to the right of the Grantor or any nominee of the Grantor to
acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified. Any such disposition which shall be a public
sale permitted by such requirements shall be made upon not less </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>than
10&nbsp;days' written notice to the Grantor specifying the time and place of such sale and, in the absence of applicable requirements of law, shall be by public auction (which may, at the
option of DRC, be subject to reserve), after publication of notice of such auction not less than 10&nbsp;days prior thereto in two newspapers of general circulation in the jurisdiction in which such
auction is to be held. To the extent permitted by any such requirements of law, DRC may bid for and become the purchaser of the Collateral or any item thereof, offered for sale in accordance with this
Section without accountability to the Grantor (except to the extent of surplus money received). It: under mandatory requirements of law, DRC shall be required to make disposition of the Collateral
within a period of time which does not permit the giving of notice to the Grantor as hereinabove specified, DRC need give the Grantor only such notice of disposition as shall be reasonably practicable
in view of such mandatory requirements of law. DRC shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. DRC may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Without
limiting DRC's rights pursuant to Section&nbsp;7(i), upon the occurrence and continuance of an Event of Default, DRC shall have the right at any time to make
any payments and do any other acts DRC may deem necessary to protect its security interests in the Collateral, including, without limitation, the rights to pay, purchase, contest or compromise any
Encumbrance which, in the reasonable judgment of DRC, appears to be prior to or superior to the security interests granted hereunder, and appear in and defend any action or proceeding purporting to
affect its security interests in, or the value of, the Collateral. The Grantor hereby agrees to reimburse DRC for all payments made and expenses incurred under this Agreement including reasonable
fees, expenses and disbursements of attorneys and paralegals acting for DRC, including any of the foregoing payments under, or acts taken to protect its security interests in, the Collateral,
including payment of the balance of the purchase price for the Product Rights and all other rights acquired under or pursuant to the Sale Agreement, which amounts shall be secured under this
Agreement, and agrees it shall be bound by any payment made or act taken by DRC hereunder absent DRC's gross negligence or willful misconduct. DRC shall have no obligation to make any of the foregoing
payments or perform any of the foregoing acts. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;The
Grantor hereby irrevocably authorizes and appoints DRC, or any Person or agent DRC may designate, as the Grantor's attorney-in-fact, with
full authority in the place and stead of the Grantor and in the name of the Grantor or otherwise, at the Grantor's cost and expense, in DRC's good faith business judgment, to take any action and to
execute any instrument that DRC may deem necessary or advisable to accomplish the purposes and intents of this Agreement and to exercise all of the following powers upon and at any time after the
occurrence and during the continuance of an Event of Default, which powers, being coupled with an interest, shall be irrevocable until all of the Obligations shall have been paid and satisfied in
full: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;ask
for, demand, collect, bring suit, recover, compromise, administer, accelerate or extend the time of payment, issue credits, compromise, receive and give acquittance
and receipts for moneys due and to become due under or in respect of any of the Collateral; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;receive,
take, endorse, negotiate, sign, assign and deliver and collect any checks, notes, drafts or other instruments, documents and chattel paper, in connection with
clause&nbsp;(i) above; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;receive,
open and dispose of all mail addressed to the Grantor in connection with clause&nbsp;(i) above, and notify postal authorities to change the address for
delivery thereof to such address as DRC may designate; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;give
customers indebted on the Collateral notice of DRC's interest therein, or to instruct such customers to make payment directly to DRC for the Grantor's account or
to request, at any time from customers indebted on the Collateral, verification of information concerning the Collateral and the amounts owing thereon; </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2><A
NAME="page_kw1064_1_7"> </A> </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;convey
any item of Collateral to any purchaser thereof; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)&nbsp;&nbsp;make
any payments or take any acts under Sections 6(c) and 7(i)&nbsp;hereof; and </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)&nbsp;&nbsp;file
any claims or take any action or institute any proceedings that DRC may reasonably deem necessary or desirable for the collection of any of the Collateral or
otherwise to enforce the rights of DRC with respect to any of the Collateral. </FONT></P>

</UL>

<P><FONT SIZE=2>DRC's
authority under this Section&nbsp;6(d) shall include, without limitation, the authority to execute and give receipt for any certificate of ownership or any document, transfer title to any item
of Collateral, sign the Grantor's name on all financing statements or any other documents deemed necessary or appropriate to preserve, protect or perfect the security interest in the Collateral and to
file the same, prepare, file and sign the Grantor's name on any notice of lien, assignment or satisfaction of lien or similar document in connection with any Collateral and prepare, file and sign the
Grantor's name on a proof of claim in bankruptcy or similar document against any customer of the Grantor, and to take any other actions arising from or incident to the rights, powers and remedies
granted to DRC in this Agreement. This power of attorney is coupled with an interest and is irrevocable by the Grantor until all of the Obligations shall have been paid and satisfied in full. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;All
cash proceeds received by DRC in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied by ORC against
the Obligations in such order as DRC may determine. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t)&nbsp;&nbsp;&nbsp;&nbsp;Upon
the occurrence and during the continuance of an Event of Default, all income, royalties, payments and damages under or in respect of the Collateral, if any,
received thereafter shall be held by the Grantor in trust for the benefit of DRC, separate from the Grantor's own property or funds and immediately turned over to DRC with proper assignments or
endorsements. Upon the occurrence and during the continuance of an Event of Default, DRC shall have the right to notify payors of income, royalties, payments and damages under or in respect of the
Collateral to make payment directly to DRC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;Each
and every right, power and remedy hereby specifically given to DRC shall be in addition to every other right, power and remedy specifically given under this
Agreement or now or hereafter existing at law or in equity, or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time
to time or simultaneously and as often and in such order as may be deemed expedient by DRC. All such rights, powers and remedies shall be cumulative and the exercise or the beginning of exercise of
one shall not be deemed a waiver of the right to exercise of any other or others. No delay or omission of DRC in the exercise of any such right, power or remedy and no renewal or extension of any of
the Obligations shall impair any such right, power or remedy or shall be construed to be a waiver of any Event of Default or any acquiescence therein. </FONT></P>

<P><FONT SIZE=2><B>7.</B></FONT><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;GENERAL PROVISIONS</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Notices.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;All notices, approvals, consents or other communications required or desired to be given hereunder
shall be in writing and sent by certified or registered mail, return receipt requested, by </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_kw1064_1_8"> </A>
<BR>

<P><FONT SIZE=2>overnight
delivery service, with all charges prepaid, or by telecopier followed by a hard copy sent by overnight mail: </FONT></P>

<UL>

<P><FONT SIZE=2>in
the case of a notice to the Grantor at: </FONT></P>

<P><FONT SIZE=2>Amphastar
Pharmaceuticals,&nbsp;Inc.<BR>
11570 6th Street<BR>
Rancho Cucamonga<BR>
California 91730 </FONT></P>

<P><FONT SIZE=2>Attention:
Chief Financial Officer<BR>
Fax No.: (909)&nbsp;980-6139<BR>
Email: DavidN@Amphastar.com </FONT></P>

<P><FONT SIZE=2>and
in the case of a notice to DRC at: </FONT></P>

<P><FONT SIZE=2>Drug
Royalty USA,&nbsp;Inc.<BR>
Bank of America Center<BR>
101 Convention Center Drive<BR>
Suite 850, P.O.&nbsp;Box 50401<BR>
Las Vegas, Nevada 89109 </FONT></P>

<P><FONT SIZE=2>Attention:
Behzad Khosrowshahi<BR>
Fax No.: (702)&nbsp;598-3651<BR>
Email: bk@drugroyalty.com </FONT></P>

<P><FONT SIZE=2>with
a copy to Fasken Martineau DuMoulin LLP at: </FONT></P>

<P><FONT SIZE=2>66
Wellington Street West<BR>
Suite 4200, Toronto Dominion Bank<BR>
Tower Box 20, Toronto-Dominion Centre<BR>
Toronto, Ontario<BR>
M5K lN6 </FONT></P>

<P><FONT SIZE=2>Attention:
Scott Conover<BR>
Fax No.: (416)&nbsp;364-7813<BR>
Email: sconover@tor.fasken.com </FONT></P>

</UL>

<P><FONT SIZE=2>All
such notices and correspondence shall be deemed given (i)&nbsp;if sent by certified or registered mail, three Business Days after being postmarked, (ii)&nbsp;if sent by overnight delivery
service, when received at the above stated addresses or when delivery is refused and (iii)&nbsp;if sent by telecopier transmission, when receipt of such transmission is acknowledged. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Headings.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The headings in this Agreement are for purposes of reference only and shall not affect the meaning
or construction of any provision of this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Severability.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The provisions of this Agreement are severable, and if any clause or provision shall be held
invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect, in that jurisdiction only, such clause or provision, or part thereof, and shall
not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Agreement in any jurisdiction. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Amendments&#151;Waivers and Consents.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any amendment or waiver of any provision of this Agreement and
any consent to any departure by the Grantor from any provision of this Agreement shall not be effective unless the same shall be in writing and signed by the Grantor and DRC and then such waiver or
consent shall be effective only in the specific instance and for the specific purpose for which given. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_kw1064_1_9"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Interpretation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Time is of the essence in each provision of this Agreement of which time is an element. All
terms not defined herein or in the RP Agreement shall have the meaning set forth in the Uniform Commercial Code, except where the context otherwise requires. To the extent a term or provision of this
Agreement conflicts with the Agreement and is not dealt with herein with more specificity, the Agreement shall control with respect to the subject matter of such term or provision. Acceptance of or
acquiescence in a course of performance rendered under this Agreement shall not be relevant in determining the meaning of this Agreement even though the accepting or acquiescing party had knowledge of
the nature of the performance and opportunity for objection. "Including" when used herein means "including without limitation" and shall not be construed to limit any general statement which it
follows to the specific or similar items or matters immediately following it. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Continuing Security Interest.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Agreement shall create a continuing security interest in the Collateral
and shall (i)&nbsp;remain in full force and effect until the payment in full in cash of the Obligations and the termination of the RP Agreement, (ii)&nbsp;be binding upon the Grantor and its
successors and assigns and (iii)&nbsp;inure, together with the rights and remedies of DRC, to DRC's successors, transferees and assigns. Without limiting the generality of the foregoing
clause&nbsp;(iii), DRC may, in accordance with the terms of the RP Agreement, assign or otherwise transfer all or any portion of its rights and obligations under the RP Agreement to any other
Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to DRC herein or otherwise, in each case as provided in the Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Reinstatement.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;To the extent permitted by law, this Agreement shall continue to be effective or be
reinstated if at any time any amount received by DRC in respect of the Obligations is rescinded or must otherwise be restored or returned by DRC because the Grantor is the subject of an Event of
Default, all as though such payments had not been made. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Survival of Provisions.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;All representations, warranties and covenants of the Grantor contained herein shall
survive the execution and delivery of this Agreement, and shall terminate only upon the full and final payment and performance by the Grantor of the Obligations secured hereby and termination of the
RP Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;DRC May Perform: Acquisition Agreements Cure Rights.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If the Grantor fails to perform any agreement contained
herein, or upon the occurrence of an Event of Default under the Acquisition Agreements, DRC may (but shall have no obligation to) itself perform, or cause performance of, such agreement, and the
expenses of ORC incurred in connection therewith and the full amount paid by ORC to Organon USA&nbsp;Inc. under Sections 4.1(b) and (c)&nbsp;of the Sale Agreement, if any, shall be payable by the
Grantor together with interest in accordance with the RP Agreement, and shall constitute Obligations secured by this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;No Duty on DRC.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The powers conferred on ORC hereunder are solely to protect the interest of ORC in the
Collateral and shall not impose any duty upon DRC to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for money actually received by it
hereunder, ORC shall have no duty as to any Collateral, as to ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters related to any
Collateral, whether or not ORC has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any Person or any other rights pertaining to
any Collateral. DRC shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if such Collateral is accorded treatment substantially equal
to that which ORC accords its own property. To the extent the Collateral is held by a custodian, ORC shall be deemed to have exercised reasonable care if it has selected the custodian with reasonable
care. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Delays: Partial Exercise of Remedies.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;No delay or omission of DRC to exercise any right or remedy hereunder,
whether before or after the occurrence of any Event of Default, shall impair any such right or shall operate as a waiver thereof or as a waiver of any such Event of Default. No single </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_kw1064_1_10"> </A>
<BR>

<P><FONT SIZE=2>or
partial exercise by DRC of any right or remedy shall preclude any other or further exercise thereof, or preclude any other right or remedy. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Release: Termination of Agreement.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Subject to the provisions of Section&nbsp;7(g) hereof, upon the payment
in full of the Obligations and the termination of the RP Agreement, this Agreement shall terminate and all rights in the Collateral shall revert to the Grantor. At such time, DRC shall, upon the
request of the Grantor and at the expense of DRC, (A)&nbsp;execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence such termination, (B)&nbsp;reassign
and redeliver to the Grantor all of the Collateral hereunder which has not been sold, disposed of, retained or applied by DRC in accordance with the terms hereof and (C)&nbsp;return to the Grantor
the originals of the Special Power of Attorney to the extent same are then in DRC's possession. Such reassignment and redelivery shall be without warranty by or recourse to DRC, except as to the
absence of any prior assignments by DRC of its interest in the Collateral. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Counterparts.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Agreement may be executed in one or more counterparts, each of which shall be deemed an
original but both of which shall together constitute one and the same agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Facsimile Execution.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;To evidence the fact that it has executed this Agreement, a party may send a copy of
its executed counterpart to the other party by facsimile transmission. That party shall be deemed to have executed this Agreement on the date it sent such facsimile transmission. In such event, such
party shall forthwith deliver to the other party the counterpart of this Agreement executed by such party. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;GOVERNING LAW.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS
OF THE STATE NEW YORK, WITHOUT GIVING EFFECT TO CONFLICT OF LAW PRINCIPLES. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;SUBMISSION TO JURISDICTION.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;ALL DISPUTES BETWEEN THE GRANTOR AND DRC, WHETHER SOUNDING IN CONTRACT, TORT,
EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY COURTS LOCATED IN THE STATE OF NEW YORK AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT DRC SHALL HAVE THE RIGHT, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE GRANTOR OR ITS PROPERTY IN ANY LOCATION REASONABLY SELECTED BY DRC IN GOOD FAITH TO ENABLE DRC TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE
A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF DRC. THE GRANTOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY DRC. THE GRANTOR WAIVES
ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH DRC HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON
CONVENIENS. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;JURY TRIAL.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;THE GRANTOR AND DRC EACH HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO A
TRIAL BY JURY. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>[THIS SPACE INTENTIONALLY LEFT BLANK]</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_kw1064_1_11"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, the parties hereto have executed this Agreement by causing this Agreement to be signed by their respective duly authorized officers on the date first above written. </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><B>AMPHASTAR PHARMACEUTICALS,&nbsp;INC.</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="4%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>DAVID W. NASSIF</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Name: David W. Nassif<BR>
Title: </FONT><FONT SIZE=2><I>Chief Financial Officer</I></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="4%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><BR>
Accepted and Agreed as of the date first above written:</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="4%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="43%"><BR><FONT SIZE=2><B>DRUG ROYALTY USA,&nbsp;INC.</B></FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="4%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Name:<BR>
Title:</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_kw1064_1_12"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>SCHEDULE A<BR>
LIST OF EXISTING SECURITY ON THE COLLATERAL  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Security Agreement dated February&nbsp;8, 2001 executed by Amphastar Pharmaceuticals,&nbsp;Inc. in favour of Cathay Bank, a California banking corporation. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_kw1064_1_13"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>SCHEDULE B<BR>
INTELLECTUAL PROPERTY  </B></FONT></P>

<P><FONT SIZE=2>Cortrosyn
United States Trade Mark Registration No.&nbsp;779366 </FONT></P>

<P><FONT SIZE=2>U.S.
NDA Number 16-750 </FONT></P>

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<TR VALIGN="TOP">
<TD WIDTH="19%"><FONT SIZE=2>Domain Names:</FONT></TD>
<TD WIDTH="81%"><FONT SIZE=2>cortrosyn.com<BR>
cortrosyn.us</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>13</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_kx1064_1_14"> </A> </FONT> <FONT SIZE=2><B>ANNEX 1<BR>
DEFINITIONS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT SIZE=2><B>Accounts</B></FONT><FONT SIZE=2>" shall have the meaning set forth in the UCC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Acquisition Agreements</B></FONT><FONT SIZE=2>" means collectively the asset sale agreement between Amphastar and Organon USA&nbsp;Inc. (the
"</FONT><FONT SIZE=2><B>Sale Agreement</B></FONT><FONT SIZE=2>"), the security agreement between Amphastar and Organon USA&nbsp;Inc., the toll manufacturing agreement between Amphastar and Organon
USA&nbsp;Inc. pertaining to Cortrosyn and the quality agreement between Amphastar and Organon USA&nbsp;Inc., each dated June&nbsp;26,2003, as such agreements may be amended, restated,
supplemented or otherwise modified from time to time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Active Pharmaceutical Ingredient</B></FONT><FONT SIZE=2>" or "</FONT><FONT SIZE=2><B>API</B></FONT><FONT SIZE=2>" means the drug substance cosyntropin and any
analog, derivative, improvement or variation of such active pharmaceutical ingredient. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Affiliate</B></FONT><FONT SIZE=2>" means a Person which, directly or indirectly, controls, is controlled by or is under common control with another. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Closing Document</B></FONT><FONT SIZE=2>" means any document, instrument, undertaking or agreement made or delivered pursuant to or in connection with the RP
Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Collateral</B></FONT><FONT SIZE=2>" has the meaning provided for in Section&nbsp;1 of this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Commercial Tort Claims</B></FONT><FONT SIZE=2>" shall have the meaning set forth in the UCC. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Cortrosyn</B></FONT><FONT SIZE=2>" means a pharmaceutical preparation containing the Active Pharmaceutical Ingredient, in all doses, for all indications and
diseases, whether approved by a Governmental Agency or not, using any delivery mechanism and including any improvement, variation, any minor chemical alteration, new generation or product line
extensions, and any product or combination of products with a chemical or biological formulation that contains the Active Pharmaceutical Ingredient, manufactured and/or sold by
or on behalf of Amphastar, its Affiliates, licensees, distributors or agents under the Trade Mark or any other name. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Encumbrance</B></FONT><FONT SIZE=2>" means any encumbrance of any kind whatsoever, actual or contingent, fixed or floating, including any security interest,
mortgage, lien, pledge, assignment, charge, trust or deemed trust (whether contractual, statutory or otherwise arising). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Event of Default</B></FONT><FONT SIZE=2>" has the meaning provided for in Section&nbsp;5 of this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>FDA</B></FONT><FONT SIZE=2>" means the U.S. Food and Drug Administration. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>General Intangibles</B></FONT><FONT SIZE=2>" shall have the meaning set forth in the UCC. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Governmental Agency</B></FONT><FONT SIZE=2>" means any domestic or foreign government whether federal, state, provincial or municipal and any governmental
agency, governmental authority, regulatory authority, governmental tribunal or governmental commission of any kind whatever including the FDA. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Intellectual Property</B></FONT><FONT SIZE=2>" means all of Amphastar's existing or hereafter acquired right, title and interest in the Territory in and to the
Patent Rights, Trade Marks, Trade Secrets, domain names and internet addresses, know-how and other intellectual property relating to, associated with, covering or embodying Cortrosyn or
the Active Pharmaceutical Ingredient. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Inventory</B></FONT><FONT SIZE=2>" shall have the meaning set forth in the UCC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Letter-of-Credit Right</B></FONT><FONT SIZE=2>" shall have the meaning set forth in the UCC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Material Adverse Financial Change</B></FONT><FONT SIZE=2>" means any change, event, occurrence or change in the state of facts that has or could be expected to
have a material adverse effect on the financial condition of Amphastar. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>14</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>NDA</B></FONT><FONT SIZE=2>" means the application (U.S. NDA Number 16-750) for Cortrosyn prepared pursuant to applicable FDA regulations and filed
by Organon USA&nbsp;Inc. with the FDA for authorization to market Cortrosyn within the United States, including all additions, supplements, extensions and modifications thereto made prior to or
during the Term as defined in and under the RP Agreement; and transferred by Organon USA&nbsp;Inc. to Amphastar pursuant to the Sale Agreement. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Obligations</B></FONT><FONT SIZE=2>" has the meaning provided for in Section&nbsp;2 of this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Patent Rights</B></FONT><FONT SIZE=2>" means all of Amphastar's existing or hereafter acquired right, title and interest in the Territory to the patents and
patent applications claiming, relating to or associated with Cortrosyn or the Active Pharmaceutical Ingredient and all improvements thereto made by Amphastar or its Affiliates, including all
divisions, continuations, partial continuations, extensions, substitutions, confirmations, registrations, revalidations, additions or reissues of or to any of the patents or patent applications. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Person</B></FONT><FONT SIZE=2>" includes an individual, body corporate, partnership, joint venture, co-operative, trust or unincorporated
organization, Governmental Agency or any agency or instrumentality thereof, or any other entity recognized by law. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Proceeds</B></FONT><FONT SIZE=2>" shall have the meaning set forth in the UCC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Product Rights</B></FONT><FONT SIZE=2>" means all of the rights to Cortrosyn acquired by Amphastar under the Acquisition Agreements including the NDA, copies of
all FDA files, regulatory files and formulae for Cortrosyn and the most recent master batch record for Cortrosyn. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Sales of Cortrosyn</B></FONT><FONT SIZE=2>" means (a)&nbsp;gross revenues from sales of Cortrosyn in the Territory by Grantor, its Affiliates, licensees,
distributors and agents to a purchaser (including, a wholesaler or group purchasing organization and any licensee under Bankruptcy Code Section&nbsp;365(n)(2)); and (b)&nbsp;all amounts recovered
by or paid to Grantor pursuant to a settlement, order or judgment in respect of any claim or legal proceeding relating to Cortrosyn or any of the Product Rights or Intellectual Property or any right
of Grantor to manufacture, market, sell or distribute Cortrosyn or the ownership or rights of Grantor to any of the Product Rights or Intellectual Property. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Supporting Obligations</B></FONT><FONT SIZE=2>" shall have the meaning set forth in the UCC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Territory</B></FONT><FONT SIZE=2>" means the United States of America and its respective territories and possessions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Trade Mark</B></FONT><FONT SIZE=2>" means the United States trade mark Cortrosyn&reg;, registration number 779366, any and all United States trade marks,
service marks or symbols, trade devices, certification marks, trade names and applications therefor in respect of, associated with or relating to Cortrosyn now or hereafter filed by or issued,
licensed or assigned to or under the control of or owned under common law by Amphastar or its Affiliates in the Territory and including all reissues, extensions, continuations, renewals, supplements
or amendments thereto. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Trade Secrets</B></FONT><FONT SIZE=2>" means all information, technical data, experimental procedure, scientific and medical information invented, developed,
controlled or acquired prior to or during the term of the RP Agreement by or on behalf of Amphastar or its Affiliates in the Territory relating to the development, manufacturing, distributing,
marketing, promoting, offering for sale or sale of Cortrosyn, the Active Pharmaceutical Ingredient or the Product Rights, including all information contained in health and marketing registration
applications filed by or on behalf of Amphastar or its Affiliates or Organon USA&nbsp;Inc. or its Affiliates relating to Cortrosyn, and all pre-clinical and clinical data, product forms,
specifications and manufacturing data relating to Cortrosyn, the Active Pharmaceutical Ingredient or the Product Rights, including all Technical Information (as such term is defined in the Sale
Agreement). </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>15</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>UCC</B></FONT><FONT SIZE=2>" shall mean the Uniform Commercial Code as in effect on the date hereof in the State of New York; provided, however, that if by
reason of mandatory provisions of law, any or all of the attachment, perfection or priority of DRC's security interest in any item or portion of the Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than the State of New York, the tern "UCC" shall mean the Uniform Commercial Code as in effect on the date hereof in such other jurisdiction for purposes of
the provisions hereof relating to such attachment, perfection or priority and for purposes of definitions relating to such provisions. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>16</FONT></P>

<HR NOSHADE>
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<P ALIGN="CENTER"><FONT SIZE=2><B>EXHIBIT A<BR>
TO<BR>
SECURITY AGREEMENT  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> SPECIAL POWER OF ATTORNEY  </B></FONT></P>

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<TABLE WIDTH="35%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>STATE OF CALIFORNIA</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="33%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="45%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>ss.:</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>COUNTY&nbsp;OF&nbsp;SAN&nbsp;BERNARDINO</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KNOW
ALL MEN BY THESE PRESENTS, that </FONT><FONT SIZE=2><B>AMPHASTAR PHARMACEUTICALS,&nbsp;INC.</B></FONT><FONT SIZE=2>, a California corporation
("</FONT><FONT SIZE=2><B>Grantor</B></FONT><FONT SIZE=2>"), hereby appoints and constitutes </FONT><FONT SIZE=2><B>DRUG ROYALTY USA,&nbsp;INC.</B></FONT><FONT SIZE=2>, a Nevada corporation
("</FONT><FONT SIZE=2><B>DRC</B></FONT><FONT SIZE=2>"), and each of its officers, its true and lawful attorney, with full power of substitution and with full power and authority to perform the
following acts on behalf of Grantor: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Execution
and delivery of any and all agreements, documents, instrument of assignment or other papers which DRC, in its discretion, deems necessary or advisable for the
purpose of assigning, selling, or otherwise disposing of all right, title, and interest of Grantor in and to the "Collateral" (as such term is defined in the Security Agreement referred to below) and
all registrations, recordings, reissues, extensions, and renewals thereof, or for the purpose of recording, registering and filing of, or accomplishing any other formality with respect to the
foregoing. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Execution
and delivery of any and all documents, statements, certificates or other papers which DRC, in its discretion, deems necessary or advisable to further the
purposes described in paragraph&nbsp;1 hereof. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Power of Attorney is made pursuant to a Security Agreement, dated of even date herewith, between Grantor and DRC (the "</FONT><FONT SIZE=2><B>Security
Agreement</B></FONT><FONT SIZE=2>") and is subject to the terms and provisions
thereof. This Power of Attorney, being coupled with an interest, is irrevocable until all "</FONT><FONT SIZE=2><B>Obligations</B></FONT><FONT SIZE=2>", as such term is defined in the Security
Agreement, are indefeasibly paid in full and the Security Agreement is terminated in writing by DRC. </FONT></P>

<P><FONT SIZE=2>Dated:
August&nbsp;6, 2003 </FONT></P>

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<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2><B>AMPHASTAR PHARMACEUTICALS,&nbsp;INC.</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="47%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>DAVID W. NASSIF</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Name: David W. Nassif<BR>
Title: </FONT><FONT SIZE=2><I>Chief Financial Officer</I></FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>17</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<TD COLSPAN=2><FONT SIZE=2>STATE OF CALIFORNIA</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="33%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="45%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>ss.:</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>COUNTY&nbsp;OF&nbsp;SAN&nbsp;BERNARDINO</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
this 20th day of August, 2003, before me personally came David W. Nassif, to me known, who being duly sworn, did depose and say, that he is the CEO of </FONT> <FONT SIZE=2><B>AMPHASTAR PHAMACEUTICALS,&nbsp;INC.</B></FONT><FONT SIZE=2>, the
corporation described in and which executed the foregoing instrument. </FONT></P>

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<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>DEAN L. COLLINS</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Notary Public</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="49%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2>DEAN L. COLLINS<BR>
Commission #1323982<BR>
Notary Public&#151;California<BR>
San Bernardino County<BR>
My Comm. Expires Nov 3, 2005<BR>
[SEAL]</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>18</FONT></P>

<HR NOSHADE>
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<BR>
<P><br><A NAME="05BHL1063_6">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ku1064_1">Exhibit 10.8</A></FONT><BR>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.9
<SEQUENCE>7
<FILENAME>a2151158zex-10_9.htm
<DESCRIPTION>EXHIBIT 10.9
<TEXT>
<HTML>
<HEAD>
</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<BR>
<FONT SIZE=3 ><A HREF="#05BHL1063_7">QuickLinks</A></FONT>
<font size=3> -- Click here to rapidly navigate through this document</font>
<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="page_la1064_1_1"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="la1064_exhibit_10.9"> </A>
<A NAME="toc_la1064_1"> </A>
<BR></FONT><FONT SIZE=2><B>Exhibit 10.9    <BR>    </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>SUBORDINATION AGREEMENT  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS SUBORDINATION AGREEMENT (hereafter, this "AGREEMENT") is made as of the date last set forth below, by and between ORGANON USA&nbsp;INC., a New Jersey
corporation ("SENIOR CREDITOR"), DRUG ROYALTY USA,&nbsp;INC., a Nevada corporation ("SUBORDINATING PARTY") and AMPHASTAR PHARMACEUTICALS,&nbsp;INC., a California corporation ("Amphastar"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows: </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Certain Definitions.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The following terms shall have the following meanings for the purposes of
this AGREEMENT: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Collateral.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The term "COLLATERAL" shall mean (i)&nbsp;all of Amphastar's now existing or
hereafter acquired right, title and interest in the TRADEMARK and the NDA; (ii)&nbsp;all income, fees, royalties and other payments at any time due or payable with respect thereto, including,
without limitation, payments under all licenses at any time entered into in connection therewith; (iii)&nbsp;all reissues, extensions, continuations, renewals, supplements or amendments to the
Trademark or the NDA; (iv)&nbsp;the right to sue for past, present and future infringements of the Trademark; and (v)&nbsp;all proceeds of any of the foregoing. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Collection Action.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The term "COLLECTION ACTION" shall mean any of the following actions by SUBORDINATING
PARTY: (i)&nbsp;ask, demand, sue for, take or receive from or on behalf of any of Amphastar, by set-off or in any other manner, the whole or any part of any monies which may now or
hereafter be owing by Amphastar to SUBORDINATING PARTY on the whole or any part of the SUBORDINATED OBLIGATIONS, (ii)&nbsp;initiate or participate with others in any suit, action or proceeding
against Amphastar to enforce payment of or to collect the whole or any part of
the SUBORDINATED OBLIGATIONS, (iii)&nbsp;ask, demand, take or receive any additional security for the whole or any part of the SUBORDINATED OBLIGATIONS, (iv)&nbsp;initiate or participate with
others in any action to realize upon the COLLATERAL or any of the assets of Amphastar, or (v)&nbsp;accelerate payment of the SUBORDINATED OBLIGATIONS. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;NDA.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The term "NDA" shall mean the New Drug Application, U.S. NDA No.&nbsp;16-750. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Proceeding.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The term "PROCEEDING" shall mean any voluntary or involuntary insolvency, bankruptcy,
receivership, custodianship, liquidation, dissolution, reorganization, assignment for the benefit of creditors, appointment of a custodian, receiver, trustee or other officer with similar powers or
any other proceeding for the liquidation, dissolution or other winding up of a person or entity. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Royalty Purchase Agreement.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The term "ROYALTY PURCHASE AGREEMENT" means the agreement between Amphastar and
SUBORDINATING PARTY dated August&nbsp;5, 2003 pursuant to which SUBORDINATING PARTY will acquire from Amphastar a royalty interest in all U.S. sales of Cortrosyn by Amphastar, its affiliates,
licensees, distributors and agents as more particularly described in the ROYALTY PURCHASE AGREEMENT for a purchase price of $8,000,000 and Amphastar has agreed to grant to DRC a Security Interest in
the Collateral and certain other now existing or hereafter acquired assets of Amphastar. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Security Interests.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The term "SECURITY INTERESTS" shall mean the security interests of the SENIOR CREDITOR
and SUBORDINATING PARTY in the COLLATERAL. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>1</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Senior Debt.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The term "SENIOR DEBT" shall mean the payment obligations of Amphastar to SENIOR CREDITOR
arising under Sections 4.1(b) and 4.1(c) of the Asset Sale Agreement between Amphastar and SENIOR CREDITOR dated June&nbsp;26, 2003, whether now existing or hereafter arising (including interest
occurring on or after the filing of any petition in bankruptcy or for reorganization relating to Amphastar, whether or not such post-petition interest is allowed as a claim in such
proceeding). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Subordinated Obligations.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The term "SUBORDINATED OBLIGATIONS" shall mean the obligations of Amphastar to
SUBORDINATING PARTY under the ROYALTY PURCHASE AGREEMENT and the security agreement between Amphastar and SUBORDINATING PARTY dated as of August&nbsp;5, 2003. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Trademark.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The term "TRADEMARK" shall mean the U. S. Trademark CORTROSYN, U. S. Trademark Registration
No.&nbsp;779366. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Priority of Liens and Security Interests.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;SUBORDINATING PARTY and SENIOR CREDITOR hereby agree
and declare that at all times, whether before, after or during the pendency of any PROCEEDING, and notwithstanding the priorities which would ordinarily result from the order of the granting of a
SECURITY INTEREST, or the order, sequence or date of the filing of any financing statements or obtaining of possession, and whether or not perfected or unavoidable, SENIOR CREDITOR'S SECURITY INTEREST
shall constitute and be a senior and superior security interest, pledge, assignment, lien and charge in and upon the COLLATERAL and prior in right to any interest of SUBORDINATING PARTY in the
COLLATERAL howsoever arising, and that the SUBORDINATING PARTY'S SECURITY INTEREST shall be subject and subordinate to the SENIOR CREDITOR'S SECURITY INTEREST. SENIOR CREDITOR and SUBORDINATING PARTY
hereby agree to take any reasonable actions necessary to cause the public records to reflect the respective priorities of their SECURITY INTERESTS. SUBORDINATING PARTY agrees to file financing
statements perfecting the SUBORDINATING PARTY'S SECURITY INTEREST after the filing of financing statements perfecting SENIOR CREDITOR'S security agreement. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Permitted Payments and Payment Blockage.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Except
as provided in Section&nbsp;3(b) and Section&nbsp;4 of this AGREEMENT, Amphastar may make all payments to the SUBORDINATING PARTY required under and in
accordance with the ROYALTY PURCHASE AGREEMENT and such payments shall not constitute an Event of Default of the SENIOR DEBT. SUBORDINATING PARTY has furnished a copy of the ROYALTY PURCHASE AGREEMENT
and the related security agreement to SENIOR CREDITOR. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;No
payment shall be made by or on behalf of Amphastar on account of the principal of, premium, if any, or interest on the SUBORDINATED OBLIGATIONS or to defease or
acquire any of the SUBORDINATED OBLIGATIONS for cash or property, or on account of the redemption provisions of the SUBORDINATED OBLIGATIONS or on account of any fees, indemnities, expenses and any
other obligation relating to the SUBORDINATED OBLIGATIONS, during the period of any default in the payment of any obligation on the SENIOR DEBT when due (a "DEFAULT") beginning on the date that the
SUBORDINATING PARTY receives written notice of such DEFAULT from SENIOR CREDITOR, and ending on the earlier of (i)&nbsp;the date that all SENIOR DEBT is indefeasibly paid in full in cash, or
(ii)&nbsp;the date on which such DEFAULT is cured. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Subordination Standby.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;SUBORDINATING
PARTY agrees that payment of the SUBORDINATED OBLIGATIONS is expressly subordinated to the prior payment in full in cash of all SENIOR DEBT. Except as
provided in Section&nbsp;3(a) and clause&nbsp;(b) of this Section&nbsp;4, the SUBORDINATING PARTY shall not accept any payment with respect to the SUBORDINATED OBLIGATIONS or take any COLLECTION
ACTION, unless and until the SENIOR DEBT shall have been indefeasibly paid in full in cash. If </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>SUBORDINATING
PARTY in violation of this AGREEMENT shall attempt any COLLECTION ACTION, SENIOR CREDITOR may interpose as a defense or plea the making of this AGREEMENT and may intervene and interpose
such defense or plea in its name or in the name of Amphastar and SENIOR CREDITOR may by virtue of this AGREEMENT restrain the enforcement thereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;So
long as no DEFAULT with respect to the SENIOR DEBT has occurred and is continuing, SUBORDINATING PARTY may take COLLECTION ACTION against Amphastar and realize upon
the SUBORDINATING PARTY'S SECURITY INTEREST, upon the occurrence of both of the following: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;any
event of default under the documents evidencing the SUBORDINATED OBLIGATIONS that is not cured by Amphastar within the period, if any, provided in such documents;
and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;SENIOR
CREDITOR shall not have commenced any action to realize upon its SECURITY INTEREST in the COLLATERAL. Upon the request of SENIOR CREDITOR, SUBORDINATING PARTY
shall immediately cease any such COLLECTION ACTION then being pursued by SUBORDINATING PARTY if SENIOR CREDITOR at any time elects, in its sole discretion, after a Default on the SENIOR DEBT has
occurred and is continuing, to commence any COLLECTION ACTION. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;5.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Priority on Distribution.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In the event of any distribution, division or application, partial
or complete, voluntary or involuntary, by operation of law or otherwise, of all or a substantial part of the assets of any of Amphastar, or the proceeds of the COLLATERAL, or of any readjustment of
the obligations and indebtedness of Amphastar or of the sale of the COLLATERAL, then, and in any such event, all SENIOR DEBT shall be paid in full in cash before any payment or distribution is made in
respect of SUBORDINATED OBLIGATIONS. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Payments or Distributions Received by SUBORDINATING PARTY.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Should any payment or distribution
which is not permitted by this AGREEMENT be received by SUBORDINATING PARTY upon or with respect to SUBORDINATED OBLIGATIONS prior to the satisfaction of all SENIOR DEBT, SUBORDINATING PARTY shall
receive and hold the same in trust as trustee, for the benefit of SENIOR CREDITOR and shall forthwith deliver the same to SENIOR CREDITOR in precisely the same form received (except for the
endorsement or assignment of SUBORDINATING PARTY
where necessary) for application to the SENIOR DEBT, due or not due, and until so delivered, the same shall be held in trust by SUBORDINATING PARTY as the property of SENIOR CREDITOR. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Proceedings.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;SUBORDINATING PARTY may not commence or join with any other creditor in
commencing any PROCEEDING with respect to Amphastar unless the SENIOR DEBT has been indefeasibly paid in full in cash. In the event that the SENIOR DEBT has not been indefeasibly paid in full in cash,
and any PROCEEDING is instituted by or against Amphastar or against any property of Amphastar or any in any state or Federal court, then: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;all
SENIOR DEBT shall be indefeasibly paid in full in cash before any payment or distribution of any character, whether in cash, securities or other property, shall be
made on account of the SUBORDINATED OBLIGATIONS arising from the Collateral; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;any
payment or distribution of any character, whether in cash, securities or other property, which would otherwise (but for the terms hereof) be payable or deliverable
on account of the SUBORDINATED OBLIGATIONS arising from the Collateral shall be paid or delivered directly to SENIOR CREDITOR until all of the SENIOR DEBT shall have been indefeasibly paid in full in
cash, and SUBORDINATING P ARTY hereby irrevocably authorizes, empowers and </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<UL>
<BR>

<P><FONT SIZE=2>directs
all receivers, trustees, liquidators, conservators and others having authority to effect all such payments and deliveries; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;nothing
in this Section&nbsp;7 shall limit, alter or affect the SUBORDINATING PARTY'S entitlement to payments or distributions on SUBORDINATED OBLIGATIONS under any
PROCEEDING to the extent such payments or distributions arise from assets or property of Amphastar other than the Collateral. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SUBORDINATING
PARTY irrevocably authorizes, empowers and directs SENIOR CREDITOR to demand, sue for, collect and receive every payment or distribution described in clause&nbsp;(b) of
this Section&nbsp;7, and SUBORDINATING PARTY agrees to execute and deliver to SENIOR CREDITOR or its representative all such further instruments confirming such authorization, empowerment and
direction. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;8.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Disposition of Assets of Amphastar.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;No right of SENIOR CREDITOR to enforce the subordination
provisions contained in this AGREEMENT shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of SENIOR CREDITOR in connection with sale of the COLLATERAL or
otherwise. SENIOR CREDITOR may use such means of collection and
exercise such diligence and remedies with respect to the SENIOR DEBT and the COLLATERAL as SENIOR CREDITOR, in its sole and absolute discretion, deems appropriate under the circumstances. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;9.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Release of Liens by SUBORDINATING PARTY.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;SUBORDINATING PARTY agrees that in the event of any
sale or other disposition of any of the assets of Amphastar constituting Collateral by SENIOR CREDITOR, (a)&nbsp;SUBORDINATING PARTY shall not have any right to object to the sale or other
disposition of such assets or withhold or delay its consent, if such consent is reasonably required for the sale or other disposition of such assets; and (b)&nbsp;upon the request of SENIOR
CREDITOR, SUBORDINATING PARTY shall provide all necessary releases of security interests, assignments, pledges and liens held by SUBORDINATING PARTY necessary to accomplish such sale or other
disposition free and clear of all security interests, assignments, pledges and liens of SUBORDINATING PARTY, all without any consideration or payment to SUBORDINATING PARTY, unless the proceeds from
such sale are applied to indefeasibly pay the SENIOR DEBT in full, in which event any proceeds in excess of the amount used to pay the SENIOR DEBT in full shall be paid to SUBORDINATING PARTY. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;SUBORDINATING PARTY.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;In
the event that Amphastar defaults on its obligation to make the payments under Sections 4.1 (b)&nbsp;or 4.1 (c)&nbsp;of the Asset Sale Agreement, referred to in
Section&nbsp;1 (g)&nbsp;of this AGREEMENT, the SUBORDINATING PARTY shall have the right and opportunity (but not the obligation) to cure such breach within ten (10)&nbsp;days of the
SUBORDINATING PARTY receiving written notice from SENIOR CREDITOR of Amphastar's breach. In the event that SUBORDINATING PARTY cures such a breach within ten (10)&nbsp;days of receiving written
notice from SENIOR CREDITOR of Amphastar's breach, SENIOR CREDITOR agrees that such a breach by Amphastar will not constitute an Event of Default (as such term is defined in the SENIOR CREDITOR
Security Agreement dated June&nbsp;26, 2003 between SENIOR CREDITOR and Amphastar pertaining to the SENIOR DEBT). SENIOR CREDITOR agrees not to exercise any of its rights and remedies (including
commencing any collection action or proceeding) until such time as it has given written notice to SUBORDINATING PARTY of default by Amphastar in making the required payment of SENIOR DEBT when due and
SUBORDINATING PARTY has failed to remedy such default within the ten-day cure period. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Forthwith
upon payment in full, by either Amphastar or SUBORDINATING PARTY, to SENIOR CREDITOR of the SENIOR DEBT, SENIOR CREDITOR agrees to release and discharge all of
its Security Interests held by SENIOR CREDITOR relating to the SENIOR DEBT and shall </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>

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<BR>

<P><FONT SIZE=2>ensure
that all registrations and filings necessary or desirable to affect or record the release and discharge are made including a UCC-3 termination statement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;In
the event of payment in full by SUBORDINATING PARTY to SENIOR CREDITOR of the SENIOR DEBT, SENIOR CREDITOR agrees that it shall continue to perform its obligations in
accordance with the terms and conditions of the Toll Agreement and the Quality Agreement, both between SENIOR CREDITOR and Amphastar and dated June&nbsp;26, 2003. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;11.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Default.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;SUBORDINATING PARTY and SENIOR CREDITOR shall each provide to the other a copy of
any notice of the occurrence of any default or event of default by Amphastar with respect to the SUBORDINATED OBLIGATIONS or the SENIOR DEBT, respectively, at the time any such notice is delivered to
Amphastar. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;12.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Instrument Legend.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any document evidencing SUBORDINATED OBLIGATIONS and any renewals or
replacements thereof shall be inscribed with a legend, satisfactory to SENIOR CREDITOR, conspicuously indicating that payment thereof is subordinated to the claims of SENIOR CREDITOR pursuant to the
terms of this AGREEMENT. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;13.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Subrogation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;After all of the SENIOR DEBT has been indefeasibly paid in full in cash and
until the SUBORDINATED OBLIGATIONS has been paid in full, SUBORDINATING PARTY shall be subrogated to the rights of SENIOR CREDITOR to receive distributions with respect to the SENIOR DEBT, to the
extent that distributions otherwise payable to the SUBORDINATING PARTY have been applied to the payment of the SENIOR DEBT in accordance with the provisions of this AGREEMENT. As between Amphastar and
SUBORDINATING PARTY, a distribution applied to the payment of the SENIOR DEBT in accordance with the provisions of this AGREEMENT which otherwise would have been made to SUBORDINATING PARTY shall not
be deemed a payment by Amphastar on the SUBORDINATED OBLIGATIONS, it being understood that the subordination provisions of this AGREEMENT are intended solely for the purpose of defining the relative
rights of the SENIOR CREDITOR, on the one hand, and the SUBORDINATING PARTY, on the other hand, and nothing contained in this AGREEMENT shall impair the obligations of Amphastar, which are absolute
and unconditional, to pay to SUBORDINATING PARTY the SUBORDINATED OBLIGATIONS as and when the same shall become due and payable in accordance with its terms, except as such obligation is modified by
the rights confirmed hereunder in favor of the SENIOR CREDITOR, or affect the relative rights of SUBORDINATING PARTY and the creditors of Amphastar other than SENIOR CREDITOR. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;14.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Assignment of SUBORDINATED OBLIGATIONS.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;SUBORDINATING PARTY agrees that, until the SENIOR
DEBT has been indefeasibly paid in full in cash, it will not assign, transfer, recast, permit a refinancing of, or grant a participating interest in, all or any portion of the SUBORDINATED
OBLIGATIONS, other than by way of security to the SUBORDINATING PARTY'S secured creditors pursuant to an agreement between Canadian Imperial Bank of Commerce, Drug Royalty Corporation&nbsp;Inc. and
Drug Royalty USA,&nbsp;Inc. dated January&nbsp;29, 2003 without the prior written consent of SENIOR CREDITOR not to be unreasonably withheld. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;15.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Term.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This AGREEMENT shall constitute a continuing agreement between SUBORDINATING PARTY and
SENIOR CREDITOR for the benefit of SENIOR CREDITOR, and
shall remain in full force and effect until all of the SENIOR DEBT shall have been indefeasibly paid in full in cash. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;16.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Notices.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any notice, demand or other communication required or permitted under the terms of
this AGREEMENT shall be in writing with return receipt or other acknowledgment requested, and shall be made by facsimile, Federal Express or other similar overnight delivery service </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>or
certified or registered mail, return receipt requested, and shall be effective upon receipt. Notices shall be addressed as provided below: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;If
to SENIOR CREDITOR: </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>375
Mt. Pleasant Avenue<BR>
West Orange, NJ 07052<BR>
Attn: Michael Novinski, President </FONT></P>

<P><FONT SIZE=2>With
a copy addressed to:<BR>
Patrick J. Osinski, Vice President and General Counsel </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;If
to SUBORDINATING PARTY: </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Bank
of America Center<BR>
101 Convention Center Drive<BR>
Suite 850, P.O.&nbsp;Box 50401<BR>
Las Vegas, Nevada 89109<BR>
Attn: President<BR>
Fax No.: (702)&nbsp;598-3651 </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;If
to Amphastar: </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>11570
Sixth Street<BR>
Rancho Cucamonga, California 91730<BR>
Attn: Chief Financial Officer<BR>
Fax No.: (909)&nbsp;980-6139 </FONT></P>

</UL>
</UL>
</UL>

<P><FONT SIZE=2>or
at such other address as any party may designate by notice to the other parties in accordance with the provisions hereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;17.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Governing Law.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This AGREEMENT shall be interpreted, and the rights and liabilities of the
parties hereto determined, in accordance with the laws of New Jersey, without regard to its principles of conflicts of law. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;18.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Parties.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This AGREEMENT shall be binding upon, and inure to the benefit of, SUBORDINATING
PARTY, SENIOR CREDITOR and their respective successors and assigns. SENIOR CREDITOR will not assign the documents pertaining to the SENIOR DEBT without the assignee agreeing in writing in favor of the
SUBORDINATING PARTY to be bound by this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;19.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Entire Agreement.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This AGREEMENT constitutes and expresses the entire understanding between
the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, whether express or implied, oral or
written with respect to the subject matter hereof. Neither this AGREEMENT nor any portion or provision hereof may be changed, waived or amended orally or in any manner other than by an agreement in
writing signed by the parties. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;20.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Additional Documentation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Each party shall execute and deliver to the other such further
instruments and shall take such further action as the other party may at any time or times reasonably request in order to carry out the provisions and intent of this AGREEMENT. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;21.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Severability.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The provisions of this AGREEMENT are independent of and separable from each
other. If any provision hereof shall for any reason be held invalid or unenforceable, it is the intent of the parties that such invalidity or unenforceability shall not affect the validity or
enforceability of any other provision hereof, and that this AGREEMENT shall be construed as if such invalid or unenforceable provision had never been contained herein. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;22.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Counterparts.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This AGREEMENT may be executed in as many counterpart copies as may be
required. It shall not be necessary that the signature of, or on behalf of, each party appear on each counterpart, but it shall be sufficient that the signature of, or on behalf of, each party appear
on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. Facsimile signatures shall be effective as originals. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, this AGREEMENT has been duly executed by the parties hereto as of the 5th day of August, 2003. </FONT></P>

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<TD COLSPAN=3><FONT SIZE=2><BR>
ORGANON USA,&nbsp;INC.</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="40%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="40%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>H. COSTERMANS</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="40%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>P.J. OSINSKI</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2>Name:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="40%"><FONT SIZE=2>H. Costermans;</FONT><HR NOSHADE></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="40%"><FONT SIZE=2>P.J. Osinski</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2>Its:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="40%"><FONT SIZE=2>Vice President;</FONT><HR NOSHADE></TD>
<TD WIDTH="7%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="40%"><FONT SIZE=2>Vice President</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=3 VALIGN="TOP"><FONT SIZE=2><BR>
AMPHASTAR PHARMACEUTICALS,&nbsp;INC.</FONT></TD>
<TD WIDTH="7%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="40%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="40%" ALIGN="CENTER"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>DAVID W. NASSIF</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> David W. Nassif<BR>
Chief Financial Officer</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="40%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
DRUG ROYALTY USA,&nbsp;INC.</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="40%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="40%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>BEHZAD KHOSROWSHAHI</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Behzad Khosrowshahi<BR>
President&nbsp;&amp; CEO</FONT></TD>
<TD WIDTH="7%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="40%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><B>ROYALTY PURCHASE AGREEMENT  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> BETWEEN  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> AMPHASTAR PHARMACEUTICALS,&nbsp;INC.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> and  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> DRUG ROYALTY USA,&nbsp;INC.  </B></FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=9,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="7",CHK=1048393,FOLIO='blank',FILE='DISK046:[05BHL4.05BHL1064]LB1064A.;16',USER='RFARRIN',CD='10-FEB-2005;04:01' -->
<A NAME="page_lb1064_1_1"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><B>TABLE OF CONTENTS  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="12%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="78%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Page</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><B>ARTICLE&nbsp;1</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2><B>INTERPRETATION</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><B>1</B></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Definitions</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Headings</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1.3</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Number and Gender</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Entire Agreement</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Applicable Law and Attornment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Currency</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1.7</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Schedules</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>1.8</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Interpretation</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><BR><FONT SIZE=2><B>ARTICLE&nbsp;2</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2><B><BR>
INVESTMENT AND ROYALTY INTEREST</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><B><BR>
2</B></FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>DRC Investment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Payment of Royalty Interest.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2.3</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Term</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>2.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Additional DRC Default Rights</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>3</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><BR><FONT SIZE=2><B>ARTICLE&nbsp;3</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2><B><BR>
REPRESENTATIONS AND WARRANTIES</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><B><BR>
4</B></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Representations and Warranties of Amphastar</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>3.1.1 Corporate Matters</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>4</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>3.1.2 The Financial Statements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>3.1.3 Undisclosed Liabilities</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>3.1.4 Absence of Changes</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>3.1.5 Material Contracts</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>3.1.6 Absence of Conflicting Agreements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>3.1.7 Consents and Approvals</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>3.1.8 Compliance with Applicable Law</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>3.1.9 Litigation</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>3.1.10 Purchased Assets</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>7</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>3.1.11 Royalty Interest</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>3.1.12 No Options</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>3.1.13 Marketing</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>3.1.14 Intellectual Property</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>3.1.15 Supply and Manufacture of API</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>3.1.16 Disclosure</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Representations and Warranties of DRC</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>3.2.1 Corporate Matters</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>3.2.2 Absence of Conflicting Agreements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>3.2.3 Consents, Approvals, Etc</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3.3</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Commission</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Non-Waiver</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Survival of Representations and Warranties</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>3.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Meaning of Knowledge Qualification</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>10</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><BR><FONT SIZE=2><B>ARTICLE&nbsp;4</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2><B><BR>
COVENANTS</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><B><BR>
11</B></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>4.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Covenants During the Term</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>11</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><BR><FONT SIZE=2><B>ARTICLE&nbsp;5</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2><B><BR>
CLOSING</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><B><BR>
14</B></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Closing</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>14</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Deliveries by DRC</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>14</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<BR>
<P ALIGN="CENTER"><FONT SIZE=2>i</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_lb1064_1_2"> </A>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5.3</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Deliveries by Amphastar</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>15</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>DRC's Conditions</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>15</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Amphastar's Conditions</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>16</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Waiver</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>16</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>5.7</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Failure to Satisfy Conditions</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>16</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><BR><FONT SIZE=2><B>ARTICLE&nbsp;6</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2><B><BR>
INDEMNIFICATION</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><B><BR>
16</B></FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>6.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Mutual Indemnifications for Breaches of Warranty, etc</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>16</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>6.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Third Party Claims</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>17</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>6.3</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Agency for Representatives</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>17</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><BR><FONT SIZE=2><B>ARTICLE&nbsp;7</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2><B><BR>
GENERAL</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><B><BR>
17</B></FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.1</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Amendment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>17</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.2</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Remedies Cumulative and Waivers</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>18</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.3</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Performance on Holidays</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>18</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.4</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Financial Reporting Standards</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>18</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.5</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Expenses</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>18</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.6</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Time</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>18</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.7</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Notices</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>18</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.8</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Assignment</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>19</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.9</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Further Assurances</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>19</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.10</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Independent Parties</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>20</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.11</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Public Announcements</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>20</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.12</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Severability</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>20</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.13</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Specific Performance</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>20</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.14</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Third Party Beneficiary</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>20</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.15</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Counterparts</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>20</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.16</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Facsimile Execution</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>20</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.17</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Confidentiality</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>21</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.18</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Waiver of Jury</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>21</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>7.19</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="78%"><FONT SIZE=2>Service of Process</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>21</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>ii</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P><FONT SIZE=2><A
NAME="page_lc1064_1_1"> </A> </FONT> <FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><B>THIS AGREEMENT</B></FONT><FONT SIZE=2> is made and entered into as of the 5th day of August, 2003 by and between </FONT><FONT SIZE=2><B>AMPHASTAR
PHARMACEUTICALS,&nbsp;INC.</B></FONT><FONT SIZE=2>, a subsisting California corporation ("</FONT><FONT SIZE=2><B>Amphastar</B></FONT><FONT SIZE=2>"), and</FONT><FONT SIZE=2><B>DRUG ROYALTY
USA,&nbsp;INC.</B></FONT><FONT SIZE=2>, a subsisting Nevada corporation ("</FONT><FONT SIZE=2><B>DRC</B></FONT><FONT SIZE=2>"). </FONT></P>

<P><FONT SIZE=2>RECITALS: </FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>A.</FONT></DT><DD><FONT SIZE=2>Amphastar
is a pharmaceutical company that is in the business of discovering, developing, manufacturing, marketing, distributing and selling generic and specialty pharmaceutical
products.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>B.</FONT></DT><DD><FONT SIZE=2>Pursuant
to an asset sale agreement (the "</FONT><FONT SIZE=2><B>Sale Agreement</B></FONT><FONT SIZE=2>") dated June&nbsp;26, 2003 between Amphastar and Organon USA&nbsp;Inc.
("</FONT><FONT SIZE=2><B>Organon</B></FONT><FONT SIZE=2>") Amphastar acquired from Organon the Purchased Rights (as such term is defined therein) (the
"</FONT><FONT SIZE=2><B>Acquisition</B></FONT><FONT SIZE=2>").
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>C.</FONT></DT><DD><FONT SIZE=2>DRC
has agreed to provide funds to Amphastar in return for a royalty interest in the Net Sales of Cortrosyn, all on the terms and conditions provided in this Agreement. </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>NOW, THEREFORE</B></FONT><FONT SIZE=2>, in consideration of the premises, the mutual covenants in this Agreement and of other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the Parties agree as follows: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 1<BR>
INTERPRETATION  </B></FONT></P>

<P><FONT SIZE=2><B>1.1</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Definitions</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
defined terms denoted by a capital letter have the meanings ascribed to them as set forth in Schedule&nbsp;A hereto. </FONT></P>

<P><FONT SIZE=2><B>1.2</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Headings</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
division of this Agreement into Articles, Sections, Subsections and Schedules and the insertion of headings are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement. The Article, Section, Subsection and Schedule headings in this Agreement are not intended to be full or precise descriptions of the text to which they
refer and are not to be considered part of this Agreement. </FONT></P>

<P><FONT SIZE=2><B>1.3</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Number and Gender</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
this Agreement, words in the singular include the plural and vice-versa and words in one gender include all genders. </FONT></P>

<P><FONT SIZE=2><B>1.4</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Entire Agreement</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement, together with the Closing Documents, constitute the entire agreement between the Parties pertaining to the subject matter hereof and supersede all prior agreements,
negotiations, discussions and understandings, written or oral including the Confidentiality Agreement. There are no representations, warranties, conditions, other agreements or acknowledgements,
whether direct or collateral, or express or implied, that form part of or affect this Agreement, or which induce any Party to enter into this Agreement or on which reliance is placed by any Party,
except as specifically set forth in this Agreement or in the Closing Documents. </FONT></P>

<P><FONT SIZE=2><B>1.5</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Applicable Law and Attornment</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
validity, interpretation and enforcement of this Agreement shall be governed by the laws of the State of New York without giving effect to conflict of law principles. The Parties
irrevocably attorn and submit to the non-exclusive jurisdiction of the courts of the State of New York with respect to any matter arising hereunder or related hereto. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>1</FONT></P>

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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Party irrevocably waives: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;any
objection which it may have at any time to the laying of venue of any litigation arising out of or relating to this Agreement brought in any court of the State of
New York; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;any
claim that any such litigation brought in any court of the State of New York has been brought in an inconvenient forum; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;the
right to object, with respect to such litigation brought in any court of the State of New York, that such court does not have jurisdiction over such Party. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Party agrees that a final judgment in any litigation commenced in any court of the State of New York shall be conclusive and may be enforced in any other jurisdiction by suit on the
judgment or in any other manner provided by law. </FONT></P>

<P><FONT SIZE=2><B>1.6</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Currency</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless
specified otherwise, all statements of or references to monetary amounts in this Agreement are to US Dollars. </FONT></P>


<P><FONT SIZE=2><B>1.7</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Schedules</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following Schedules form part of this Agreement: </FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="13%" ALIGN="LEFT"><FONT SIZE=1><B>Schedule<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="84%" ALIGN="LEFT"><FONT SIZE=1><B>Description of Schedule<BR> </B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="13%" ALIGN="RIGHT"><BR><FONT SIZE=2>A</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2><BR>
Definitions</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>B</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Intellectual Property</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>C</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Representations and Warranties&#151;Disclosure</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>D</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="84%"><FONT SIZE=2>Form of Security Agreement</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2><B>1.8</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Interpretation</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither
Party shall be or be deemed to be the drafter of this Agreement for the purposes of construing this Agreement against one Part or the other. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 2<BR>
INVESTMENT AND ROYALTY INTEREST  </B></FONT></P>

<P><FONT SIZE=2><B>2.1</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>DRC Investment</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to the provisions of this Agreement and to Closing, Amphastar agrees to pay to DRC the Royalty Interest in accordance with the terms hereof and such other amounts as provided
herein in consideration of the payment of $8&nbsp;million by DRC to Amphastar on Closing (the "</FONT><FONT SIZE=2><B>Invested Amount</B></FONT><FONT SIZE=2>"). </FONT></P>

<P><FONT SIZE=2><B>2.2</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Payment of Royalty Interest</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Subject
to Section&nbsp;2.2(g) and Section&nbsp;2.4, in consideration of the Invested Amount, Amphastar shall pay to DRC a royalty of: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;23%
of Net Sales of Cortrosyn up to and including $2.5&nbsp;million per Quarter; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;3%
of Net Sales of Cortrosyn in excess of $2.5&nbsp;million but not more than $5&nbsp;million per Quarter; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;1%
of Net Sales of Cortrosyn in excess of $5&nbsp;million but not more than $7.5&nbsp;million per Quarter, </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

<HR NOSHADE>
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<UL>
<BR>
<UL>

<P><FONT SIZE=2>(collectively,
the "</FONT><FONT SIZE=2><B>Royalty Interest</B></FONT><FONT SIZE=2>"). Subject to Section&nbsp;2.2(g) and Section&nbsp;2.4, for avoidance of doubt, no royalty shall be paid to DRC
in respect of any Net Sales of Cortrosyn in excess of $7.5&nbsp;million per Quarter. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Calculation
and payment of the Royalty Interest shall be based on all Net Sales of Cortrosyn commencing the first Business Day after the Closing Date to and including
the last day of the Term. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Amphastar
shall pay the Royalty Interest to DRC within 30&nbsp;days of the end of each Quarter during the Term based on the Net Sales of Cortrosyn in the immediately
preceding Quarter. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;Any
payment of the Royalty Interest shall, if overdue, bear interest from the due date at a per annum rate of five percent (5%) above the Prime Rate in effect on the due
date until the Royalty Interest and such interest is paid in full. The payment of such interest shall not foreclose DRC from exercising any other rights it may have as a consequence of the lateness of
any payment of the Royalty Interest. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;Amphastar
agrees to pay the Royalty Interest to DRC without set-off, counterclaim, withholding or deduction. For avoidance of doubt, this clause shall not be
construed to alter the deductions permitted in connection with the sales of Cortrosyn as set forth in the definition of Net Sales of Cortrosyn. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;Amphastar
agrees that the Royalty Interest shall be paid to DRC throughout the Term until and unless DRC otherwise directs in writing. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;In
the event that Amphastar receives orders for Cortrosyn from its customers during a period of time for which Amphastar has insufficient inventory of Cortrosyn to meet
all of its outstanding orders (the "</FONT><FONT SIZE=2><B>Backorders</B></FONT><FONT SIZE=2>"), any Backorders that are subsequently filled by the sale of Cortrosyn shall be credited to Net Sales of
Cortrosyn in the Quarter in which the inventory shortage giving rise to such Backorders commenced up to the maximum dollar entitlement of Royalty Interest under Sections 2.2(a)(i),
2.2(a)(ii)&nbsp;and 2.2(a)(iii)&nbsp;in respect of that Quarter. The royalty in respect of such Backorders for such Quarter shall be included in the calculation of the Royalty Interest and shall
be paid by Amphastar to DRC in accordance with this Section&nbsp;2.2. If the Royalty Interest for such Quarter has been previously calculated and paid by Amphastar to DRC, the Royalty Interest shall
be recalculated to take into account the filled Backorders and Amphastar shall pay to DRC the amount of the Royalty Interest for such Quarter less any amount previously paid in respect of such
Quarter. Schedule&nbsp;B sets forth an illustration of the calculation of the Royalty Interest under this Section&nbsp;2.2(g). </FONT></P>

<P><FONT SIZE=2><B>2.3</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Term</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Subject
to Section&nbsp;2.3(b), the term of this Agreement shall commence on the Closing Date and continue for a period of 5&nbsp;years ending on August&nbsp;4,
2008 (the "</FONT><FONT SIZE=2><B>Term</B></FONT><FONT SIZE=2>"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)The&nbsp;Term
shall automatically be extended, without any further act or formality, if the Toll Agreement (as defined below) and the Quality Agreement (as defined below) are
terminated prior to the expiration of the 3&nbsp;year and 5&nbsp;year term, respectively, or if Organon ceases to supply the API or manufacture the Product for any reason for more than 90
consecutive days (the "</FONT><FONT SIZE=2><B>Trigger Event</B></FONT><FONT SIZE=2>"). This extension shall apply successively upon the occurrence of each Trigger Event and shall continue in each
instance for the period of time commencing on the date of the Trigger Event and ending when Amphastar or a third party for and on behalf of Amphastar begins to supply the API and/or manufacture the
Product under a valid Registration (including a supplemental NDA) and all regulatory approvals required by Applicable Law having been obtained. </FONT></P>

<P><FONT SIZE=2><B>2.4</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Additional DRC Default Rights</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event that Amphastar fails to pay Organon the balance of the purchase price of $12,000,000 when due in accordance with Section&nbsp;4.1(b) and (c)&nbsp;of the Sale Agreement
and DRC pays to Organon </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>the
amount of purchase price not paid by Amphastar (the "</FONT><FONT SIZE=2><B>Additional Invested Amount</B></FONT><FONT SIZE=2>") then in addition to and not in substitution for any rights and
remedies of DRC under this Agreement, the Security Agreement, at law or in equity: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2>Amphastar
shall pay to DRC the Additional Invested Amount together with interest on the unpaid balance of the Additional Invested Amount at the rate of 20% per annum calculated and
payable monthly, without setoff, counterclaim, withholding or deduction. Until such time as the Additional Invested Amount together with such interest is paid in full, Amphastar shall pay all Excess
Cash Flow to DRC on the first business day of each month.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(b)</FONT></DT><DD><FONT SIZE=2>Amphastar
shall carryon its business in the ordinary course with a view to maximizing Excess Cash Flow.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(c)</FONT></DT><DD><FONT SIZE=2>Amphastar
shall not create, incur, assume or otherwise become liable for any indebtedness for borrowed money, bank debt or other debt other than trade payables incurred in the
ordinary course of its business, grant or permit any Encumbrance, make or provide any loan or other financial assistance, make any capital expenditure, investment, distribution or return of capital,
declare or pay any dividends, redeem or purchase any of its shares or take or fail to take any other action if such action or inaction would or is reasonably likely to materially reduce Excess Cash
Flow, except in accordance with an annual budget prepared by Amphastar and agreed to in writing by DRC or otherwise with the prior written consent of DRC.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(d)</FONT></DT><DD><FONT SIZE=2>Amphastar
shall have the right to pay the Additional Invested Amount together with the interest thereon contemplated in Section&nbsp;2.4(a) at any time provided an Event of Default
has not occurred under the Security Agreement.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(e)</FONT></DT><DD><FONT SIZE=2>The
Term shall automatically be extended without any further act or formality by a period equal to the period commencing on the date of payment by DRC of the Additional Invested
Amount and ending on the date of payment by Amphastar to DRC of the Additional Invested Amount together with interest thereon in full. This extension of the Term shall be in addition to any extension
contemplated in Section&nbsp;2.3(b).
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(f)</FONT></DT><DD><FONT SIZE=2>Notwithstanding
the provisions of Section&nbsp;2.2, the provisions of this Section&nbsp;2.4 shall apply until and unless the Additional Invested Amount together with interest
thereon contemplated in Section&nbsp;2.4(a) has been paid to DRC in full, whereupon the provisions of Section&nbsp;2.2 shall apply.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(g)</FONT></DT><DD><FONT SIZE=2>For
avoidance of doubt, (i)&nbsp;DRC may, but has no obligation to, pay the Additional Invested Amount; (ii)&nbsp;nothing herein shall affect the rights of any third party secured
creditor of Amphastar; and (iii)&nbsp;until and unless the Additional Invested Amount together with interest contemplated in Section&nbsp;2.4(a) has been paid in full, Amphastar shall have no
obligation to accrue or pay the Royalty Interest pursuant to Section&nbsp;2.2. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 3<BR>
REPRESENTATIONS AND WARRANTIES  </B></FONT></P>

<P><FONT SIZE=2><B>3.1</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Representations and Warranties of Amphastar</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amphastar
represents and warrants to DRC as of the date of this Agreement as follows and acknowledges that DRC is relying on such representations and warranties in entering into this
Agreement: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.1.1</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Corporate Matters</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Amphastar
is a corporation duly incorporated, organized and validly existing under the laws of its jurisdiction of incorporation. No proceedings have been taken or
authorized by either Amphastar or, </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>to
the best of its knowledge, by any other Person, with respect to the bankruptcy, insolvency, liquidation, dissolution or winding up of Amphastar. A true and correct copy of the articles of
incorporation as amended of Amphastar and the by-laws as amended of Amphastar have been previously provided to DRC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
authorized capital of Amphastar consists of 50,000,000 -shares of voting common stock and 10,000,000 shares of preferred stock of which 33,804,100 common stock and
no preference stock have been validly issued and are outstanding. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Amphastar
has all necessary power and capacity to execute and deliver and to observe and perform its covenants and obligations under this Agreement and the Closing
Documents to which it is a party. Amphastar has taken all corporate action necessary to authorize the execution and delivery of, and the observance and performance of its covenants and obligations
under this Agreement and the Closing Documents to which it is a party. A true and correct copy of the resolution of the board of directors of Amphastar approving the within transaction has been
previously provided to DRC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;This
Agreement and each Closing Document to which it is a party have been or will be duly executed and delivered by Amphastar, and this Agreement and each such Closing
Document constitute a valid and binding obligation of Amphastar enforceable against it in accordance with its terms; provided that enforcement may be limited by bankruptcy, insolvency, liquidation,
reorganization, reconstruction and other similar laws generally affecting enforceability of creditors' rights and that equitable remedies such as specific performance and injunction are in the
discretion of the Court from which they are sought. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;Amphastar
has all necessary corporate power and capacity to carryon its business as is presently carried on by it and to manufacture, market, sell and distribute
Cortrosyn. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;&nbsp;&nbsp;Amphastar
is a private company and is not a registrant in the United States. Amphastar is up-to-date in all filings required under, and is not
otherwise in default of, any requirement of any applicable securities laws or regulations. . </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.1.2</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>The Financial Statements</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Financial Statements: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;have
been prepared in accordance with GAAP, applied on a basis consistent with that of the preceding periods; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;are
true and fair in all material respects; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;accurately
disclose the material assets, liabilities and financial position of Amphastar and its Affiliates and the results of the operations of Amphastar and its
Affiliates as at the dates thereof and for the periods covered thereby; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;contain
or reflect adequate provision for all liabilities and obligations of Amphastar and its Affiliates, as at the date thereof. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
at the date hereof, Amphastar is not aware of any information that would render the Financial Statements incomplete or inaccurate in any material respect. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.1.3</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Undisclosed Liabilities</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amphastar
and its Affiliates have no material liabilities of any kind except: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;liabilities
disclosed or provided for in the Financial Statements and liabilities created by the Acquisition Agreements (as defined below); and </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;liabilities
incurred in the ordinary course of business since December&nbsp;31, 2002, which are consistent with past practice and are not, in the aggregate, material
and adverse to the financial condition or results of operations of Amphastar and its Affiliates taken as a whole. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.1.4</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Absence of Changes</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since
December&nbsp;31, 2002: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;there
has not been any change in the financial condition or results of operations of Amphastar and its Affiliates, other than changes in the ordinary course of business,
and such changes and those resulting from the Acquisition Agreements (i)&nbsp;have not, either individually or in the aggregate, been materially adverse and (ii)&nbsp;have not had or are not
reasonably expected to have, either before or after the date hereof, a material adverse effect on the financial condition of Amphastar and its Affiliates, or Amphastar's or its Affiliates' future
prospects taken as a whole; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;there
has not been any termination, amendment or revocation of any contract, lease, license, patent or other agreement or any damage, destruction, loss, labor dispute or
other event, development or condition of any character (whether or not covered by insurance) which has had, or could have, a material adverse effect on Amphastar, its Affiliates or their future
prospects taken as a whole. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.1.5</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Material Contracts</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Except
for the Sale Agreement, the security agreement between Amphastar and Organon (the "</FONT><FONT SIZE=2><B>Organon Security Agreement</B></FONT><FONT SIZE=2>"),
the toll manufacturing agreement between Amphastar and Organon pertaining to Cortrosyn (the "</FONT><FONT SIZE=2><B>Toll Agreement</B></FONT><FONT SIZE=2>") and the quality agreement between
Amphastar and Organon (the "</FONT><FONT SIZE=2><B>Quality Agreement</B></FONT><FONT SIZE=2>"), each dated June&nbsp;26, 2003 and as each such agreement may be amended, restated, supplemented or
otherwise modified from time to time (collectively, the "</FONT><FONT SIZE=2><B>Acquisition Agreements</B></FONT><FONT SIZE=2>"), neither Amphastar nor any of its Affiliates is a party to or bound by
any material instrument, contract, lease, license, patent, commitment or other agreement whatsoever, whether oral or written, which relate to the ownership of Cortrosyn, the Product Rights or the
Intellectual Property or the right to make, use, license, market, distribute, promote, offer to sell or sell the Intellectual Property or Cortrosyn. A true correct and complete copy of each of the
Acquisition Agreements has been delivered to DRC or its solicitors. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Each
of the Acquisition Agreements is in good standing in full force and effect with no amendment, and constitutes valid and binding obligations of the parties thereto
enforceable in accordance with their respective terms. Each of the parties thereto has complied with all material terms thereof, has paid all amounts due thereunder, has not waived any rights or
defaults thereunder and no default or breach exists in respect thereof on the part of any of the parties thereto and no event has occurred which, after the giving of notice or the lapse of time or
both, would constitute such a default or breach and neither party has given or received a notice of termination, waiver, force majeure, suspension or delay under or in respect of any of the
Acquisition Agreements. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.1.6</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Absence of Conflicting Agreements</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
of the execution and delivery of, or the observance and performance by Amphastar of, any covenant or obligation under this Agreement or any Closing Document to which it is a party
or the consummation of any of the transactions contemplated thereby: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;contravenes
or results in, or will contravene or result in, a violation of or a default under (with or without the giving of notice or lapse of time, or both) or in the
acceleration of any obligation under: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;any
Applicable Law; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;the
articles of incorporation, by-laws, directors' or shareholders' resolutions of Amphastar or any shareholders agreement or voting trust pertaining to
Amphastar; or </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

<HR NOSHADE>
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<UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;any
instrument, contract, lease, license, patent or other agreement to which Amphastar or any of the Affiliates of either of them is a party, or by which it or its
Business or property is bound or affected; </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;relieves
any party to any instrument, contract, lease, license, patent or other agreement described in clause&nbsp;(iii) above of any of its obligations or enables it
to terminate, suspend or to amend any of its obligations thereunder; or </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;results
in the creation or imposition of any Encumbrance on Amphastar, any of its Affiliates, Cortrosyn, the Product Rights or the Intellectual Property other than the
Security Agreement (as defined below) in favor of DRC. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.1.7</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Consents and Approvals</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
consent, approval, license, order or authorization, registration, declaration or filing with or of any Governmental Agency or other Person is required by Amphastar or its Affiliates,
in connection with: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;the
execution and delivery by Amphastar of this Agreement and the Closing Documents to which it is party; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;the
observance and performance by it of its obligations under this Agreement and the Closing Documents to which it is party except as contemplated herein; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;the
consummation of any of the transactions contemplated thereby; or </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;the
completion of the Acquisition. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.1.8</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Compliance with Applicable Law</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
of Amphastar and each of its Affiliates has conducted and is conducting its business in compliance with all Applicable Laws, and not in breach of any Applicable Laws. Each of
Amphastar and each of its Affiliates is in good standing in all jurisdictions where it is required to be registered, licensed or otherwise qualified due to the nature, location or character of its
business and assets (including the Purchased Assets), including in each state, district, commonwealth and territory of the United States of America. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.1.9</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Litigation</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as disclosed in the Financial Statements, there is no claim, demand, suit, action, cause of action, dispute, proceeding, litigation, investigation, grievance, arbitration,
governmental proceeding or other proceeding including appeals and applications for review, in progress against or affecting Amphastar or any of its Affiliates which could reasonably be expected to
result in any Material Adverse Financial Change of Amphastar and its Affiliates taken as a whole or relating to Cortrosyn or any of the Product Rights or Intellectual Property, nor are any of the same
pending or, to the best of Amphastar's knowledge, threatened. There is not presently outstanding against Amphastar or any of its Affiliates any judgment, decree, injunction, rule, order or award of
any court, Governmental Agency or arbitrator that may adversely affect Amphastar or any of its Affiliates or Amphastar's right or ability to manufacture, market, sell or distribute Cortrosyn or the
ownership or rights of Amphastar to any of the Product Rights or Intellectual Property. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.1.10</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Purchased Assets</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amphastar
is the owner of the Purchased Assets including the Product Rights and Intellectual Property, with good and marketable title thereto, free and clear of </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;all
Encumbrances other than the security granted to Organon under the Organon Security Agreement and to DRC under the Security Agreement. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.1.11</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Royalty Interest</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amphastar
is entitled to grant and pay the Royalty Interest to DRC as herein contemplated. There has been no sale, conveyance, assignment or granting of any license or any royalties or
similar rights to or the creation of any Encumbrance on or in respect of the Royalty Interest, the Product Rights, Intellectual Property, the Acquisition Agreements or the Collateral as defined in and
under the Security Agreement in favor of any other Person except for the Royalty Interest to DRC contemplated by this Agreement; the security granted to Organon under the Organon Security Agreement
and as set forth in Schedule&nbsp;C. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.1.12</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>No Options</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
Person other than Organon, by virtue of the Organon Security Agreement and DRC has any agreement, option, warrant or right, or any right capable of becoming any of the foregoing, for
the purchase of all or any of Amphastar's right, title or interest in Cortrosyn or any of the Acquisition Agreements, the Product Rights or Intellectual Property. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.1.13</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Marketing</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amphastar
has no current proposal or intention to abandon or delay the marketing, sales and distribution of Cortrosyn nor is it aware of any existing circumstance, event or condition
which could have a material adverse effect on the marketing, sales and distribution of Cortrosyn. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.1.14</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Intellectual Property</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;The
Intellectual Property consists on the date hereof of the Trade Mark, the NDA and the "cortrosyn.com" and "cortrosyn.us" domain names and is sufficient to carryon the
business of the production, manufacture, marketing, distribution and sale of Cortrosyn. To the best of Amphastar's knowledge and belief, the Trade Mark ownership has been validly transferred from
Organon&nbsp;Inc. to Organon on June&nbsp;19,2003 by recordation of a change of name document within the records of the United States Patent and Trade Mark Office. The Trade Mark ownership has
been validly assigned by Organon to Amphastar on June&nbsp;26, 2003 and such assignment has been duly recorded by the United States Patent and Trade Mark Office. Amphastar is the registered owner of
the Trade Mark free and clear of all Encumbrances. Amphastar has not, and to its knowledge, Organon has not allowed or acquiesced in the use of the Trade Mark by any other Person in the Territory. To
the best of Amphastar's knowledge and belief, the Trade Mark is distinctive and is not confusing with any other trade mark or trade name. The United States trade mark registration of the Trade Mark in
the name of Amphastar as the owner thereof is valid in good standing and is not the subject of any expungement or cancellation proceedings. To the best of Amphastar's knowledge, use of the Trade Mark
does not constitute infringement of any Person's common law or statutory trade mark rights within the Territory. Amphastar is not aware of any infringement or passing off relating to the Trade Mark
within the Territory. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
NDA is in full force and effect and, to Amphastar's knowledge, has been duly and validly issued. To Amphastar's knowledge, there is no proceeding by any Governmental
Agency pending, nor is any Governmental Agency threatening with respect to Cortrosyn a product recall or market withdrawal, or the revocation or suspension of the NDA. To Amphastar's knowledge all
required notices, supplemental applications and annual or other reports, including adverse experience reports, with respect to the NDA which are required to maintain the NDA in good standing have been
filed with the FDA and true and correct copies of such documents have been provided to DRC prior to the Closing Date. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;To
Amphastar's knowledge, as of the Closing Date, the production, manufacture, marketing, distribution and sale of Cortrosyn in the Territory does not infringe any third
party's intellectual property rights, and neither Amphastar nor Organon has received any notice, </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_lc1064_1_9"> </A>
<UL>
<BR>

<P><FONT SIZE=2>complaint,
threat or claim concerning alleging infringement of any patent, trademark or other intellectual property right of any other Person. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.1.15</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Supply and Manufacture of API</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Organon
has agreed to cause Diosynth&nbsp;Inc. or its affiliates to supply to Amphastar and its affiliates or any other party designated by Amphastar the API for the manufacture and
sale of the Product (as such term is defined in the Acquisition Agreements) at a price of $180.00 per gram for a period of five (5)&nbsp;years beginning on June&nbsp;26,2003 in accordance with the
terms of the Acquisition Agreements. Organon has agreed to manufacture the Product for Amphastar at a price of $2.70 per vial (subject to adjustment) for a period of three (3)&nbsp;years beginning
on June&nbsp;26, 2003 in accordance with the terms of the Acquisition Agreements. Pursuant to the Acquisition Agreements, Organon has agreed not to sell any Product to any party (other than
Amphastar, its affiliates and designates) in the Territory or to any party outside the Territory for sale, distribution or delivery into the Territory. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.1.16</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Disclosure</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
representation or warranty made by Amphastar in this Agreement contains any untrue statement of a material fact or omits to state any material fact necessary to make any such
representation or warranty not misleading to a prospective investor seeking full information as to Amphastar, Cortrosyn and the Intellectual Property. </FONT></P>

<P><FONT SIZE=2><B>3.2</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Representations and Warranties of DRC</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DRC
represents and warrants to Amphastar as of the date of this Agreement as follows and acknowledges that Amphastar is relying on such representations and warranties in entering into
this Agreement: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.2.1</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Corporate Matters</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;DRC
is a corporation duly incorporated, organized and validly existing under the laws of its jurisdiction of incorporation. No proceedings have been taken or authorized
by DRC or, to the best of DRC's knowledge, by any other Person, with respect to the bankruptcy, insolvency, liquidation, dissolution or winding up of DRC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;DRC
has all necessary power and capacity to execute and deliver, and to observe and perform its covenants and obligations under, this Agreement and the Closing Documents
to which it is a party. DRC will have on or before Closing taken all action necessary to authorize the execution and delivery of, and the observance and performance of its covenants and obligations
under, this Agreement and the Closing Documents to which it is a party. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;This
Agreement and each Closing Document to which it is a party has been or will be duly executed and delivered by DRC, and this Agreement and each such Closing Document
constitute a valid and binding obligation of DRC enforceable against it, in accordance with its terms; provided that enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization,
reconstruction and other similar laws generally affecting enforceability of creditors' rights and that equitable remedies such as specific performance and injunction are in the discretion of the court
from which they are sought. . </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;DRC
has all necessary corporate power and capacity to carryon its business as is presently carried on by it. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.2.2</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Absence of Conflicting Agreements</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
of the execution and delivery of, or the observance and performance by DRC of, any covenant or obligation under this Agreement or any Closing Document to which it is a party or the
consummation of the transactions contemplated thereby contravenes or results in, or will contravene or </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>result
in, a violation of or a default under (with or without the giving of notice or lapse of time, or both) or in the acceleration of any obligation under: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;any
Applicable Law; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;the
constating documents, articles, by-laws, directors' or shareholders' resolutions of DRC or any shareholders agreement or voting trust pertaining to DRC;
or </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;any
instrument, contract, lease, license, patent or other agreement to which DRC is a party, or by which it or its business or property is bound or affected. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.2.3</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Consents, Approvals, Etc.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
consent, approval, license, order or authorization, registration, declaration or filing with or of any Governmental Agency or other Person is required by DRC, in connection with: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;the
execution and delivery by DRC of this Agreement or any Closing Document to which it is a party; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;the
observance and performance by DRC of its obligations under this Agreement and the Closing Documents to which it is a party; or </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;the
consummation of any of the transactions contemplated thereby. </FONT></P>

</UL>

<P><FONT SIZE=2><B>3.3</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Commission</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Party represents and warrants to the other that the other Party will not be liable for any brokerage commission, finder's fee or other like payment in connection with the
transactions contemplated hereby because of any action taken by, or agreement or understanding reached by, that Party. </FONT></P>

<P><FONT SIZE=2><B>3.4</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Non-Waiver</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
investigations made by or on behalf of DRC at any time shall waive, diminish the scope of or otherwise affect any representation or warranty made by Amphastar herein or pursuant
hereto. The acceptance by DRC of any payment in respect of the Royalty Interest shall be deemed not to be a waiver of any of its rights hereunder. </FONT></P>

<P><FONT SIZE=2><B>3.5</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Survival of Representations and Warranties</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
representations and warranties, made by any Party in this Agreement or in any Closing Document shall survive the Closing, until the expiration of the Term. After such period, neither
Party shall have any further liability hereunder with respect to such representations and warranties except with respect to Claims properly made within such period. </FONT></P>

<P><FONT SIZE=2><B>3.6</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Meaning of Knowledge Qualification</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Where
any representation or warranty contained in this Agreement is expressly qualified by reference to the "knowledge of Amphastar" or to the "best of the knowledge and belief of
Amphastar", it shall be deemed to refer to the knowledge of any director or responsible senior officer of Amphastar and the knowledge which Amphastar would have had if it had conducted a diligent
inquiry into the relevant subject matter. Amphastar confirms to DRC that at least one responsible senior officer of Amphastar has made due and diligent inquiry of such Persons as he or she reasonably
considers necessary as to the matters that are the subject of such representations and warranties. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

<HR NOSHADE>
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<BR>
<UL>

<P><FONT SIZE=2><B> ARTICLE 4 COVENANTS  </B></FONT></P>

</UL>

<P><FONT SIZE=2><B>4.1</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Covenants During the Term</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amphastar
covenants and agrees with DRC that, subject to Closing, during the Term, Amphastar shall, at its own expense, act as follows: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Meetings
</FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>If
so requested by DRC, senior officers of Amphastar shall, up to four times annually (but not more than once in any Quarter) meet with representatives of DRC at a mutually convenient time and place.
At such meetings, Amphastar shall be prepared to discuss matters relating to Cortrosyn and the Intellectual Property (and if requested by DRC provide copies of the relevant documentation), including,
if any, product development plans, business plans, budget, expansion activities, comparison to forecast, financial results and projections, patent filings, licensing agreements,
co-promotion agreements, distribution agreements, sales agreements, purchase orders, sales and marketing activities pertaining to Cortrosyn and the Intellectual Property. Amphastar shall
also provide DRC with timely information pertaining to Cortrosyn with respect to all correspondence with or from the FDA. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Financial
Information </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Amphastar
shall provide to DRC: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;quarterly
unaudited financial statements for Amphastar within 45&nbsp;days of the end of each of the first three Quarters in each year and within 60&nbsp;days of the
end of the fourth Quarter in each year; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;a
written report of the Chief Financial Officer of Amphastar as to the financial basis for the calculation of the Royalty Interest including the Net Sales of Cortrosyn
for each Quarter within 30&nbsp;days of the end of each Quarter and in the event of a Backorder, the calculation of the adjusted Royalty Interest in accordance with Section&nbsp;2.2(g). Such
report shall be delivered to DRC simultaneously with the payment of the Royalty Interest by Amphastar to DRC; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;annual
audited consolidated financial statements of Amphastar and its Affiliates and all other annual financial information provided at the same time and in the same
form provided to the shareholders of Amphastar; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;sales
projections and marketing plan, if any, with respect to Cortrosyn within 60&nbsp;days of Amphastar's fiscal year end. </FONT></P>

<P><FONT SIZE=2>Amphastar
acknowledges and agrees that all financial statements shall be prepared in accordance with GAAP and that the information and materials provided to DRC under clause&nbsp;(i), (ii),
(iii)&nbsp;and (iv)&nbsp;may be disclosed or provided to DRC's secured lenders and investors provided such secured lenders and investors enter into a confidentiality agreement pertaining to such
information and materials. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Audit
Right </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>If
so requested by DRC, DRC shall annually have the right, but not the obligation, to audit Amphastar's books and records and other supporting documentation pertaining to Net Sales of Cortrosyn for
any calendar year not previously audited by DRC. Such audit shall be conducted by a recognized accounting firm of DRC's choice. DRC shall give Amphastar reasonable notice prior to having such an audit
performed and such audit shall be conducted during regular working hours at Amphastar. Such audit shall be for DRC's account unless the Royalty Interest paid in such period is less than 97% of the
royalties due to DRC as </FONT></P>

</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>

<HR NOSHADE>
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<A NAME="page_lc1064_1_12"> </A>
<UL>
<UL>

<P><FONT SIZE=2>calculated
pursuant to the audit, in which case Amphastar shall pay for the out-of-pocket cost of the audit. Any shortfall in royalties payable to DRC that is discovered as a
result of such audit shall be included in the Royalty Interest, and shall be payable to DRC within 3 Business Days of such audit. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;Security
Agreement </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Amphastar
shall on or before Closing execute and deliver a security agreement, substantially in the form of security agreement attached at Schedule&nbsp;D hereto, in favor of DRC as general
continuing collateral security for all present and future obligations of Amphastar under this Agreement (the "</FONT><FONT SIZE=2><B>Security Agreement</B></FONT><FONT SIZE=2>"), all on the terms set
forth in the Security Agreement. Amphastar shall on or before Closing register on behalf of DRC a financing statement in respect of the Security Agreement under the Uniform Commercial Code. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;Compliance
with Law </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Amphastar
shall and shall cause its Affiliates to comply with all Applicable Law in connection with the ownership and rights in and the use of the Intellectual Property and with respect to carrying on
its business including in particular the manufacture, marketing, sale and distribution of Cortrosyn. Amphastar shall and shall cause its Affiliates to make all filings, renewals, extensions and take
all necessary or desirable actions to maintain in good standing ownership and all rights to the Intellectual Property and Product Rights, including the timely filing of all required notices,
supplemental applications and annual and other reports with the FDA which are required to maintain the NDA in good standing. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;Product
Liability and Infringement </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Amphastar
shall maintain comprehensive product liability insurance in respect of Cortrosyn and in respect of any product liability claims in an amount per claim of not less than $5&nbsp;million.
Maintenance of such insurance coverage will not relieve Amphastar of any responsibility under this Agreement for damage in excess of insurance limits or otherwise. Amphastar shall indemnify, defend
and save harmless DRC and its Representatives and from and against any and all Claims which may be made or brought against any such indemnified party as a result of, in respect of or arising out of
Cortrosyn or the use of Cortrosyn or any of the Intellectual Property infringing a patent, trade mark, copyright or other intellectual property right or any other right of a third party. Amphastar
shall provide DRC with a certificate evidencing such insurance coverage and the insurer's agreement to notify DRC at least sixty (60)&nbsp;days in advance of any cancellation or modification of such
insurance. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;Material
Agreements </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Amphastar
shall perform, fulfill, comply and discharge all of its obligations under and in accordance with the terms of the Acquisition Agreements and all sales agreements for Cortrosyn. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;Books
and Records </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Amphastar
shall maintain at its usual place of business in Rancho Cucamonga, California, up-to-date records, reports, accounts, books and files which shall accurately reflect
all particulars known to or under the control of Amphastar which pertain to Cortrosyn and the operation of its business generally. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;Notification </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Amphastar
shall promptly notify DRC in writing of any material adverse change in its business (including, any material adverse event in respect of any contract with respect to Cortrosyn (including any
notice of default, suspension, waiver, termination or claim under any of the </FONT></P>

</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_lc1064_1_13"> </A>
<UL>
<UL>

<P><FONT SIZE=2>Acquisition
Agreements, any notice of a recall of Cortrosyn, or notice with respect to the NDA including any notice of market withdrawal, suspension or revocation) and any Material Adverse Financial
Change (including any material adverse change in a budget or sales projections most recently provided to DRC&raquo; or the commencement of any litigation against Amphastar, any of its Affiliates
or in respect of Cortrosyn or any of the Product Rights or Intellectual Property claiming in excess of $500,000 and each such notification shall contain full particulars of the event or events
described therein. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp;DRC's
Right to Defend </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Amphastar
will not allow any Intellectual Property to lapse or become abandoned nor settle any claim by a third party in respect of Amphastar's or its Affiliates' rights in Cortrosyn, any Intellectual
Property or Product Rights or the Acquisition Agreements without 60&nbsp;days' prior written notification to DRC and in the case of such a settlement proposal, without the prior written approval of
DRC. If Amphastar or an Affiliate decides not to defend, enforce or pursue any of its rights with respect to Cortrosyn, the Acquisition Agreements, the Product Rights or the Intellectual Property, DRC
shall have the right but not the obligation, at its sole expense, to defend, enforce or pursue such rights for and in the name of Amphastar or the applicable Affiliate and any money or
non-monetary consideration received or recovered by Amphastar as a result thereof or in connection or non-monetary consideration therewith shall be held in trust for the sole
benefit of DRC and paid by Amphastar in full to DRC (and in the case of any non-monetary consideration, assigned to DRC free and clear of any and all Encumbrances) forthwith after receipt
thereof by Amphastar or such Affiliate without deduction, set-off or counterclaim. The amount of such proceeds paid to (and any non-monetary consideration received by) DRC
shall be in addition to and not included in the Royalty Interest. Amphastar shall (and shall cause its applicable Affiliate(s) to) co-operate in all reasonable respects with DRC's defense,
enforcement or pursuit of such rights but at the expense of DRC (including, if required to obtain standing in any such action, appearing in the pleadings or legal proceedings at the direction of DRC
and its counsel, at the cost of ORC). Amphastar shall provide to DRC, in confidence, all files, books, records and other information in its possession or control which may be relevant to assist DRC in
the defense, enforcement or pursuit of such rights. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;&nbsp;&nbsp;Power
of Attorney </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Amphastar
hereby appoints DRC as its attorney-in-fact, with full authority in the place and stead of Amphastar and in the name of Amphastar, or otherwise, from time
to time in DRC's discretion to take any action and to execute any instrument consistent with the terms of this Agreement, which DRC may deem necessary or advisable for the purpose of exercising any
rights granted to DRC pursuant to Section&nbsp;4.1 (j)&nbsp;hereof. The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable.
Amphastar hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;&nbsp;&nbsp;&nbsp;Maximize
Returns </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Amphastar
shall use all commercially reasonable efforts to maximize the Royalty Interest in the Territory, including through selling, manufacturing, marketing, promoting, producing and obtaining
regulatory approvals for Cortrosyn, obtaining and maintaining all Registrations for Cortrosyn and maintaining, protecting, pursuing and defending its rights under the Intellectual Property. Amphastar
agrees to act in good faith and to avoid structuring its business and affairs in a manner which would allow it to avoid having to fulfill the spirit of this Agreement. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;&nbsp;Negative
Covenant </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>13</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_lc1064_1_14"> </A>
<UL>
<UL>

<P><FONT SIZE=2>Without
the prior written consent of DRC, Amphastar shall not and shall cause its Affiliates not to (i)&nbsp;sell, assign, transfer, license, deliver or otherwise dispose (each a
"</FONT><FONT SIZE=2><B>disposition</B></FONT><FONT SIZE=2>"), other than the assignment by way of security of certain collateral granted to Organon under the Organon Security Agreement, of any of
the Intellectual Property or Product Rights, its ownership or rights in Cortrosyn or any of its rights in and benefits under the Acquisition Agreements; (ii)&nbsp;waive expressly or by course of
conduct, amend, cancel or terminate, or exercise any of Amphastar's rights under the Acquisition Agreements; (iii)&nbsp;create or permit to exist any Encumbrance on the Collateral as defined in and
under the Security Agreement other than the Organon Security Agreement; (iv)&nbsp;fail to f1l1fill its obligations under the Acquisition Agreements; (v)&nbsp;consent to any assignment of any of
the Acquisition Agreements by Organon; (vi)&nbsp;agree to do any of the foregoing; or (vii)&nbsp;take such other action, if such action would or is reasonably likely to reduce or otherwise
adversely affect the Royalty Interest or cause any representation or warranty set forth in Section&nbsp;3.1 or Section&nbsp;3 of the Security Agreement to become untrue as of the date of such
action. For avoidance of doubt, any disposition referred to in clause&nbsp;(i) above shall be subject to DRC's rights under this Agreement and the Security Agreement and shall only be made by
Amphastar or its Affiliates with the prior written consent of DRC. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;&nbsp;&nbsp;Non-Monetary
Consideration </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Amphastar
shall not, without the prior written consent of DRC, accept or solicit any non-monetary consideration in respect of the sale of Cortrosyn. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)&nbsp;&nbsp;&nbsp;Discharge
of Organon Security </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Forthwith
upon payment in full to Organon of the balance of the purchase price as set forth in the Sale Agreement; Amphastar shall obtain a release and discharge from Organon of all Encumbrances held
by Organon and shall ensure that all registrations and filings necessary or desirable to </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;effect
or record the release and discharge are made including a UCC-3 financing statement. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 5<BR>
CLOSING  </B></FONT></P>

<P><FONT SIZE=2><B>5.1</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Closing</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to this Article&nbsp;5, the payment of the Invested Amount shall be completed (the "</FONT><FONT SIZE=2><B>Closing</B></FONT><FONT SIZE=2>") at 4:00 PM, on August&nbsp;5,
2003 or at such other time or date as the parties may agree (such date being herein referred to as the "</FONT><FONT SIZE=2><B>Closing Date</B></FONT><FONT SIZE=2>"). </FONT></P>

<P><FONT SIZE=2><B>5.2</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Deliveries by DRC</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DRC
hereby agrees to deliver to Amphastar at the Closing a wire transfer to an account designated by Amphastar in writing prior to Closing in the sum of $8&nbsp;million, representing
payment of the Invested Amount in full by wire transfer to the following account: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TD WIDTH="33%"><FONT SIZE=2>Beneficiary Bank Name:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="TOP"><FONT SIZE=2>Cathay Bank</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="33%"><FONT SIZE=2>Beneficiary Bank ABA No.:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="TOP"><FONT SIZE=2>122203950</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="33%"><FONT SIZE=2>Beneficiary Bank Address:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="TOP"><FONT SIZE=2>777 North Broadway, Los Angeles, CA 90012</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="33%"><FONT SIZE=2>Beneficiary Name:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="TOP"><FONT SIZE=2>Amphastar Pharmaceuticals,&nbsp;Inc.</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="33%"><FONT SIZE=2>Beneficiary Account No.:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="66%" VALIGN="TOP"><FONT SIZE=2>14012529</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="33%"><FONT SIZE=2>Beneficiary Address:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="66%"><FONT SIZE=2>11570 6th Street, Rancho Cucamonga, CA 91730</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>14</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_lc1064_1_15"> </A>

<P><FONT SIZE=2><B>5.3</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Deliveries by Amphastar</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amphastar
covenants and agrees to deliver to DRC, each in fonn satisfactory to DRC: </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;at
the Closing, such other documents and instruments as DRC may reasonably require to give effect to and carry out the transactions contemplated herein, including a
receipt from Amphastar for the Invested Amount, and the Security Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;at
the Closing, a subordination agreement among Organon, Amphastar and DRC granting to DRC the right to cure a default by Amphastar in any payments of the purchase price
pursuant to the Sale Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;on
a best-efforts basis, within 15 Business Days of the Closing Date, a release agreement executed by Cathay Bank, UCC-3 financing statement and
other documentation satisfactory to DRC to affect the release and discharge of the Encumbrance of Cathay Bank on the Collateral as defined in and under the Security Agreement. A failure by Amphastar
to deliver to DRC, within 60&nbsp;days of the Closing Date, a release agreement executed by Cathay Bank, UCC-3 financing statement and other documentation satisfactory to DRC to affect
the release and discharge of the Encumbrance of Cathay Bank on the Collateral as defined in and under the Security Agreement shall constitute an Event of Default under the Security Agreement. </FONT></P>

<P><FONT SIZE=2><B>5.4</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>DRC's Conditions</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
obligation of DRC to pay the Invested Amount and to consummate the transactions otherwise contemplated by this Agreement shall be subject to the satisfaction of, or compliance with,
at or before the Closing Date, each of the following conditions precedent (each of which is hereby acknowledged to be inserted for the exclusive benefit of DRC and may be waived by it in whole or in
part): </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Performance
of Covenants </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Amphastar
shall have observed or performed in all respects, all of its obligations, covenants and agreements and fulfilled all of its conditions hereunder to be observed, performed or fulfilled at or
before the time of Closing. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Receipt
of Closing Documentation </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Amphastar
shall have executed and delivered all of the Closing Documents and made such other deliveries as contemplated in Section&nbsp;5.3. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;DRC
Board Approval </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>The
board of directors of DRC shall have authorized the execution and delivery of this Agreement by DRC, the completion of the transactions contemplated in this Agreement and the performance of its
obligations hereunder. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;Due
Diligence </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>DRC
shall be satisfied in all material respects, in its sole discretion, with the results of its due diligence with respect to Cortrosyn, Amphastar, including its capability to manufacture, sell and
distribute Cortrosyn, the Intellectual Property, the Acquisition and all financial and technical information with respect thereto. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;Consents
and Approvals </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>Amphastar
shall have obtained all requisite third-party consents and approvals to enable Amphastar to complete the transactions contemplated by this Agreement, to perform its obligations hereunder and
to perfect its security interest in the Collateral as defined in and under the Security Agreement including the consent of Organon to the cure right as contemplated in Section&nbsp;5.3(d). </FONT></P>

</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>15</FONT></P>

<HR NOSHADE>
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<UL>
<UL>
</UL>
</UL>
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<P><FONT SIZE=2><A
NAME="page_ld1064_1_16"> </A> </FONT> <FONT SIZE=2><B>5.5</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Amphastar's Conditions</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
obligation of Amphastar to complete the transactions contemplated by this Agreement shall be subject to the satisfaction of, or compliance with, at or before the Closing Date, each
of the following conditions precedent (each of which is hereby acknowledged to be inserted for the exclusive benefit of Amphastar and may be waived by it in whole or in part): </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Performance
of Covenants </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>DRC
shall have observed or performed in all respects, all of its obligations, covenants and agreements and fulfilled all of its conditions hereunder to be observed, performed or fulfilled by it at or
before the time of Closing. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Receipt
of Closing Documentation </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>DRC
shall have executed and delivered all of the Closing Documents and paid the Invested Amount as contemplated in Section&nbsp;2.1. </FONT></P>

</UL>
</UL>
</UL>

<P><FONT SIZE=2><B>5.6</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Waiver</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
Party may waive, by notice to the other Parties, any condition set forth in this Article&nbsp;5 which is for its benefit. No waiver by a Party of any condition, in whole or in
part, shall operate as a waiver of any other condition. </FONT></P>

<P><FONT SIZE=2><B>5.7</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Failure to Satisfy Conditions</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any condition set forth in Section&nbsp;5.4 or 5.5 is not satisfied on or before the time of Closing, the Party entitled to the benefit of such condition (the
"</FONT><FONT SIZE=2><B>First Party</B></FONT><FONT SIZE=2>") may terminate this Agreement by notice in
writing to the other Party. Upon such notice being given, the First Party shall be released from all obligations hereunder. If the First Party can show that the condition or conditions which have not
been satisfied and for which the First Party has terminated this Agreement (a)&nbsp;are, or were during the period between the date hereof and the Closing Date, reasonably capable of being performed
or caused to be performed by the other Party or (b)&nbsp;have not been satisfied by reason of a default by the other Party hereunder, the other Party shall be in breach of its obligations hereunder;
otherwise the other Party shall also be released from all obligations hereunder. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 6<BR>
INDEMNIFICATION  </B></FONT></P>

<P><FONT SIZE=2><B>6.1</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Mutual Indemnifications for Breaches of Warranty, etc.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amphastar
agrees with DRC and DRC agrees with Amphastar (the Party agreeing to indemnify another Party, its Representatives and their respective heirs, legal representatives, successors
and assigns being called the "</FONT><FONT SIZE=2><B>Indemnifying Party</B></FONT><FONT SIZE=2>" and the Party including its Representatives and their respective heirs, legal representatives,
successors and assigns to be indemnified being called collectively, the "</FONT><FONT SIZE=2><B>Indemnified Party</B></FONT><FONT SIZE=2>") to indemnify and save harmless the Indemnified Party,
effective as and from the date hereof, from and against any claims, demands, actions, causes of action, damage, loss, cost, liability or expense (excluding those of an indirect or consequential
nature) (the "Claims") which may be made or brought against the Indemnified Party or which it may suffer or incur as a result of, in respect of, or arising out of any non-fulfillment of
any covenant or agreement on the part of the Indemnifying Party under this Agreement or any incorrectness in or breach of any representation or warranty of the Indemnifying Party contained herein. Any
amount which an Indemnifying Party is liable to pay to an Indemnified Party pursuant to this Section shall bear interest at a rate per annum equal to the Prime Rate plus 5% per annum, calculated and
payable monthly, both before and after judgment, with interest on overdue interest at the same rate, from the date the Indemnified Party disbursed funds, suffered damages or losses or incurred a loss,
liability or expense in respect of a Claim, to the date of </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>16</FONT></P>

<HR NOSHADE>
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<A NAME="page_ld1064_1_17"> </A>
<BR>

<P><FONT SIZE=2>payment
by the Indemnifying Party to the Indemnified Party. Any amount which an Indemnifying Party is required to pay to an Indemnified Party pursuant to this Section or pursuant to Section&nbsp;6.2
(including interest thereon) is called an "Indemnified Loss". The foregoing obligation of indemnification in respect of such Claims shall be subject to the limitation set forth in Section&nbsp;3.5
hereof respecting the survival of the representations and warranties of the Parties. The Indemnified Party shall use reasonable commercial efforts to minimize the amount of the Indemnified Loss. </FONT></P>

<P><FONT SIZE=2><B>6.2</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Third Party Claims</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
a Claim is made against an Indemnified Party by a third party for which the Indemnified Party may be entitled to indemnification under Section&nbsp;6.1, the Indemnified Party shall
give notice (the "</FONT><FONT SIZE=2><B>Indemnity Notice</B></FONT><FONT SIZE=2>") to the Indemnifying Party specifying the particulars of such claim within 30&nbsp;days after it receives
notification of the Claim. Failure to give such notice within such time period shall not prejudice the rights of an Indemnified Party except to the extent that the failure to give such notice
materially adversely affects the ability of the Indemnifying Party to defend the Claim or to cure the breach or incorrectness of the representation, warranty, covenant or agreement giving rise to the
Claim. The Indemnifying Party shall have the right to participate in any negotiations or proceedings with respect to such Claim at its own expense. The Indemnified Party shall not settle or compromise
any such Claim without the prior written consent of the Indemnifying Party, unless the Indemnifying Party has not, within 15 Business Days after the giving of the Indemnity Notice, given notice to the
Indemnified Party that it wishes to dispute such Claim. If the Indemnifying Party does give such a notice, </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;it
shall have the right at its own cost and expense to assume the defense of such Claim and to defend such Claim in the name of the Indemnified Party; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;the
Indemnified Party shall be entitled to participate in such defense at its own expense; and </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;the
Indemnifying Party shall not settle or compromise such Claim, without the prior written consent of the Indemnified Party unless such settlement or compromise
involves no admission of liability by or on behalf of the Indemnified Party and includes a full and final comprehensive release of the Indemnified Party. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Indemnified Party shall provide to the Indemnifying Party, in confidence, all files, books, records and other information in its possession or control which may be relevant to the
defense of such Claim. The Indemnified Party shall co-operate in all reasonable respects in the defense of such Claim but at the expense of the Indemnifying Party. If the Indemnifying
party fails, after the giving of such notice, diligently and reasonably to defend such Claim throughout the period that such Claim exists, its right to defend the Claim shall terminate and the
Indemnified Party may assume the defense of such Claim at the sole expense of the Indemnifying Party. In such event, the Indemnified Party may compromise or settle such Claim, without the consent of
the Indemnifying Party. </FONT></P>

<P><FONT SIZE=2><B>6.3</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Agency for Representatives</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Party agrees that it accepts the indemnity under this Agreement in favor of any of its Representatives as agent and trustee of that Representative. Each Party agrees that the
Indemnified Party may enforce an indemnity in favor of any of its Representatives on behalf of that Representative. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 7<BR>
GENERAL  </B></FONT></P>

<P><FONT SIZE=2><B>7.1</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Amendment</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement may be amended or supplemented only by a written agreement signed by each Party. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>17</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P><FONT SIZE=2><B>7.2</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Remedies Cumulative and Waivers</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
rights and remedies of DRC under this Agreement and the Security Agreement and under any other document or instrument executed pursuant hereto or thereto are cumulative and are in
addition to and not in substitution for any rights or remedies provided by law or by equity. Any waiver of, or consent to depart from, the requirements of any provision of this Agreement shall be
effective only if it is in writing and signed by the Party giving it, and only in the specific instance and for the specific purp0se for which it has been given. No failure on the part of any Party to
exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver of such right. No single or partial exercise of any such right shall preclude any other or further
exercise of such right or the exercise of any other right. </FONT></P>

<P><FONT SIZE=2><B>7.3</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Performance on Holidays</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any action is required to be taken pursuant to this Agreement on or by a specified date which is not a Business Day, then such action shall be valid if taken on or by the next
succeeding Business Day. </FONT></P>

<P><FONT SIZE=2><B>7.4</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Financial Reporting Standards</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
accounting and financial terms used herein and the treatment of any accounting matter contemplated herein, unless specifically provided to the contrary, shall be interpreted and
applied in accordance with GAAP. </FONT></P>

<P><FONT SIZE=2><B>7.5</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Expenses</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Party shall pay all expenses it incurs in authorizing, preparing, executing and performing this Agreement and the transactions contemplated hereunder, whether or not the Closing
occurs, including all fees and expenses of its legal counsel, bankers, investment bankers, brokers, accountants or other representatives or consultants. Notwithstanding the foregoing, Amphastar shall
pay DRC forthwith on demand by DRC for all expenses it incurs in connection with maintaining, protecting, realizing, disposing or enforcing its security under the Security Agreement including all
reasonable fees and expenses of its legal counsel, other representatives or consultants. </FONT></P>

<P><FONT SIZE=2><B>7.6</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Time</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Time
is of the essence of this Agreement and each of its provisions. </FONT></P>

<P><FONT SIZE=2><B>7.7</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Notices</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
notice, demand or other communication (in this Section, a "</FONT><FONT SIZE=2><B>notice</B></FONT><FONT SIZE=2>") required or permitted to be given or made hereunder shall be in
writing and shall be sufficiently given or made if: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;delivered
in person during normal business hours of the recipient on a Business Day and left with a receptionist or other responsible employee of the recipient at the
relevant address set forth below; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;except
during any period of actual or imminent interruption of postal services due to strike, lockout or other cause, sent by registered mail or by courier for next
Business Day delivery; or </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;sent
by Transmission, charges prepaid and confirmed by registered mail or courier as provided in Subsection (b); </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>in
the case of a notice to Amphastar at: </FONT></P>

<P><FONT SIZE=2>Amphastar
Pharmaceuticals,&nbsp;Inc.<BR>
11570 6th Street<BR>
Rancho Cucamonga<BR>
California 91730 </FONT></P>

</UL>
</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>18</FONT></P>

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<UL>
<UL>
<UL>
<BR>

<P><FONT SIZE=2>Attention:
Chief Financial Officer<BR>
Fax No.: (909)&nbsp;980-6139<BR>
Email: DavidN@Amphastar.com </FONT></P>

<P><FONT SIZE=2>and
in the case of a notice to DRC at: </FONT></P>

<P><FONT SIZE=2>Drug
Royalty USA,&nbsp;Inc.<BR>
Bank of America Center<BR>
101 Convention Center Drive<BR>
Suite 850, P.O.&nbsp;Box 50401<BR>
Las Vegas, Nevada 89109 </FONT></P>

<P><FONT SIZE=2>Attention:
Behzad Khosrowshahi<BR>
Fax No.: (702)&nbsp;58-36519<BR>
Email: bk@drugroyalty.com </FONT></P>

<P><FONT SIZE=2>with
a copy to Fasken Martineau DuMoulin LLP at: </FONT></P>

<P><FONT SIZE=2>66
Wellington Street West<BR>
Suite 4200, Toronto Dominion Bank<BR>
Tower Box 20, Toronto-Dominion Centre<BR>
Toronto; Ontario<BR>
M5K lN6 </FONT></P>

<P><FONT SIZE=2>Attention:
Scott Conover<BR>
Fax No.: (416)&nbsp;364-7813<BR>
Emai1: sconover@tor.fasken.com </FONT></P>

</UL>
</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
notice so given shall be deemed to have been given and to have been received on the day of delivery, if so delivered, on the fifth Business Day (excluding each day during which there
exists any interruption of postal services due to strike, lockout or other cause) following the mailing thereof, if so mailed, and on the day following the day notice was sent by Federal Express
courier or by Transmission, provided such day is a Business Day and if not, on the first Business Day thereafter. Addresses for notice may be changed by giving notice in accordance with this Section. </FONT></P>


<P><FONT SIZE=2><B>7.8</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Assignment</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement or any or all of the rights or obligations hereunder may not be assigned by either Amphastar or DRC without the prior written consent of the other, provided that
(i)&nbsp;Amphastar, without such consent, may assign the entire Agreement and its rights and obligations hereunder to an arm's length bona fide third party in connection with the transfer or sale of
all or substantially all of its assets or business, or in the event of its merger or consolidation or change in control or similar transaction and provided that such assignment includes the Security
Agreement and the Acquisition Agreements and the assignee assumes the obligations of Amphastar hereunder and thereunder, and (ii)&nbsp;DRC may assign this Agreement in whole or in part by way of
security to a financial institution or other lender and/or to an Affiliate of DRC and/or as part of a sale of a material part of DRC whether by way of a reorganization or otherwise, without the
consent of Amphastar, provided DRC gives written notice of such assignment to Amphastar. This Agreement shall enure to the benefit of and be binding upon the Parties and their respective successors
(including any successor by reason of amalgamation or statutory arrangement of any Party) and permitted assigns. </FONT></P>

<P><FONT SIZE=2><B>7.9</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Further Assurances</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Party shall do such acts and shall execute such further documents, conveyances, deeds, assignments, transfers and the like, and will cause the doing of such acts and will cause the
execution of such further documents as are within its power as any other Party may in writing at any time and </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>19</FONT></P>

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<P><FONT SIZE=2>from
time to time reasonably request be done and/or executed, in order to give full effect to the provisions of this Agreement and the Closing Documents. Without limiting the generality of the
foregoing, DRC and Amphastar agree to co-operate on any applicable accounting or tax issues arising from the transaction contemplated hereby. </FONT></P>

<P><FONT SIZE=2><B>7.10</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Independent Parties</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nothing
contained in this Agreement shall in any way or for any purpose constitute any Party a partner of any other Party in the conduct of any business or otherwise or a member of a
joint venture or joint
enterprise or create any fiduciary relationship among them. Except as set forth in Sections 4.1 G)&nbsp;and 4.1 (k), neither of Amphastar on the one hand or DRC on the other shall have any authority
to act for or to assume any obligation or responsibility on behalf of the other and neither of Amphastar on the one hand or DRC on the other shall have any authority to bind the other to act or to
undertake any obligation or responsibility whatsoever. </FONT></P>

<P><FONT SIZE=2><B>7.11</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Public Announcements</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Parties agree to discuss and co-ordinate all public announcements concerning the transactions contemplated herein except as may be necessary, in the opinion of counsel to
the Party making such disclosure, to comply with the requirements of any Applicable Law. If any such public statement or release is so required, the Party making such disclosure shall, where
practicable, consult with the other Party prior to making such statement or release and shall use reasonable efforts acting in good faith, to agree upon a text for such statement or release which is
satisfactory to both Parties. Subject to the Closing, Amphastar and DRC will discuss and agree on the appropriate method for making a joint announcement about such Closing. </FONT></P>

<P><FONT SIZE=2><B>7.12</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Severability</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any covenant, obligation or provision of this Agreement or the application thereof to any Person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of
this Agreement or the application of such covenant, obligation or agreement to Persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby
and each covenant, obligation and provision of this Agreement shall be separately valid and enforceable to the fullest extent permitted by Applicable Law. </FONT></P>

<P><FONT SIZE=2><B>7.13</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Specific Performance</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
of the Parties hereto acknowledges that the other Party may have no adequate remedy at law if it fails to perform any of its obligations under this Agreement. In such event, each of
the Parties agrees that the other Party shall have the right, in addition to any other rights it may have (whether at law or in equity), to equitable remedies such as injunction and specific
performance of this Agreement. </FONT></P>

<P><FONT SIZE=2><B>7.14</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Third Party Beneficiary</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nothing
in this Agreement or in any agreement entered into pursuant hereto or in connection herewith is intended expressly or by implication to, or shall, confer upon any person other
than the Parties and their respective Representatives, any rights or remedies of any kind. </FONT></P>

<P><FONT SIZE=2><B>7.15</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Counterparts</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement may be executed in any number of counterparts and by facsimile transmission. Each executed counterpart shall be deemed to be an original. All executed counterparts taken
together shall constitute one agreement. </FONT></P>

<P><FONT SIZE=2><B>7.16</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Facsimile Execution</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
evidence the fact that it has executed this Agreement, a Party may send a copy of its executed counterpart to the other Party by facsimile transmission. That Party shall be deemed to
have executed </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>20</FONT></P>

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<BR>

<P><FONT SIZE=2>this
Agreement on the date it sent such facsimile transmission. In such event, such Party shall forthwith deliver to the other Party the counterpart of this Agreement executed by such Party. </FONT></P>

<P><FONT SIZE=2><B>7.17</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Confidentiality</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
information furnished by DRC to Amphastar or by Amphastar to DRC in connection with this Agreement and the transactions contemplated hereby, as well as the terms, conditions and
provisions of this Agreement, shall be kept confidential by Amphastar and DRC and shall be used by Amphastar and DRC only in connection with this Agreement and the transactions contemplated hereby,
except in connection with the enforcement of rights or exercise of remedies under this Agreement and the Security Agreement and except to the extent that such information (i)&nbsp;is already known
by the party to whom the information is disclosed or in the public domain at the time the information is disclosed, (ii)&nbsp;thereafter becomes lawfully obtainable from other sources,
(iii)&nbsp;is required to be disclosed in any document to be filed with any federal, state, provincial, municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign or (iv)&nbsp;is required to be disclosed under securities laws or regulations applicable to DRC or its affiliates, or by court order. Notwithstanding the
foregoing, either Party may disclose such information to its Affiliates, directors, officers, investors, bankers, advisors, trustees and representatives, provided that such Persons shall be informed
of the confidential nature of such information and shall be obligated to keep such information confidential pursuant to the terms of this Section&nbsp;7.17. </FONT></P>

<P><FONT SIZE=2><B>7.18</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>WAIVER OF JURY</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FOR
THE PURPOSES OF ANY LITIGATION COMMENCED IN THE UNITED STATES, EACH PARTY IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LITIGATION (A)&nbsp;TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT; OR (B)&nbsp;ARISING FROM OR RELATING TO ANY RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT; AND AGREES THAT ANY SUCH LITIGATION SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH PARTY HEREBY ACKNOWLEDGES THAT THE OTHER PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS IN THIS SECTION 7.18. </FONT></P>

<P><FONT SIZE=2><B>7.19</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Service of Process</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
Party irrevocably consents to the service of process out of the courts of the State of New York in accordance with the local rules of civil procedure or by mailing a copy thereof,
by registered mail, postage prepaid to such Party at the address of such Party, or by sending a copy thereof by facsimile or by email in pdf format to such Party at the facsimile number or email
address of such Party determined under Section&nbsp;7.7. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>[signature page to follow]</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>21</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>TO WITNESS THEIR AGREEMENT,</B></FONT><FONT SIZE=2> the Parties have duly executed this Agreement as of the date first above written. </FONT></P>

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<TR VALIGN="TOP">
<TD WIDTH="43%"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><B><BR>
AMPHASTAR PHARMACEUTICALS,&nbsp;INC.</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>DAVID W. NASSIF</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Name:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>David W. Nassif</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Title:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>Chief Financial Officer</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><BR><FONT SIZE=2><B>DRUG ROYALTY USA,&nbsp;INC.</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="43%"><BR><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Name:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>Behzad Khosrowshahi</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Title:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>President and CEO</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>22</FONT></P>

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<A NAME="page_ld1064_1_23"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>TO WITNESS THEIR AGREEMENT,</B></FONT><FONT SIZE=2> the Parties have duly executed this Agreement as of the date first above written. </FONT></P>

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<TD WIDTH="43%"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><B><BR>
AMPHASTAR PHARMACEUTICALS,.&nbsp;INC.</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="43%"><BR><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Name:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>David Nassif</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Title:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>Chief Financial Officer</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><BR><FONT SIZE=2><B> DRUG ROYALTY USA,&nbsp;INC.</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>BEHZAD KHOSROWSHAHI</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Name:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>Behzad Khosrowshahi</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>Title:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>President and CEO</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>23</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_le1064_1_1"> </A> </FONT> <FONT SIZE=2><B>SCHEDULE A<BR>
DEFINITIONS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT SIZE=2><B>Acquisition</B></FONT><FONT SIZE=2>" has the meaning ascribed thereto in recital B to this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Acquisition Agreements</B></FONT><FONT SIZE=2>" has the meaning ascribed thereto in subsection 3.1.5(a). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Active Pharmaceutical Ingredient</B></FONT><FONT SIZE=2>" or "</FONT><FONT SIZE=2><B>API</B></FONT><FONT SIZE=2>" means the drug substance cosyntropin, and any
analog, derivative, improvement or variation of such active pharmaceutical ingredient. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Affiliate</B></FONT><FONT SIZE=2>" means a Person which, directly or indirectly, controls, is controlled by or is under common control with another. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Agreement</B></FONT><FONT SIZE=2>" means this agreement, all attached schedules and any agreement, or schedule supplementing or amending this agreement. All uses
of the words "hereto", "herein," "hereof," "hereby" and "hereunder" and similar expressions refer to this Agreement and not to any particular section or portion of it. References to an Article,
Section, Subsection, or Schedule refer to the applicable article, section, subsection, or schedule of this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Applicable Law</B></FONT><FONT SIZE=2>" means, in respect of any Person, property, transaction or event, any statute, law, ordinance, rule, regulation,
regulatory policy, by-law, order, judgment, decree or restriction of any kind whatever applicable to that Person, property, transaction or event. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Business Day</B></FONT><FONT SIZE=2>" means any day of the week other than a Saturday, Sunday or statutory or civic holiday observed in each of Toronto, Ontario
and Rancho Cucamonga, California. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Claim</B></FONT><FONT SIZE=2>" has the meaning ascribed thereto in Article&nbsp;6. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Closing</B></FONT><FONT SIZE=2>" and "</FONT><FONT SIZE=2><B>Closing Date</B></FONT><FONT SIZE=2>" have the respective meanings ascribed thereto in
Section&nbsp;5.1. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Closing Document</B></FONT><FONT SIZE=2>" means any document, instrument, undertaking or agreement made or delivered pursuant to or in connection with this
Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Confidentiality Agreement</B></FONT><FONT SIZE=2>" means that certain confidentiality agreement entered into by and between Amphastar and DRC dated
November&nbsp;7, 2002. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Control</B></FONT><FONT SIZE=2>" (including, with correlative meanings, the terms "</FONT><FONT SIZE=2><B>controlled by</B></FONT><FONT SIZE=2>" and
"</FONT><FONT SIZE=2><B>under common control with</B></FONT><FONT SIZE=2>") means the possession of the power, in law or in fact, to direct or cause the direction of the management and policies of a
Person, whether through legal and beneficial ownership of a majority of voting securities or other equity interests, by agreement or otherwise. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Cortrosyn</B></FONT><FONT SIZE=2>" means a pharmaceutical preparation containing the Active Pharmaceutical Ingredient, in all doses, for all indications and
diseases, whether approved by a Governmental Agency or not, using any delivery mechanism and including any improvement, variation, any minor chemical alteration, new generation or product line
extensions, and any product or combination of products with a chemical or biological formulation that contains the Active Pharmaceutical Ingredient, manufactured and/or sold by or on behalf of
Amphastar, its Affiliates, licensees, distributors or agents under the Trade Mark or any other name. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Encumbrance</B></FONT><FONT SIZE=2>" means any encumbrance of any kind whatsoever, actual or contingent, fixed or floating, including any security interest,
mortgage, lien, pledge, assignment, charge, trust or deemed trust (whether contractual, statutory or otherwise arising). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Excess Cash Flow</B></FONT><FONT SIZE=2>" for any month means the sum (without duplication) of the gross receipts of Amphastar from all sources minus
(i)&nbsp;all cash operating costs of Amphastar actually incurred in the ordinary course of business including all interest expense and scheduled repayments of bank indebtedness, capital lease
obligations and other liabilities which in accordance with GAAP would be classified upon the balance sheet of Amphastar as long term debt that was either existing at the time of payment by DRC of the
Additional Invested Amount (and the scheduled repayments thereof have not, without the prior written consent of DRC, been amended or otherwise modified or altered) or was </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-1</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>actually
incurred subsequently by Amphastar in accordance with an annual budget prepared by Amphastar and approved in writing by DRC or otherwise with the prior written consent of DRC; minus
(ii)&nbsp;any cash expenditure that, in conformity with GAAP, would be required to be classified as a capital expenditure and was actually incurred by Amphastar in accordance with an annual budget
prepared by Amphastar and approved in writing by DRC or otherwise with the prior written consent of DRC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>FDA</B></FONT><FONT SIZE=2>" means the U.S. Food and Drug Administration. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>"Financial Statements</B></FONT><FONT SIZE=2>" means the audited consolidated financial statements of Amphastar for the twelve-month period ending as at
December&nbsp;31,2001 and 2002 and the unaudited consolidated financial statements for the 3&nbsp;month period ended March&nbsp;31, 2003. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>GAAP</B></FONT><FONT SIZE=2>" means U.S. generally accepted accounting principles, unless specifically provided to the contrary herein, from time to time
approved by the Financial Accounting Standards Board, or any successor institute, applicable as at the date on which any calculation or determination is required to be made in accordance with
generally accepted accounting principles. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Governmental Agency</B></FONT><FONT SIZE=2>" means any domestic or foreign government whether federal, state, provincial or municipal and any governmental
agency, governmental authority, regulatory authority, governmental tribunal or governmental commission of any kind whatever including the FDA. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Including</B></FONT><FONT SIZE=2>", when used herein or in any Closing Document, means "including without limitation" and shall not be construed to limit any
general statement which it follows to the specific or similar items or matters immediately following it. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Indemnified Party</B></FONT><FONT SIZE=2>" has the meaning ascribed thereto in Article&nbsp;7. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Indemnifying Party</B></FONT><FONT SIZE=2>" has the meaning ascribed thereto in Article&nbsp;7. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Indemnity Notice</B></FONT><FONT SIZE=2>" has the meaning ascribed thereto in Article&nbsp;7. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Invested Amount</B></FONT><FONT SIZE=2>" has the meaning ascribed thereto in Section&nbsp;2.1. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Intellectual Property</B></FONT><FONT SIZE=2>" means all of Amphastar's existing or hereafter acquired right, title and interest in the Territory in and to the
Patent Rights, Trade Marks, Trade Secrets, domain names and internet addresses, know-how and other intellectual property relating to, associated with, covering or embodying Cortrosyn or
the Active Pharmaceutical Ingredient. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Material Adverse Financial Change</B></FONT><FONT SIZE=2>" means any change, event, occurrence or change in the state of facts that has or could be expected to
have a material adverse effect on the financial condition of Amphastar. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>NDA</B></FONT><FONT SIZE=2>" means the application (U.S. NDA Number 16-750) for Cortrosyn prepared pursuant to applicable FDA regulations and filed
by Organon with the FDA for authorization to market Cortrosyn within the United States, including all additions, supplements, extensions and modifications thereto made prior to or during the Term; and
transferred by Organon to Amphastar pursuant to the Sale Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Net Sales of Cortrosyn</B></FONT><FONT SIZE=2>" means (a)&nbsp;gross revenues from sales of Cortrosyn in the Territory by Amphastar, its Affiliates, licensees,
distributors and agents to a purchaser (including, a wholesaler or group purchasing organization and any licensee under Bankruptcy Code Section&nbsp;365(n)(2)) less deductions actually allowed or
specifically allocated to Cortrosyn by such vendor in accordance with GAAP for: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;trade,
quantity and cash discounts allowed on Cortrosyn; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;allowances
or credits to customers on account of rejection or return of Cortrosyn; and </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;rebates
to customers; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;charge
backs to wholesalers; and </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-2</FONT></P>

<HR NOSHADE>
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<UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;&nbsp;group
purchasing organization administration fees </FONT></P>

</UL>

<P><FONT SIZE=2>but
without any other deduction, including for withholding taxes, other taxes, bad debts, allowance for doubtful accounts, co-management fees, development expenses, educational and
promotional expenses or any other expenses, but in no event shall such deductions in aggregate exceed 17.4% of gross revenues from sales of Cortrosyn in the Territory; and (b)&nbsp;all amounts
recovered by or paid to Amphastar pursuant to a settlement, order or judgment in respect of any claim or legal proceeding relating to Cortrosyn or any of the Product Rights or Intellectual Property or
any right of Amphastar to manufacture, market, sell or distribute Cortrosyn or the ownership or rights of
Amphastar to any of the Product Rights or Intellectual Property. For the purposes hereof, "gross revenues" shall mean units shipped times (a)&nbsp;the purchase price in the case of indirect sales
through wholesalers and (b)&nbsp;the contract price in the case of direct sales to customers and shall be determined in accordance with GAAP, consistently applied. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Parties</B></FONT><FONT SIZE=2>" means Amphastar and DRC, collectively, and "Party" means each of them. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Patent Rights</B></FONT><FONT SIZE=2>" means all of Amphastar's existing or hereafter acquired right, title and interest in the Territory to the patents and
patent applications claiming, relating to or associated with Cortrosyn or the Active Pharmaceutical Ingredient and all improvements thereto made by Amphastar or its Affiliates, including, all
divisions, continuations, partial continuations, extensions, substitutions, confirmations, registrations, revalidations, additions or reissues of or to any of the patents or patent applications. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Person</B></FONT><FONT SIZE=2>" includes an individual, body corporate, partnership, joint venture, co-operative, trust or unincorporated
organization, Governmental Agency or any agency or instrumentality thereof, or any other entity recognized by law. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Prime Rate</B></FONT><FONT SIZE=2>" for any day means the rate of interest expressed as a rate per annum that JP Morgan Chase establishes at its head office in
the city of New York, as a reference rate of interest that it will charge on that day for US Dollar demand loans to its corporate customers in the United States and which it at present refers to as
its prime rate. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Product Rights</B></FONT><FONT SIZE=2>" means all of the rights to Cortrosyn acquired by Amphastar under the Acquisition Agreements including the NDA, copies of
all FDA files, regulatory files and formulae for Cortrosyn and the most recent master batch record for Cortrosyn. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Purchased Assets</B></FONT><FONT SIZE=2>" has the meaning ascribed thereto in the Sale Agreement and includes the Product Rights and Intellectual Property. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Quarter</B></FONT><FONT SIZE=2>" means a calendar quarter ending on March&nbsp;31, June&nbsp;30, September&nbsp;30 and December&nbsp;31 in each calendar
year. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Registration</B></FONT><FONT SIZE=2>" means the obtaining of all approvals and authorizations under Applicable Law to legally manufacture, package, market,
distribute, promote, offer for sale and sell Cortrosyn to end users in the Territory. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Representative</B></FONT><FONT SIZE=2>" means each Affiliate of a Party and the respective directors, officers, employees and agents of such Party and its
Affiliates. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Royalty Interest</B></FONT><FONT SIZE=2>" has the meaning assigned thereto in subsection 2.2(a). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Security Agreement</B></FONT><FONT SIZE=2>" has the meaning assigned thereto in subsection 4.1(d). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Tax Returns</B></FONT><FONT SIZE=2>" means all reports, returns and other documents filed or required to be filed by Amphastar and its Affiliates in respect of
Taxes or in respect of or pursuant to any Applicable Law. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Taxes</B></FONT><FONT SIZE=2>" means all national, federal, provincial, state, municipal, local, foreign or other taxes, imposts, levies, assessments and
government fees, charges or dues, lawfully levied, assessed or imposed and all interest and penalties thereon. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-3</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Term</B></FONT><FONT SIZE=2>" has the meaning assigned thereto in Section&nbsp;2.3. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Territory</B></FONT><FONT SIZE=2>" means the United States of America and its respective territories and possessions. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Trade Mark</B></FONT><FONT SIZE=2>" means the United States trade mark Cortrosyn&reg; registration number 779366 any and all United States trade marks,
service marks or symbols, trade devices, certification maries, trade names and applications therefor in respect of, associated with or relating to Cortrosyn now or hereafter filed by or issued,
licensed or assigned to or under the control of or owned under common law by Amphastar or its Affiliates in the Territory and including all reissues, extensions, continuations, renewals, supplements
or amendments thereto. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Trade Secrets</B></FONT><FONT SIZE=2>" means all information, technical data, experimental procedure, scientific and medical information invented, developed,
controlled or acquired prior to or during the Term by or on behalf of Amphastar or its Affiliates in the Territory relating to the development, manufacturing, distributing, marketing, promoting,
offering for sale or sale of Cortrosyn, the Active Pharmaceutical Ingredient or the Product Rights, including all information contained in health and marketing registration applications filed by or on
behalf of Amphastar or its Affiliates or Organon or its Affiliates relating to Cortrosyn, and all pre-clinical and clinical data, product forms, specifications and
manufacturing data relating to Cortrosyn, the Active Pharmaceutical Ingredient or the Product Rights, including all Technical Information (as such term is defined in the Sale Agreement). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><B>Transmission</B></FONT><FONT SIZE=2>" means any electronic means of sending messages, including facsimile transmission and email which produces a paper record. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>SCHEDULE B<BR>
ILLUSTRATION OF CALCULATION<BR>
OF ROYALTY INTEREST UNDER SECTION 2.2(g)  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2>If
the inventory shortage giving rise to the Backorder commences in the third month of Quarter 1, Net Sales of Cortrosyn in Quarter 1 (before the Section&nbsp;2.2(g) adjustment) are
$3&nbsp;million, the Backorder is $2&nbsp;million and is filled by the sale of Cortrosyn in Quarter 2:
<BR><BR></FONT>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2>Royalty
Interest under Section&nbsp;2.2(a)&nbsp;= (23% X 2,500,000)&nbsp;+&nbsp;(3% X 500,000)&nbsp;= $590,000 (calculated and paid in first 30&nbsp;days of Quarter 2).
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(b)</FONT></DT><DD><FONT SIZE=2>Section&nbsp;2.2(g)
adjustment (calculated and paid in first 30&nbsp;days of Quarter 3)&nbsp;is the difference between the Net Sales of Cortrosyn of $3&nbsp;million plus the
$2&nbsp;million of Backorders calculated pursuant to Section&nbsp;2.2(a) and the Royalty Interest calculated under subparagraph (a)&nbsp;above. DRC's entitlement under
Section&nbsp;2.2(g)&nbsp;= [(23%&nbsp;X 2,500,000)&nbsp;+ (3%&nbsp;X 2,500,000)]&nbsp;- $590,000&nbsp;= $60,000.
<BR><BR></FONT></DD></DL>
</DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2>If
the inventory shortage giving rise to the Backorder commences in the third month of Quarter 1, Net Sales of Cortrosyn in Quarter 1 (before the Section&nbsp;2.2(g) adjustment) are
$5&nbsp;million, the Backorder is $3&nbsp;million and is filled by the sale of Cortrosyn in Quarter 2:
<BR><BR></FONT>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2>Royalty
Interest under Section&nbsp;2.2(a)&nbsp;= (23%&nbsp;X 2,500,000)&nbsp;+ (3%&nbsp;X 2,500,000)&nbsp;= $650,000 (calculated and paid in first 30&nbsp;days of
Quarter 2).
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(b)</FONT></DT><DD><FONT SIZE=2>Section&nbsp;2.2(g)
adjustment (calculated and paid in first 30&nbsp;days of Quarter 3)&nbsp;is the difference between the Net Sales of Cortrosyn of $5&nbsp;million plus the
$3&nbsp;million of Backorders calculated pursuant to Section&nbsp;2.2(a) and the Royalty Interest calculated under subparagraph (a)&nbsp;above. DRC's entitlement under
Section&nbsp;2.2(g)&nbsp;= [(23%&nbsp;X 2,500,000)&nbsp;+ (3%&nbsp;X 2,500,000)&nbsp;+ (1%&nbsp;X 2,500,000)]&nbsp;- $650,000&nbsp;= $25,000. </FONT></DD></DL>
</DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>A-4</FONT></P>

<HR NOSHADE>
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<UL>
<UL>
</UL>
</UL>
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_lf1064_1_1"> </A> </FONT> <FONT SIZE=2><B>SCHEDULE C<BR>
REPRESENTATIONS AND WARRANTIES&#151;DISCLOSURE  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-1</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_lg1064_1_1"> </A> </FONT> <FONT SIZE=2><B>SCHEDULE D<BR>
FORM OF SECURITY AGREEMENT  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>D-1</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>
<P><br><A NAME="05BHL1063_7">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_la1064_1">Exhibit 10.9</A></FONT><BR>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.11
<SEQUENCE>8
<FILENAME>a2151158zex-10_11.htm
<DESCRIPTION>EXHIBIT 10.11
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<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="lh1064_exhibit_10.11"> </A>
<A NAME="toc_lh1064_1"> </A>
<BR></FONT><FONT SIZE=2><B>Exhibit 10.11    <BR>    </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>PROMISSORY NOTE  </B></FONT></P>

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<TH WIDTH="15%" ALIGN="CENTER"><FONT SIZE=1><B>Principal</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Loan Date</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>Maturity</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Loan No</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>Call</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>Collateral</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Account</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Officer</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Initials</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>$6,200,000.00</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>02-08-2001</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>610040016</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>BL 66</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>89</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>JL</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<P><FONT SIZE=2>References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item </FONT></P>

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<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><B>Borrower:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="33%"><FONT SIZE=2><B>AMPHASTAR PHARMACEUTICALS, INC.<BR>
33-0702205)<BR>
11570 6th STREET<BR>
RANCHO CUCAMONGA, CA 91730</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2><B>(TIN: Lender:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="33%"><FONT SIZE=2><B>CATHAY BANK, a California Banking Corporation<BR>
INTERNATIONAL DEPARTMENT<BR>
777 NORTH BROADWAY<BR>
LOS ANGELES, CA 90012</B></FONT></TD>
</TR>
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<TD WIDTH="44%"><BR><FONT SIZE=2><B>Principal Amount: $6,200,000.00</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="RIGHT"><BR><FONT SIZE=2><B>Initial Rate: 8.500%</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="29%" ALIGN="RIGHT"><BR><FONT SIZE=2><B>Date of Note: February&nbsp;8, 2001</B></FONT></TD>
</TR>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>PROMISE TO PAY. AMPHASTAR PHARMACEUTICALS,&nbsp;INC. ("Borrower") promises to pay to CATHAY BANK, a California Banking Corporation ("Lender"), or order, in
lawful money of the United States of America, the principal amount of Six Million Two Hundred Thousand&nbsp;&amp; 00/100 Dollars ($6,200,000.00), together with interest on the unpaid principal balance
from February&nbsp;8, 2001, until paid in full.</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>PAYMENT. Subject to any payment changes resulting from changes in the Index, Borrower will pay this loan in accordance with the following payment
schedule:</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;/&nbsp;&nbsp;&nbsp;&nbsp;Initials See "TWO PAYMENT SCHEDULES DURING THE TERM OF THE NOTE" Section below.</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
annual interest rate for this Note is computed on a 365/360 basis; that is, by applying the ratio of the annual interest rate over a year of 360&nbsp;days, multiplied by the
outstanding principal balance,
multiplied by the actual number of days the principal balance is outstanding. Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing. Unless
otherwise agreed or required by applicable law, payments will be applied first to accrued unpaid interest, then to principal, and any remaining amount to any unpaid collection costs and late charges. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*during
the Interest Only period and MONTHLY on the Mini&#151;Term period. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;VARIABLE INTEREST RATE.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The interest rate on this Note is subject to change from time to time based on changes in an
independent index which is the PUBLISHED WALL STREET JOURNAL PRIME RATE (the "Index"). The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after notice to Borrower. Lender will tell Borrower the current Index rate upon Borrower's request. Borrower understands that
Lender may make loans based on other rates as welt. The interest rate change will not occur more often than each DAY.* </FONT><FONT SIZE=2><B>The Index currently is 8.500%. The interest rate to be
applied to the unpaid principal balance of this Note will be at a rate equal to the Index</B></FONT><FONT SIZE=2>, </FONT><FONT SIZE=2><B>resulting in a current rate of
8.500%.</B></FONT><FONT SIZE=2> NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. Whenever increases occur in the interest
rate, Lender, at its option, may do one or more of the following: (a)&nbsp;increase Borrower's payments to ensure Borrower's loan will pay off by its original final maturity date,
(b)&nbsp;increase Borrower's payments to cover accruing interest, (c)&nbsp;increase the number of Borrower's payments, and (d)&nbsp;continue Borrower's payments at the same amount and increase
Borrower's final payment. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PREPAYMENT.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Borrower agrees that all loan fees and other prepaid finance charges are earned fully as of the date of the loan
and will not be subject to refund upon early payment (whether </FONT></P>

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<P><FONT SIZE=2>voluntary
or as a result of default), except as otherwise required by law, Except for the foregoing, Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments under the payment schedule. Rather, they will reduce the principal
balance due and may result in Borrower making fewer payments. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DEFAULT.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Borrower will be in default if any of the following happens: (a)&nbsp;Borrower fails to make any payment when due.
(b)&nbsp;Borrower breaks any promise Borrower has made to Lender, or Borrower fails to comply with or to perform when due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower has with Lender. (c)&nbsp;Any representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or at the time made or furnished. (d)&nbsp;Borrower becomes insolvent, a receiver is appointed for any part of Borrower's
property, Borrower makes an assignment for the benefit of creditors, or any proceeding is commenced either by Borrower or against Borrower under any bankruptcy or insolvency laws. (e)&nbsp;Any
creditor tries to take any of Borrower's property on or in which Lender has a lien or security interest. This includes a garnishment of any of Borrower's accounts with Lender, (f)&nbsp;Any guarantor
dies or any of the other events described in this default section occurs with respect to any guarantor of this Note, (g)&nbsp;A material adverse change occurs in Borrower's financial condition, or
Lender believes the prospect of payment or performance of the Indebtedness is impaired. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;LENDER'S RIGHTS.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Upon default, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid
interest immediately due, without notice, and then Borrower will pay that amount. Upon Borrower's failure to pay all amounts declared due pursuant to this section, including failure to pay upon final
maturity, Lender, at its option, may also, if permitted under applicable law, increase the variable interest rate on this Note to 3.000&nbsp;percentage points over the Index. Lender may hire or pay
someone else to help collect this Note if Borrower does not pay. Borrower also will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and
Lender's legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post&#151;judgment collection services, Borrower also will pay any court costs, in addition to all other sums provided by law. </FONT> <FONT SIZE=2><B>This Note has been delivered to Lender and accepted by
Lender in the State of California. If there Is a lawsuit, Borrower agrees upon Lender's request to submit to the
Jurisdiction of the courts of LOS ANGELES County, the State of California, Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either
Lender or Borrower against the other. This Note shall be governed by and construed in accordance with the laws of the State of California.</B></FONT></P>


<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;COLLATERAL.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Borrower acknowledges this Note is secured by property as described in a UCC&#151;1 Financing Statement
and a Deed of Trust on property located in San Bernardino County, State of California. That agreement contains the following due on sale provision: Lender may, at its option, declare immediately due
and payable all sums secured by this Note upon the sale or transfer, without the Lender's prior written consent, of all or any part of the Real Property, or any interest in the Real Property. A "sale
or transfer" means the conveyance of Real Property or any right, title or interest therein; whether legal, beneficial or equitable; whether voluntary or involuntary; whether by outright sale, deed,
installment sale contract, land contract, contract for deed, leasehold Interest with a term greater than three (3)&nbsp;years, lease&#151;option contract, or by sale, assignment, or transfer
of any beneficial interest in or to any land trust holding title to the Real Property, or by any other method of conveyance of Real Property interest, If any Trustor is a corporation, partnership or
limited liability company, transfer also includes any change in ownership of more than twenty&#151;five percent (25%) of the voting stock, partnership interests or limited liability company
interests, as the case may be, of </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

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<P><FONT SIZE=2>Trustor.
However, this option shall not be exercised by Lender if such exercise is prohibited by applicable law, </FONT></P>


<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WAIVER OF CONFIDENTIALITY OF BUSINESS ADDRESS.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Borrower hereby waives any rights to keep business address on file with the
Department of Motor Vehicles ("DMV") confidential from Lender. Borrower authorizes Lender, its agents, successors, and assigns to obtain business address from the DMV when Lender has legitimate need
for this information. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ARBITRATION.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any dispute arising out of or related to the promissory note, commercial guaranty, or any loan evidenced thereby
or collateral security (including without limitation, deeds of trust) therefor, including any dispute in a bankruptcy proceeding filed by or against either party, shall be determined by arbitration
administered by the American Arbitration Association ("AAA") in accordance with its Commercial Arbitration Rules and Supplemental Procedures for Financial Services Disputes, except as modified by this
agreement. The parties to the agreement each agree to submit to jurisdiction in California for the enforcement of this agreement, and judgment on the award rendered in any arbitration may be entered
in any court having jurisdiction over the parties. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
the extent not provided by this agreement, including the Rules incorporated herein, arbitration under this agreement shall be governed by California arbitration law. Arbitration under
this agreement shall be conducted in California in English and, unless otherwise agreed by the parties with respect to a particular dispute, shall be heard by a panel of three arbitrators. Disputes in
arbitration under this agreement shall be determined in accordance with the substantive law of the State of California, and statutes of limitations, waivers and estoppels which otherwise would apply
in a judicial proceeding shall apply. The arbitrators shall not have power to make an award of $1.0&nbsp;million or more against any party to an arbitration under this agreement unless it is in the
form of a statement of decision as described in California Code of Civil Procedure Section&nbsp;632, and the parties hereto specifically reserve the right, upon a petition to vacate, to have any
such award reviewed and vacated upon the same grounds as would result in reversal on appeal from a judgment after trial by court. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
arbitrators in any arbitration under this agreement shall be experienced in the areas of law raised by the subject matter of the dispute. Lists of prospective arbitrators shall
include retired judges. Notwithstanding the AAA rules, (a)&nbsp;any party may strike from a list of prospective arbitrators any Individual who is regarded by that party as not appropriate for the
dispute; and (b), if the arbitrator appointment cannot be made from the initial list of prospective arbitrators circulated by the AAA, a second and, if necessary, a third list shall be circulated and
exhausted before the AAA is empowered to make the appointment. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BUSINESS LOAN AGREEMENT.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Note is additionally subject to all the terms and conditions of a Business Loan Agreement of
even date herewith and any and all modifications and replacements thereof. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MINIMUM INTEREST CHARGE.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Borrower understands and agrees that even upon full prepayment of this Note, Lender is entitled to a
minimum interest charge of $100.00 </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/&nbsp;&nbsp;&nbsp;&nbsp;INITIALS TWO PAYMENT SCHEDULES DURING THE TERM OF THE NOTE in.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Borrower will pay this
loan in
accordance with the following payment schedule: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Interest Only Period. Twenty&#151;four (24)&nbsp;monthly payments of accrued interest beginning MARCH 20, 2001 and continuing to and including FEBRUARY 20,
2003 at the interest rate as set forth in the "Variable Interest Rate" section below. From the date herewith, this Note evidences a straight line of credit. Advances may be requested orally by
Borrower or by an authorized person. All oral requests shall be confirmed in writing on the day of the request. All communications, instructions, or directions by telephone or otherwise to Lender are
to be directed to Lender's Office shown above. The following party or parties are authorized to request advances </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

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<P><FONT SIZE=2>under
the line of credit until Lender receives from Borrower at Lender's Office shown above written notice of revocation of their authority: JACK ZHANG, President and MARY LUO, Secretary. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Mini&#151;Term Loan Period. After FEBRUARY 20, 2003, Borrower is not entitled to further advances. And, as long as Borrower is not in Default under this Note
or any Related Loan Documents, Lender will calculate a minimum monthly payment of principal and interest. The initial minimum monthly payment will be calculated using the then outstanding principal
balance and the then interest rate in effect for a term of approximately 36&nbsp;months including ONE final payment of all outstanding principal and accrued Interest on FEBRUARY 20, 2006 ("Final
Payment Date"). Borrower understands that the interest rate change will not occur more often than each MONTH during this Mini&#151;Term Period. Borrower's first payment is due on MARCH 20,
2003, and each subsequent payment is due on the same day of each month thereafter, until the Final Payment Date. The initial monthly payment will be calculated as if the loan is for a term expiring
approximately 36&nbsp;months after the Interest Only Period (the "Initial Amortization Period" and as if the loan was payable in equal monthly payments of principal and interest during the entire
Initial Amortization Period. The amount of the minimum monthly payment is subject to change at least once every six months during the term of the loan (Payment Change Date") beginning on the due date
of the 7th scheduled monthly payment, based on the interest rate effective the month preceding the Payment Change Date and the remaining principal balance as hereinafter provided. On each Payment
Change Date and beginning with that payment, the required minimum payment amount due on that date and on the due date of the monthly payment thereafter until the next payment Change Date (subject to
additional amounts to cover any shortfall in required interest payments as hereinafter provided), will be that amount which would be sufficient to repay the outstanding principal balance of the Note
as of the Payment Change Date, plus Interest accruing thereon at the annual rate in effect, in equal monthly payments as if the loan term was the remainder of the Initial Amortization Period; provided
that the full amount of unpaid principal and unpaid accrued interest will be due and payable on the Final Payment date. Borrower understands and agrees that the interest rate due on this Note may
change monthly and that in the event the interest rate increases at any time during the term of this Note, there s a possibility that such minimum monthly payments may not be sufficient to pay in full
all monthly accrued interest; in which event, Borrower agrees to pay to Lender, upon demand, such additional sums which, together with and in addition to the minimum monthly payment then in effect,
will be sufficient to pay in full all such accrued unpaid interest on the due date of each monthly payment hereunder. In the event of such increases in interest rate between Payment Change Dates,
Borrower understands that unpaid principal due on the Note may not be reduced by Borrower's monthly payments and that the amount of the final payment due on the Note may be greater than any prior
estimate. For purposes of computing the amount of interest accruing during the month preceding each payment due date, the annual interest rate computed as set forth above and the interest rate change
will not occur more often than each MONTH AS OF THE 20TH AND BASED ON THE INDEX AS OF THE 10TH. </FONT></P>

</UL>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PAYMENTS APPLICATION.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Nothwithstanding anything contained in this Note to the contrary, interest payable on the outstanding
principal balance shall be calculated, and each payment shall be applied by Lender, as it received on the specified due date for such payment. Borrower acknowledges and agrees that Lender will not
make any adjustments to the allocation of any payments made hereunder, even if such payments are not actually received on the applicable payment due date. </FONT></P>


<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;GENERAL PROVISIONS.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them.
Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive any applicable statute of limitations, presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

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<P><FONT SIZE=2>accommodation
maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan, or release any party or
guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice
to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE
TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.</B></FONT></P>

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<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2><B>BORROWER:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=6><BR><FONT SIZE=2><B>AMPHASTAR PHARMACEUTICALS,&nbsp;INC.</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><BR><FONT SIZE=2><B>By:</B></FONT></TD>
<TD WIDTH="39%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><HR NOSHADE><FONT SIZE=2><B>JACK ZHANG, PRESIDENT</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>CHANGE IN TERMS AGREEMENT  </B></FONT></P>

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<TH WIDTH="19%" ALIGN="CENTER"><FONT SIZE=1><B>Principal</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>Loan Date</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>Maturity</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Loan No</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Call</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Account</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Officer</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Initials</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%" ALIGN="RIGHT"><FONT SIZE=2><B>$6,200,000.00</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>04-06-2004</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><B>05-31-2005</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><B>18408074</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>BL 62/89</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><B>JL</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Any
item above containing "***" has been omitted due to text length limitations </FONT></P>

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<TR VALIGN="TOP">
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><B>Borrower:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2><B>AMPHASTAR PHARMACEUTICALS, INC.<BR>
11570 6th STREET<BR>
RANCHO CUCAMONGA, CA 91730</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><B>Lender:</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="36%"><FONT SIZE=2><B>CATHAY BANK, a California Bank Corp.<BR>
CORPORATE COMMERCIAL LOAN DEPT.<BR>
777 NORTH BROADWAY<BR>
LOS ANGELES, CA 90012</B></FONT></TD>
</TR>
</TABLE>
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<TD WIDTH="78%"><BR><FONT SIZE=2><B>Principal Amount: $6,200,000.00</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><BR><FONT SIZE=2><B>Date of Agreement: April&nbsp;6,2004</B></FONT></TD>
</TR>
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<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DESCRIPTION OF EXISTING INDEBTEDNESS.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This is a modification of that certain $6,200,000.00 Promissory Note executed by the
undersigned and dated February&nbsp;8, 2001 (the "Note") subject to a Change In Terms Agreements dated April&nbsp;26, 2002 and April&nbsp;30, 2003 and any and all renewals, extensions,
modifications, refinancings, consolidations and substitutions thereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Note is additionally subject to all the terms and conditions of a Business Loan Agreement dated February&nbsp;8, 2001, subject to a Modification of Business Loan Agreement dated
April&nbsp;26, 2002, April&nbsp;30, 2003 and of even date herewith and any and all modifications and replacements thereof. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DESCRIPTION OF COLLATERAL.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Note continues to be secured by property as described In a UCC&#151;1 Financing
Statement and a Deed of Trust executed by respective Trustors on real property located in San Bernardino County, State of California. </FONT></P>


<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DESCRIPTION OF CHANGE IN TERMS.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;For good and valuable consideration, Lender and Borrower hereby agree to modify the Note as
follows: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
maturity date of the Note is hereby extended to May&nbsp;31, 2005, at which time the entire unpaid principal balance and accrued interest will be due and payable.
The next scheduled monthly payment of accrued interest is due April&nbsp;30, 2004, and all subsequent payments are due on the same day of each month after that </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following minimum interest rate is added to the Note: NOTICE: Under no circumstances will the interest rate on the Note be less than 4.000% (the "Interest Rate
Floor") or more than the maximum rate allowed by applicable law; provided, however, that if this Change in Terms Agreement changes the amount of the Interest Rate Floor, the new amount of the Interest
Rate Floor will not be effective until such time (a)&nbsp;all conditions to the effectiveness of this Change in Terms Agreement are satisfied, (b)&nbsp;all documents required by Lender in
connection with this Change in Terms Agreement have been received, and (c)&nbsp;Lender's internal loan department has made such adjustments to the Lender's automated loan system as may be necessary
to change the amount of the Interest Rate Floor. </FONT></P>

</UL>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CONTINUING VALIDITY.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Except as expressly changed by this Agreement, the terms of the original obligation or obligations,
including all agreements evidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender's right to strict performance
of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute a satisfaction of the obligation(s). It </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P><FONT SIZE=2>is
the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), including accommodation parties, unless a party is expressly released by Lender in
writing. Any maker or endorser, including accommodation makers, will not be released by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below,
then all persons signing below acknowledge that this Agreement is given conditionally, based on the representation to Lender that the non&#151;signing party consents to the changes and
provisions of this Agreement or otherwise will not be released by it. This waiver applies not only to any Initial extension, modification or release, but also to all such subsequent actions. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT. BORROWER AGREES TO THE TERMS OF THE
AGREEMENT.</B></FONT></P>

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<TD COLSPAN=2><FONT SIZE=2><B>BORROWER:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=6><BR><FONT SIZE=2><B>AMPHASTAR PHARMACEUTICALS,&nbsp;INC.</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><BR><FONT SIZE=2><B>By:</B></FONT></TD>
<TD WIDTH="39%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><HR NOSHADE><FONT SIZE=2><B>JACK ZHANG, President of AMPHASTAR PHARMACEUTICALS&nbsp;INC.</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="26%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>
<P><br><A NAME="05BHL1063_8">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_lh1064_1">Exhibit 10.11</A></FONT><BR>

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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.12
<SEQUENCE>9
<FILENAME>a2151158zex-10_12.htm
<DESCRIPTION>EXHIBIT 10.12
<TEXT>
<HTML>
<HEAD>
</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<BR>
<FONT SIZE=3 ><A HREF="#05BHL1063_9">QuickLinks</A></FONT>
<font size=3> -- Click here to rapidly navigate through this document</font>
<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="page_li1064_1_1"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="li1064_exhibit_10.12"> </A>
<A NAME="toc_li1064_1"> </A>
<BR></FONT><FONT SIZE=2><B>Exhibit 10.12    <BR>    </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>COMMERCIAL SECURITY AGREEMENT  </B></FONT></P>

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<TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>Principal<BR>
$6,200,000.00</B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Loan Date<BR>
02-08-2001</B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>Maturity</B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Loan No<BR>
610040016</B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER"><FONT SIZE=1><B>Call<BR>
BL 66</B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>Collateral<BR>
89</B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>Account</B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Officer<BR>
JL</B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Initials</B></FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=17 VALIGN="TOP"><HR NOSHADE></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=17 VALIGN="TOP"><FONT SIZE=2> References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item</FONT></TD>
</TR>
</TABLE>
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<TD WIDTH="11%"><FONT SIZE=2><B>Borrower:</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="34%"><FONT SIZE=2><B>AMPHASTAR PHARMACEUTICALS,&nbsp;INC.</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2><B>(TIN: Lender:</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="34%"><FONT SIZE=2><B>CATHAY BANK, a California Banking Corporation</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="34%"><FONT SIZE=2><B>33-0702205)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="34%"><FONT SIZE=2><B>INTERNATIONAL DEPARTMENT</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="34%"><FONT SIZE=2><B>11570 6th STREET</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="34%"><FONT SIZE=2><B>777 NORTH BROADWAY</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="11%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="34%"><FONT SIZE=2><B>RANCHO CUCAMONGA, CA 91730</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="34%"><FONT SIZE=2><B>LOS ANGELES, CA 90012</B></FONT></TD>
</TR>
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<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS COMMERCIAL SECURITY AGREEMENT is entered into between AMPHASTAR PHARMACEUTICALS,&nbsp;INC. (referred to below as "Grantor"); and CATHAY
BANK, a California Banking Corporation (referred to below as "Lender"). For valuable consideration, Grantor grants to Lender a security interest in the Collateral to secure the Indebtedness and agrees
that Lender shall have the rights stated in this Agreement with respect to the Collateral, In addition to all other rights which Lender may have by law.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DEFINITIONS.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The following words shall have the following meanings when used in this Agreement. Terms not otherwise defined
in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. All references to dollar amounts shall mean amounts in lawful money of the United States of America. </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Agreement.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>The word "Agreement" means this Commercial Security Agreement, as this Commercial Security Agreement may be
amended or modified from time to time, together with all exhibits and schedules attached to this Commercial Security Agreement from time to time. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Collateral.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>The word "Collateral" means the following described property of Grantor, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>All Accounts Receivable, inventory and Leasehold Improvements on the property located at 11570 6th Street, Rancho Cucamonga, CA 91730  </B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the word "Collateral" includes all the following, whether now owned or hereafter acquired, whether now existing or hereafter arising, and wherever located: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;All
attachments, accessions, accessories, tools, parts, supplies, increases, and additions to and all replacements of and substitutions for any property described above, </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;All
products and produce of any of the property described in this Collateral section. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;All
accounts, general intangibles, instruments, rents, monies, payments, and all other rights, arising out of a sale, lease, or other disposition of any of the property
described in this Collateral section. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;All
proceeds (including insurance proceeds) from the sale, destruction, loss, or other disposition of any of the property described in this Collateral section. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;All
records and data relating to any of the property described in this Collateral section, whether In the form of a writing, photograph, microfilm, microfiche, or
electronic </FONT></P>

</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>1</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_li1064_1_2"> </A>
<UL>
<UL>
<BR>

<P><FONT SIZE=2>media,
together with all of Grantor's right, title, and interest in and to all computer software required to utilize, create, maintain, and process any such records or data on electronic media. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some
or all of the Collateral may be located on the following described real estate: </FONT></P>

<UL>
<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>PARCEL 4 OF PARCEL MAP 12338, IN THE CITY OF RANCHO CUCAMONGA, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 155 OF PARCEL MAPS,
PAGES 66, 67, AND 68, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.</B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Event of Default.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>The words "Event of Default" mean and include without limitation any of the Events of Default set forth
below in the section titled "Events of Default." </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Grantor.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>The word "Grantor" means AMPHASTAR PHARMACEUTICALS,&nbsp;INC., its successors and assigns </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Guarantor.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>The word "Guarantor" means and includes without limitation each and all of the guarantors, sureties, and
accommodation parties in connection with the Indebtedness. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Indebtedness.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>The word "Indebtedness" means and includes without limitation all promissory notes and credit agreements and
any renewals, extensions, modifications, consolidations and substitutions thereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Lender.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>The word "Lender" means CATHAY BANK, a California Banking Corporation, its successors and assigns. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Note.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>The word "Note" means the note or credit agreement dated February&nbsp;8, 2001, in the principal amount of
$6,200,000.00 from AMPHASTAR PHARMACEUTICALS,&nbsp;INC. to Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of and substitutions for the note
or credit agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Related Documents.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>The words "Related Documents" mean and include without limitation all promissory notes, credit agreements,
loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, and all other instruments, agreements and documents, whether now or hereafter existing, executed
in connection with the Indebtedness. </FONT></P>

</UL>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OBLIGATIONS OF GRANTOR.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Grantor warrants and covenants to Lender as follows: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Perfection of Security Interest.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Grantor agrees to execute such financing statements and to take whatever other actions are
requested by Lender to perfect and continue Lender's security interest in the Collateral, Upon request of Lender, Grantor will deliver to Lender any and all of the documents evidencing or constituting
the Collateral, and Grantor will note Lender's interest upon any and all chattel paper if not delivered to Lender for possession by Lender. Grantor hereby appoints Lender as its irrevocable
attorney&#151;in&#151;fact the purpose of executing any documents necessary to perfect or to continue the security interest granted in this Agreement. Lender may at any time, and without
further authorization from Grantor, file&nbsp;a carbon, photographic or other reproduction of any financing statement or of this Agreement for use as a financing statement. Grantor will reimburse
Lender for all expenses for the perfection and the continuation of the perfection of Lender's
security interest in the Collateral. Grantor promptly will notify Lender before any change in Grantor's name including any change to the assumed business names of Grantor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>No Violation.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>The execution and delivery of this Agreement will not violate any law or agreement governing Grantor or to
which Grantor is a party, and its certificate or articles of incorporation and bylaws do not prohibit any term or condition of this Agreement. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

<HR NOSHADE>
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<A NAME="page_li1064_1_3"> </A>
<UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Enforceability of Collateral.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>To the extent the Collateral consists of accounts, chattel paper, or general intangibles, the
Collateral is enforceable in accordance with its terms, is genuine, and complies with applicable laws concerning form, content and manner of preparation and execution, and all persons appearing to be
obligated on the Collateral have authority and capacity to contract and are in fact obligated as they appear to be on the Collateral. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Location of the Collateral.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Grantor, upon request of Lender, will deliver to Lender in form satisfactory to Lender a schedule
of real properties and Collateral locations relating to Grantor's operations, including without limitation the following: (a)&nbsp;all real property owned or being purchased by Grantor;
(b)&nbsp;all real property being rented or leased by Grantor; (c)&nbsp;all storage facilities owned, rented, leased, or being used by Grantor; and (d)&nbsp;all other properties where Collateral
is or may be located. Except In the ordinary course of its business, Grantor shall not remove the Collateral from its existing locations without the prior written consent of Lender. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Removal of Collateral.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Grantor shall keep the Collateral (or to the extent the Collateral consists of intangible property
such as accounts, the records concerning the Collateral) at Grantor's address shown above, or at such other locations as are acceptable to Lender, Some or all of the Collateral may be located at the
real property described above. Except in the ordinary course of its business, including the sales of inventory, Grantor shall not remove the Collateral from its existing locations without the prior
written consent of Lender. To the extent that the Collateral consists of vehicles, or other titled property, Grantor shall not take or permit any action which would require application for
certificates of title for the vehicles outside the State of California, without the prior written consent of Lender. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Transactions Involving Collateral.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Except for inventory sold or accounts collected in the ordinary course of Grantor's
business, Grantor shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral. While Grantor is not in default under this Agreement, Grantor may sell inventory, but only in the
ordinary course of its business and only to buyers who quality as a buyer in the ordinary course of business. A sale in the ordinary course of Grantor's business does not include a transfer in partial
or total satisfaction of a debt or any bulk sale. Grantor shall not pledge, mortgage, encumber or otherwise permit the Collateral to be subject to any lien, security interest, encumbrance, or change,
other than the security interest provided for in this Agreement, without prior written consent of Lender. This includes security interests even if junior in right to the right to the security
interests granted under this
Agreement. Unless waived by Lender, all proceeds from any disposition of the Collateral (for whatever reason) shall be held in trust for Lender and shall not be commingled with any other funds:
provided however, this requirement shall not constitute consent by Lender to any sale or other disposition. Upon receipt, Grantor shall immediately deliver any such proceeds to Lender. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Title.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Grantor represents and warrants to Lender that it holds good and marketable title to the Collateral, free and clear of
all liens and encumbrances except for the lien of this Agreement. No financing statement covering any of the Collateral is on file in any public office other than those which reflect the security
interest created by this Agreement or to which Lender has specifically consented. Grantor shall defend Lender's rights in the Collateral against the claims and demands of all other persons. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Collateral Schedules and Locations.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Insofar as the Collateral consists of inventory, Grantor shall deliver to Lender, as
often as Lender shall require, such lists, descriptions, and designations of such Collateral as Lender may require to identify the nature, extent, and location of such Collateral. Such information
shall be submitted for Grantor and each of its subsidiaries or related companies. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Maintenance and Inspection of Collateral.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Grantor shall maintain all tangible Collateral in good condition and repair.
Grantor will not commit or permit damage to or destruction of the </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

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<UL>
<BR>

<P><FONT SIZE=2>Collateral
or any part of the Collateral. Lender and its designated representatives and agents shall have the right at all reasonable times to examine, inspect, and audit the Collateral wherever
located. Grantor shall immediately notify Lender of all cases involving the return, rejection, repossession, loss or damage of or to any Collateral; of any request for credit or adjustment or of any
other dispute arising with respect to the Collateral; and generally of all happenings and events affecting the, Collateral or the value or the amount of the Collateral. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Taxes, Assessments and Liens.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Grantor will pay when due all taxes, assessments and liens upon the Collateral, its use or
operation, upon this Agreement, upon any promissory note or notes evidencing the Indebtedness, or upon any of the other Related Documents. Grantor may withhold any such payment or may elect to contest
any lien if Grantor is in good faith conducting an appropriate proceeding to contest the obligation to pay and so long as Lender's interest in the Collateral is not jeopardized in Lender's sole
opinion. If the Collateral is subjected to a lien which is not discharged within fifteen (15)&nbsp;days, Grantor shall deposit with Lender cash, a sufficient corporate surety bond or other security
satisfactory to Lender in an amount adequate to provide for the discharge of the lien plus any interest, costs, attorneys' fees or other charges that could accrue as a result of foreclosure or sale of
the Collateral. In any contest Grantor shall defend itself and Lender and shall satisfy any final adverse judgment before enforcement against the Collateral. Grantor shall name Lender as an additional
obligee under any surety bond furnished in the contest proceedings. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Compliance With Governmental Requirements.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Grantor shall comply promptly with all laws, ordinances, rules and regulations of
all governmental authorities, now or hereafter in effect, applicable to the ownership, production, disposition, or use of the Collateral. Grantor may contest in good faith any such law, ordinance or
regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Lender's interest in the Collateral, In Lender's opinion, is not jeopardized. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Hazardous Substances.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Grantor represents and warrants that the Collateral never has been, and never will be so tong as this
Agreement remains a lien on the Collateral, used for the generation, manufacture, storage, transportation, treatment, disposal, release or threatened release of any hazardous waste or substance, as
those terms are defined in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section&nbsp;9601, et seq. ("CERCLA"), the Superfund Amendments
and Reauthorization Act of 1986, Pub. L. No.&nbsp;99&#151;499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section&nbsp;1801, et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section&nbsp;6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety Code, Section&nbsp;25100, et seq., or other applicable state or
Federal laws, rules, or regulations adopted pursuant to any of the foregoing. The terms "hazardous waste" and "hazardous substance" shall also include, without limitation, petroleum and petroleum
by&#151;products or any fraction thereof and asbestos. The representations and warranties contained herein are based on Grantor's due diligence in investigating the Collateral for hazardous
wastes and substances. Grantor hereby (a)&nbsp;releases and waives any future claims against Lender for indemnity or contribution in the event Grantor becomes liable for cleanup or other costs under
any such laws, and (b)&nbsp;agrees to indemnify and hold harmless Lender against any and all claims and losses resulting from a breach of this provision of this Agreement. This obligation to
Indemnify shall survive the payment of the Indebtedness and the satisfaction of this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Maintenance of Casualty Insurance.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Grantor shall procure and maintain all risks insurance, including without limitation fire,
theft and liability coverage together with such other insurance as Lender may require with respect to the Collateral, in form, amounts, coverages and basis reasonably acceptable to Lender and issued
by a company or companies reasonably acceptable to Lender. Grantor, upon request of Lender, will deliver to Lender from time to time the policies or </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

<HR NOSHADE>
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<UL>
<BR>

<P><FONT SIZE=2>certificates
of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least thirty (30)&nbsp;days' prior written notice to
Lender and not including any disclaimer of the insurer's liability for failure to give such a notice. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender
will not be impaired in any way by any act, omission or default of Grantor or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest,
Grantor will provide Lender with such loss payable or other endorsements as Lender may require. If Grantor at any time fails to obtain or maintain any insurance as required under this Agreement,
Lender may (but shall not be obligated to) obtain such insurance as Lender deems appropriate, including if it so chooses "single interest insurance1' which will cover only Lender's interest in the
Collateral. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Application of Insurance Proceeds.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Grantor shall promptly notify Lender of any loss or damage to the Collateral. Lender may
make proof of loss if Grantor fails to do so within fifteen (15)&nbsp;days of the casualty. All proceeds of any insurance on the Collateral, including accrued proceeds thereon, shall be held by
Lender as part of the Collateral. If Lender consents to repair or replacement of the damaged or destroyed Collateral, Lender shall, upon satisfactory proof of expenditure, pay or reimburse Grantor
from the proceeds for the reasonable cost of repair or restoration, If Lender does not consent to repair or replacement of the Collateral, Lender shall retain a sufficient amount of the proceeds to
pay all of the Indebtedness, and shall pay the balance to Grantor. Any proceeds which have not been disbursed within six (6)&nbsp;months after their receipt and which Grantor has not committed to
the repair or restoration of the Collateral shall be used to prepay the Indebtedness. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Insurance Reserves.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Lender may require Grantor to maintain with Lender reserves for payment of insurance premiums, which
reserves shall be created by monthly payments from Grantor of a sum estimated by Lender to be sufficient to produce, at least fifteen (15)&nbsp;days before the premium due date, amounts at least
equal to the Insurance premiums to be paid. If fifteen (15)&nbsp;days before payment is due, the reserve funds are insufficient, Grantor shall upon demand pay any deficiency to Lender. The reserve
funds shall be held by Lender as a general deposit and shall constitute a non&#151;interest&#151;bearing account which Lender may satisfy by payment of the insurance premiums required to
be paid by Grantor as they become due. Lender does not hold the reserve funds in trust for Grantor, and Lender is not the agent of Grantor for payment of the insurance premiums required to be paid by
Grantor. The responsibility for the payment of premiums shall remain Grantor's sole responsibility. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Insurance Reports.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Grantor, upon request of Lender, shall furnish to Lender reports on each existing policy of insurance
showing such information as Lender may reasonably request including the following: (a)&nbsp;the name of the insurer; (b)&nbsp;the risks insured; (c)&nbsp;the amount of the policy; (d)&nbsp;the
property insured; (e)&nbsp;the then current value on the basis of which Insurance has been obtained and the manner of determining that value; and (f)&nbsp;the expiration date of the policy. In
addition, Grantor shall upon request by Lender (however not more often than annually) have an independent appraiser satisfactory to Lender determine, as applicable, the cash value or replacement cost
of the Collateral. </FONT></P>

</UL>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;GRANTOR'S RIGHT TO POSSESSION.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Until default, Grantor may have possession of the tangible personal property and beneficial
use of all the Collateral and may use it in any lawful manner not inconsistent with this Agreement or the Related Documents, provided that Grantor's right to possession and beneficial use shall not
apply to any Collateral where possession of the Collateral by Lender is required by law to perfect Lender's security interest in such Collateral. If Lender at any time has possession of any
Collateral, whether before or after an Event of Default, Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral if Lender takes such action for that
purpose as Grantor shall request or as Lender, in Lender's sole discretion, shall deem </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

<HR NOSHADE>
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<A NAME="page_li1064_1_6"> </A>

<P><FONT SIZE=2>appropriate
under the circumstances, but failure to honor any request by Grantor shall not of itself be deemed to be a failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties, nor to protect, preserve or maintain any security interest given to secure the Indebtedness. </FONT></P>


<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EXPENDITURES BY LENDER.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If not discharged or paid when due, Lender may (but shall not be obligated to) discharge or pay any
amounts required to be discharged or paid by Grantor under this Agreement, including without limitation all taxes, liens, security interests, encumbrances, and other claims, at any time levied or
placed on the Collateral. Lender also may (but shall not be obligated to) pay all costs for insuring, maintaining and preserving the Collateral. All such expenditures incurred or paid by Lender for
such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Grantor. All such expenses shall become a part of the
Indebtedness and, at Lenders option, will (a)&nbsp;be payable on demand, (b)&nbsp;be added to the balance of the Note and be apportioned among and be payable with any installment payments to
become due during either (i)&nbsp;the term of any applicable insurance policy or (ii)&nbsp;the remaining term of the Note, or (c)&nbsp;be treated as a balloon payment which will be due and
payable at the Note's maturity. This Agreement also will secure payment of these amounts. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon the
occurrence of an Event of Default. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EVENTS OF DEFAULT.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Each of the following shall constitute an Event of Default under this Agreement: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Default on Indebtedness.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Failure of Grantor to make any payment when due on the Indebtedness. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Other Defaults.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Failure of Grantor to comply with or to perform any other term, obligation, covenant or condition contained
in this Agreement or in any of the Related Documents or in any other agreement between Lender and Grantor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>False Statement.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Any warranty, representation or statement made or furnished to Lender by or on behalf of Grantor under this
Agreement, the Note or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Defective Collateralization.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>This Agreement or any of the Related Documents ceases to be in full force and effect (including
failure of any collateral documents to create a valid and perfected security interest or lien) at any time and for any reason. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Insolvency.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>The dissolution or termination of Grantor's existence as a going business, the Insolvency of Grantor, the
appointment of a receiver for any part of Grantor's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Grantor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Creditor or Forfeiture Proceedings.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding,
self&#151;help, repossession or any other method, by any creditor of Grantor or by any governmental agency against the Collateral or any other collateral securing the Indebtedness. This
includes a garnishment of any of Grantor's deposit accounts with Lender. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Events Affecting Guarantor.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or
such Guarantor dies or becomes incompetent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Adverse Change.</B></FONT><FONT SIZE=2> A material adverse change occurs in Grantor's financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Insecurity.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Lender, in good faith, deems itself insecure. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

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<BR>
</UL>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;RIGHTS AND REMEDIES ON DEFAULT.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If an Event of Default occurs under this Agreement, at any time thereafter, Lender shall have
all the rights of a secured party under the California Uniform Commercial Code. In addition and without limitation, Lender may exercise any one or more of the following rights and remedies: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Accelerate Indebtedness.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Lender may declare the entire Indebtedness, including any prepayment penalty which Grantor would be
required to pay, immediately due and payable, without notice. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Assemble Collateral.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Lender may require Grantor to deliver to Lender all or any portion of the Collateral and any and all
certificates of title and other documents relating to the Collateral. Lender may require Grantor to assemble the Collateral and make it available to Lender at a place to be designated by Lender.
Lender also shall have full power to enter upon the property of Grantor to take possession of and remove the Collateral. If the Collateral contains other goods not covered by this Agreement at the
time of repossession, Grantor agrees Lender may take such other goods, provided that Lender makes reasonable efforts to return them to Grantor after repossession. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Sell the Collateral.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Lender shall have full power to sell, lease, transfer, or otherwise deal with the Collateral or proceeds
thereof in its own name or that of Grantor. Lender may sell the Collateral at public auction or private sale. Unless the Collateral threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Lender will give Grantor reasonable notice of the time after which any private sale or any other intended disposition of the Collateral is to be made. The requirements of
reasonable notice shall be met if such notice is given at least ten (10)&nbsp;days, or such lesser time as required by state law, before the time of the sale or disposition. All expenses relating to
the disposition of the Collateral, including without limitation the expenses of retaking, holding, insuring, preparing for sale and selling the Collateral, shall become a part of the Indebtedness
secured by this Agreement and shall be payable on demand, with interest at the Note rate from date of expenditure until repaid. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Appoint Receiver.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>To the extent permitted by applicable law, Lender shall have the following rights and remedies regarding
the appointment of a receiver: (a)&nbsp;Lender may have a receiver appointed as a matter of right, (b)&nbsp;the receiver may be an employee of Lender and may serve without bond, and (c)&nbsp;all
fees of the receiver and his or her attorney shall become part of the Indebtedness secured by this Agreement and shall be payable on demand, with interest at the Note rate from date of expenditure
until repaid. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Collect Revenues, Apply Accounts.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Lender, either itself or through a receiver, may collect the payments, rents, income, and
revenues from the Collateral. Lender may at any time in its discretion transfer any Collateral into its own name or that of its nominee and receive the payments, rents, Income, and revenues therefrom
and hold the same as security for the Indebtedness or apply it to payment of the Indebtedness in such order of preference as Lender may determine. Insofar as the Collateral consists of accounts,
general intangibles, insurance policies, instruments, chattel paper, chooses in action, or similar property, Lender may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose, or
realize on the Collateral as Lender may determine, whether or not Indebtedness or Collateral is then due, For these purposes, Lender may, on behalf of and in the name of Grantor, receive, open and
dispose of mail addressed to Grantor; change any address to which mail and payments are to be sent; and endorse notes, checks, drafts, money orders, documents of title, instruments and items
pertaining to payment, shipment, or storage of any Collateral, To facilitate collection, Lender may notify account debtors and obligors on any Collateral to make payments directly to Lender. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Obtain Deficiency.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>If Lender chooses to sell any or all of the Collateral, Lender may obtain a judgment against Grantor for
any deficiency remaining on the Indebtedness due to Lender after </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

<HR NOSHADE>
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<UL>
<BR>

<P><FONT SIZE=2>application
of all amounts received from the exercise of the rights provided in this Agreement. Grantor shall be liable for a deficiency even if the transaction described in this subsection is a sale
of accounts or chattel paper. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Other Rights and Remedies.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Lender shall have all the rights and remedies of a secured creditor under the provisions of the
Uniform Commercial Code, as may be amended from time to time. In addition, Lender shall have and may exercise any or all other rights and remedies it may have available at law, in equity, or
otherwise. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Cumulative Remedies.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>All of Lender's rights and remedies, whether evidenced by this Agreement or the Related Documents or by
any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make
expenditures or to take action to perform an obligation of Grantor under this Agreement, after Grantor's failure to perform, shall not affect Lender's right to declare a default and to exercise its
remedies. </FONT></P>

</UL>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MISCELLANEOUS PROVISIONS.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The following miscellaneous provisions are a part of this Agreement: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Amendments.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the
parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be
charged or bound by the alteration or amendment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Applicable Law.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>This Agreement has been delivered to Lender and accepted by Lender in the State of California. If there is a
lawsuit, Grantor agrees upon Lender's request to submit to the jurisdiction of the courts of the State of California. Lender and Grantor hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by either Lender or Grantor against the other. This Agreement shall be governed by and construed in accordance with the laws of the State of California. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Attorneys' Fees; Expenses.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Grantor agrees to pay upon demand all of Lender's costs and expenses, including attorneys' fees
and Lender's legal expenses, incurred in connection with the enforcement of this Agreement. Lender may pay someone else to help enforce this Agreement, and Grantor shall pay the costs and expenses of
such enforcement, Costs and expenses Include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (and including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post&#151;judgment collection services. Grantor also shall pay
all court costs and such additional fees as may be directed by the court. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Caption Headings.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or
define the provisions of this Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Multiple Parties; Corporate Authority.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>All obligations of Grantor under this Agreement shall be joint and several, and all
references to Grantor shall mean each and every Grantor. This means that each of the persons signing below is responsible for all obligations in this Agreement. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Notices.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>All notices required to be given under this Agreement shall be given in writing, may be sent by telefacsimile
(unless otherwise required by law), and shall be effective when actually delivered or when deposited with a nationally recognized overnight courier or deposited in the United States mall, first class,
postage prepaid, addressed to the party to whom the notice is to be given at the address shown above. Any party may change its address for notices under this Agreement by giving formal written notice
to the other parties, specifying that the purpose of the notice is to change the party's address. To the extent permitted by applicable law, if there is more </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

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<UL>
<BR>

<P><FONT SIZE=2>than
one Grantor, notice to any Grantor will constitute notice to all Grantors. For notice purposes, Grantor will keep Lender informed at all times of Grantor's current address(es). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Power of Attorney.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Grantor hereby appoints Lender as its true and lawful attorney&#151;in&#151;fact,
irrevocably, with full power of substitution to do the following: (a)&nbsp;to demand, collect, receive, receipt for, sue and recover all sums of money or other property which may now or hereafter
become due, owing or payable from the Collateral; (b)&nbsp;to execute, sign and endorse any and all claims, instruments, receipts, checks, drafts or warrants issued in payment for the Collateral;
(c)&nbsp;to settle or compromise any and all claims arising under the Collateral, and, in the place and stead of Grantor, to execute and deliver its release and settlement for the claim; and
(d)&nbsp;to file any claim or claims or to take any action or institute or take part in any proceedings, either In its own name or in the name of Grantor, or otherwise, which in the discretion of
Lender may seem to be necessary or advisable. This power is given as security for the Indebtedness, and the authority hereby conferred is and shall be irrevocable and shall remain in full force and
effect until renounced by Lender. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Preference Payments.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Any monies Lender pays because of an asserted preference claim in Borrowing's bankruptcy will become a
part of the indebtedness and, at Lender's option, shall be payable by Borrower as provided above in the "EXPENDITURES BY LENDER" paragraph. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Severability.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>If a court of competent jurisdiction finds any provision of this Agreement to be invalid or unenforceable as to
any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances. If feasible, any [rest of this sentence and the
next line missing] </FONT></P>

</UL>

<P><FONT SIZE=2>cannot
be so modified, it shall be stricken and all other provisions of this Agreement In all other respects shall remain valid and enforceable. </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Successor Interests.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>Subject to the limitations set forth above on transfer of the Collateral, this Agreement shall be
binding upon and inure to the benefit of the parties, their successors and assigns. </FONT></P>

</UL>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Waiver.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and
signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement
shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Grantor, shall constitute a waiver of any of Lender's rights or of any of Grantor's obligations as to any future transactions. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases
such consent may be granted or withheld in the sole discretion of Lender. </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Waiver of Co-obligor's Rights.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2>If more than one person is obligated for the Indebtedness, Borrower irrevocably
waives, disclaims and relinquishes all claims against such other person which Borrower has or would otherwise have by virtue of payment of the Indebtedness or any part thereof, specifically including
but not limited to all rights of indemnity, contribution or exoneration. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>GRANTOR ACKNOWLEDGES HAVING READ ALL. THE PROVISIONS OF THIS COMMERCIAL SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
FEBRUARY&nbsp;8,2001.</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

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<P><FONT SIZE=2><B>GRANTOR:  </B></FONT></P>

<P><FONT SIZE=2><B>AMPHASTAR PHARMACEUTICALS,&nbsp;INC.  </B></FONT></P>

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<TD WIDTH="9%"><FONT SIZE=2><B>By:</B></FONT></TD>
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<TD WIDTH="89%"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD WIDTH="89%"><FONT SIZE=2><B>JACK ZHANG, PRESIDENT</B></FONT></TD>
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<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

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<P><br><A NAME="05BHL1063_9">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_li1064_1">Exhibit 10.12</A></FONT><BR>
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<TYPE>EX-10.13
<SEQUENCE>10
<FILENAME>a2151158zex-10_13.htm
<DESCRIPTION>EXHIBIT 10.13
<TEXT>
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<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="lk1064_exhibit_10.13"> </A>
<A NAME="toc_lk1064_1"> </A>
<BR></FONT><FONT SIZE=2><B>Exhibit 10.13    <BR>    </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>LEASE  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>by and between  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>DENNIS A. JEBBIA, a married man as his sole and separate<BR>
property, GLORIA JEBBIA, an unmarried woman,<BR>
and<BR>
GLORIA JEBBIA,<BR>
As Trustee Of The Norf James Jebbia Testamentary Trust Dated October&nbsp;18, 1982,<BR>
as Landlord<BR>
and<BR>
INTERNATIONAL MEDICATION SYSTEMS, LIMITED,<BR>
a Delaware corporation,<BR>
as Tenant  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <FONT SIZE=2><B>Dated: July&nbsp;24, 1990  </B></FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>LEASE  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS LEASE ("Lease") is made and entered into as of July&nbsp;24, 1990, by-and between Dennis A. Jebbia, a married man as his sole and separate
property, Gloria Jebbia, an unmarried woman, and Gloria Jebbia, as Trustee of the Norf James Jebbia Testamentary Trust dated October&nbsp;18, 1982, as landlord ("Landlord"), and International
Medication Systems, Limited, a Delaware corporation, as tenant ("Tenant"). </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>RECITALS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, Landlord is the owner of that certain land ("Land") located in the County of Los Angeles, State of California, more particularly described in Exhibit "A"
attached hereto and that certain building ("Building") situated on the Land, the address of which 1878-86-90 Santa Anita Avenue, South El Monte, California 91733, as depicted
in the site plan attached hereto as Exhibit "B"; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
Landlord desires to lease the Land, the Building and all fixtures attached thereto ("Leased Premises"); </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
Tenant desires to hire the Leased Premises from Landlord, upon the terms and conditions contained herein; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW,
THEREFORE, in consideration of the foregoing, the parties hereby agree as follows: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 1<BR>
FUNDAMENTAL LEASE PROVISIONS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.1&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Date</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Lease is dated as of July&nbsp;24, 1990. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.2&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Base Rent</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The monthly base rental ("Base Rent") for the
initial period shall be Twenty Thousand Five Hundred and No/100 Dollars ($20,500.00) per month, subject to adjustment as set forth in Article&nbsp;4. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.3&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Additional Rent</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In addition to the Rent, the Tenant shall
pay all of the Real Estate Taxes, as defined in Article&nbsp;6 of this Lease. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.4&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Term</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The initial term ("Initial Term") of the Lease shall
be ten (10)&nbsp;years (Article&nbsp;3), commencing upon the date Landlord takes title to the Land and the Building. Upon six (6)&nbsp;months prior written notice for each extension, Tenant may
extend the Initial Term for three (3)&nbsp;additional periods of five (5)&nbsp;years each ("Extension Terms") (Article&nbsp;3). The Initial Term and all Extension Terms shall be referred to
collectively herein as the "Term." </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.5&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Option to Terminate</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Tenant may terminate this Lease at any
time after the tenth anniversary of the Rent Commencement Date upon six (6)&nbsp;months' written notice to Landlord (Article&nbsp;3). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.6&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Conflicts</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Article&nbsp;1 is provided for summary and
convenience only. Any conflict between this article and the following articles shall be resolved in favor of the following articles. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 2<BR>
LEASE OF PREMISES  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the terms, covenants, and conditions contained herein, Landlord hereby leases to Tenant, and Tenant hereby Leases from Landlord, the Leased Premises,
together with all rights, privileges, easements and appurtenances relating thereto. It is hereby acknowledged by Landlord and Tenant that the net, usable square footage for the Building is forty
thousand eight hundred (40,800) square feet. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 3<BR>
TERM  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.1&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Initial Term</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Initial Term of this Lease shall be ten
(10)&nbsp;years, commencing on the date Landlord takes title to the Leased Premises (the Term Commencement Date"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.2&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Extension Terms</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Provided Tenant (i)is not in default in
accordance with Article&nbsp;19 of the Lease, (ii)&nbsp;is not diligently prosecuting the cure thereof, or (iii)&nbsp;is not contesting in good faith the existence of such default, upon written
notice of each extension given to Landlord in accordance with Section&nbsp;1.4 hereof, Tenant may extend the Initial Term the number of times and for the additional periods specified in
Article&nbsp;1 hereof. Such additional periods are herein referred to collectively as "Extension Terms," and individually as an "Extension Term". All provisions of this Lease shall remain in full
force and effect for each Extension Term, except for the Base Rent, which shall be calculated in accordance with Section&nbsp;4.3 hereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.3&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Option to Terminate</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall have the option to
terminate this Lease in accordance with Article&nbsp;1 hereof upon six (6)&nbsp;months' written notice to Landlord. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 4<BR>
RENT  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>4.1&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Rent Commencement Date</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Rent Commencement Date shall
mean the Term Commencement Date. </FONT></P>

<P><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Base Rent.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;During the Initial Term hereof, Base Rent shall be payable in equal monthly installments
of Twenty Thousand Five Hundred and No/100 Dollars ($20,500.00), subject to the rental adjustment set forth in this Article hereof, in advance, on the first day of each month. On the second
anniversary of the Rent Commencement Date and on every two-year anniversary thereafter during the Initial Term, the Base Rent shall be increased to an amount equal to one hundred eight
percent (108%) of the monthly Base Rent for the immediately preceding year. Base Rent and Additional Rent (defined below) shall be referred to collectively as "Rent". Commencing upon the Rent
Commencement Date, Tenant shall pay Rent to Landlord at 2468 Huntington Drive, San Marino, California 91108 or at such other place as Landlord may from time to time designate by written notice to
Tenant. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>4.3&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Extension Term Rent</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Base Rent during each of the
Extension Terms shall be adjusted to equal ninety percent (90%) of the fair market rental rate ("Fair Market Rental Rate") for the Leased Premises as of each of the following dates (individually
referred to as the "Market Adjustment Date"): (a)&nbsp;the first day of the eleventh (11th) year of the Term; (b)&nbsp;the first day of the sixteenth (16th) year of the Term; and (c)&nbsp;the
first day of the twenty-first (21st) year of the Term. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
term "Fair Market Rental Rate" for the purposes of this Lease shall mean the annual amount per rentable square foot that a willing, comparable, renewal, non-equity,
tenant using the Leased Premises for light manufacturing would pay, and a willing, comparable owner of comparable premises in the City of South El Monte, California, would accept, at arm's length,
giving appropriate consideration to environmental restrictions, zoning ordinances, possible future zoning changes, covenants, conditions and restrictions, the annual rental rate per rentable square
foot, escalation (including type and base year) and abatement provisions reflecting rent concessions, if any, length of the lease term, location of the Leased Premises being leased, and other
generally applicable conditions to the Leased Premises so that Tenant will obtain the same rent and other benefits that Landlord would otherwise give to any comparable renewal tenant. If, for example,
comparable leases provide a renewal tenant with comparable premises at Twenty-five Dollars ($25.00) per rentable square foot, with six (6)&nbsp;months' at no rent to comply with then
current environmental and land use regulations, six (6)&nbsp;months' free rent, Twenty-five Dollars ($25.00) per rentable square foot tenant improvement </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

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<P><FONT SIZE=2>allowance,
and certain other generally applicable economic terms, the Fair Market Rental Rate for Tenant shall not be Twenty-five Dollars ($25.00) per rentable square foot only, but shall
be the equivalent of Twenty-five Dollars ($25.00) per rentable square foot, six (6)&nbsp;months at no rent to comply with then current environmental and land use regulations, an
additional six (6)&nbsp;months' free rent, Twenty-five Dollars ($25.00) per rentable square foot tenant improvement allowance or payment in lieu of such allowance, and such other
generally applicable economic terms. Within thirty (30)&nbsp;days after Tenant's exercise of the extension option for the Extension Terms pursuant to Section&nbsp;1.4 hereof, the parties shall
agree upon the Base Rent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the parties are unable to agree on the Base Rent within any such thirty (30)&nbsp;day period, Tenant or Landlord may elect to have the Fair Market Rental Rate determined by the
appraisal process set forth below by delivering written notice thereof to the other party within sixty (60)&nbsp;days after Tenant exercised any such extension option in accordance with
Section&nbsp;1.4 hereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Within
ten (10)&nbsp;days after either party's election to have the Fair Market Rent Rate determined by the appraisal process, Landlord and Tenant shall each appoint by written notice
to the other an independent MAI real estate appraiser. Each appraiser shall be a member of the American Institute of Real Estate Appraisers and shall have at least five (5)&nbsp;years experience
appraising commercial property where the Leased Premises are located. Within five (5)&nbsp;days after their appointment, the two appraisers so selected shall jointly appoint an equally qualified,
independent third appraiser and shall notify Landlord and Tenant of their selection of the third appraiser. Within ten (10)&nbsp;days after the selection of the third appraiser, Landlord and Tenant
shall each submit in writing its own determination of the Fair Market Rental Rate for the Leased Premises. The third appraiser shall select either Landlord's or Tenant's determination as the Fair
Market Rental Rate of the Leased Premises within twenty (20)&nbsp;days after the date of his appointment and shall notify Landlord and Tenant in writing of such selection. If either party or its
appraiser fails to comply with this Section, then the party or its appraiser that has complied with this Section shall determine the Fair Market Rental Rate of the Leased Premises. If the two
appraisers so selected do not choose the third appraiser within said five (5)&nbsp;day period, Tenant or Landlord may apply to the presiding Judge of the Superior Court of the State of California
for the county in which the Leased Premises is located for the appointment of a third appraiser. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
party shall pay the fees, costs and expenses of the appraiser appointed by such party. Each party shall pay one-half (<SUP>1</SUP>/<SMALL>2</SMALL>) of the fees, costs and expenses
of the third appraiser. If the Fair Market Rental Rate has not been determined at such time as Tenant is obligated to pay Base Rent for such Extension Term, Tenant shall pay as Base Rent pending such
determination, the Base Rent in effect for the Leased Premises immediately prior to the Extension Term; provided, however, within thirty (30)&nbsp;days after the determination of the Fair Market
Rental Rate, the excess or shortage of Base Rent that has been actually paid, shall be paid to Landlord by Tenant or reimbursed by Landlord to Tenant. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
the thirty (30)&nbsp;month anniversary of the immediately preceding Market Adjustment Date, the Base Rent shall be increased to an amount equal to one hundred ten percent (110%) of
the monthly Base Rent for the immediately preceding year. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>4.4&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Proration</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If the Term commences on other than the first day
of a calendar month, Rent for the first and last month hereof shall be prorated on the basis of actual days elapsed. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>4.5&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Additional Rent</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall pay Real Estate Taxes, as such
term is defined in Article&nbsp;6 hereof, as Additional Rent. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 5<BR>
PARKING AND TRAFFIC FLOW  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant, its subtenants and assigns, and their respective employees, agents, invitees and licensees shall have the right to use, the cost for which has been
included in the Basic Rent during the Term of </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>the
Lease, the parking areas, which contains seventy-nine (79)&nbsp;parking spaces, located adjacent to the Leased Premises (the Parking Areas") as indicated on the site plan attached
hereto as Exhibit "C". </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 6<BR>
REAL ESTATE TAXES  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>6.1&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Payment by Tenant</I></B></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;From and after the Rent Commencement Date, Tenant shall pay all
real estate taxes and assessments ("Real Estate Taxes") which are assessed against all or any portion of the Leased Premises prior to delinquency. If the Rent Commencement Date commences, or the Term
of this Lease expires or terminates, at any time other than the beginning or end of a taxable year, the amount of such taxes and assessments to be paid by Tenant shall be prorated on the basis of a
365-day year, so as to include only that portion of the taxable year which is a part of the Term hereof. As used herein, the term "Real Estate Taxes" shall not be construed to include any
income, gift, succession, excess profits, gross receipts, revenue, estate, personal property, inheritance or franchise taxes paid or payable by Landlord, or any increase in taxes resulting from the
increased valuation caused by any sale or assignment occurring after the Rent Commencement Date, of all or any portion of the Leased Premises, or due to any change in ownership of the Landlord,
notwithstanding the fact that any of the foregoing taxes may become a lien against all or any portion of the Leased Premises, and Landlord shall pay any such increase in real property taxes relating
to all and any of the foregoing reasons. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>6.2&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Right to Contest</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall have the right to contest in
good faith the amount of Real Estate Taxes or the validity thereof by appropriate legal proceedings, and shall give Landlord notice in writing of its intention to do so at least ten (10)&nbsp;days
before any delinquency occurs; provided, however, that if at any time payment of such tax shall become necessary to prevent any penalty or sanction from being assessed or to prevent the delivery of a
tax deed conveying the Leased Premises or any portion thereof because of nonpayment, then Tenant shall be required to pay the contested tax in sufficient time to prevent any such consequences from
occurring as a condition of such contest. The cost of any contest brought by Tenant shall be paid by Tenant. Landlord agrees to execute any documents reasonably necessary to perfect Tenant's rights of
contest herein contained; provided Tenant complies with the requirements of this Section&nbsp;6.2. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 7<BR>
UTILITIES  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall pay for all water, gas, light, power, telephone and other utilities and services furnished to and/or consumed in the Leased Premises during the Term.
Tenant shall make such payments directly to the provider of such utilities and services. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 8<BR>
MAINTENANCE AND REPAIRS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>8.1</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;Landlord shall maintain all structural portions of the Leased Premises and the Building in first-class condition and
repair (reasonable wear and tear and obsolescence excepted). Landlord shall make any necessary repairs and replacements to any structural portion of the Leased Premises arising from Tenant's
reasonable use thereof. Landlord's obligation to maintain and repair the structural portions of the Leased Premises shall be limited to the following: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;&nbsp;&nbsp;&nbsp;The
foundations, bearing and exterior walls, subflooring and roof of all portions of the Leased Premises; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;&nbsp;&nbsp;&nbsp;The
electrical, plumbing, natural gas, and sewage systems leading to the Leased Premises. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>8.2</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;Except as otherwise provided herein, Tenant shall keep all non-structural portions of the Building which
Landlord is not obligated to repair or maintain in good repair. In addition to the foregoing, Tenant shall maintain and repair: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;&nbsp;&nbsp;&nbsp;Gutters
and downspouts on the Building and other improvements that are a part of the Leased Premises; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;&nbsp;&nbsp;&nbsp;Heating,
ventilating, elevator and air conditioning systems located within the Leased Premises; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;&nbsp;&nbsp;&nbsp;All
stairways, accessways, lobbies, entrances, stairs, elevators and any passageway located within the Building; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;&nbsp;&nbsp;&nbsp;The
Parking Areas, including striping, security and lighting. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>8.3</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;All repairs which Tenant is obligated to make under this Article shall be at the expense of Tenant, except to the extent
that repairs are made necessary or useful because of the negligence or willful misconduct of Landlord, its agents or employees. Upon the expiration of the Term hereof, Tenant shall surrender the
Leased Premises to Landlord in a state of good repair, reasonable wear and tear, obsolescence and damage by fire, act of God or the elements, or damage which is caused by Landlord or which Landlord is
required to repair under the terms of this Lease, excepted. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 9<BR>
INSURANCE  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.1&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Required Coverage</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Tenant, from and after the date of
execution of this Lease shall, throughout the term of this Lease, carry and maintain in full force and effect, public liability insurance, covering the Leased Premises and Tenant's activities therein,
against claims for personal injury and death in a combined single limit amount of at least One Million Dollars ($1,000,000.00) for injury or death of any one person, for injury or death of all persons
in any accident, and for property damage. Landlord shall obtain and maintain a policy of public liability in the same amount covering the Leased Premises and the permitted activities therein. All such
policies purchased by Landlord or Tenant shall name each other and Landlord's lender as additional insureds. Any blanket insurance policy or policies that insure Landlord or Tenant against the risks
and for the amounts herein specified shall be deemed to satisfy the obligation of Landlord or Tenant hereunder. In addition to the foregoing, as long as Tenant is satisfying its insurance obligations
hereunder with any blanket insurance policy or policies, Tenant shall maintain property insurance, with vandalism and plate glass endorsements, on the Leased Premises. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.2&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Fire and Extended Coverage</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Landlord shall, throughout the
Term, maintain fire and extended coverage insurance, on the Leased Premises, in an amount equal to one hundred percent (100%) of the full replacement cost of the Leased Premises and the Building
(excluding foundations and excavations). Tenant shall maintain a policy of fire and extended coverage insurance covering Tenant's personal property in an amount equal to one hundred percent (100%) of
the full replacement cost thereof. Tenant or Landlord, Landlord's lender and any Leasehold Mortgagee, as defined in Article&nbsp;14 hereof, shall be named as additional insureds, as required under
this Article&nbsp;9. All insurance required of Tenant
pursuant to this Article&nbsp;9 shall be with an insurance company reasonably acceptable to Landlord's lender and shall be primary and non-contributing. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.3&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Workers' Compensation</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Landlord and Tenant shall each
maintain workers' compensation insurance as required by applicable law. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.4&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Waiver of Subrogation</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding anything to the
contrary contained herein, Landlord and Tenant hereby release and waive any rights each may have against the other and its officers, agents and employees on account of any loss or damages occasioned
to Landlord, Tenant, their respective </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

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<P><FONT SIZE=2>property
or the Leased Premises, and arising from any risk covered by the insurance obtained hereunder, whether due to the negligence of either party, their agents, employees, officers, contractors,
licensees, invitees or other persons. The parties hereby grant to each other, on behalf of any insurer providing insurance to either of them, a waiver of any right of subrogation that any such insurer
may have or acquire against the other party and its officers, agents and employees by virtue of payment of any loss under such insurance and all policies obtained by either Tenant or Landlord shall
contain appropriate waiver of subrogation clauses. The foregoing waivers of subrogation shall be operative only so long as available without invalidating either Landlord's or Tenant's (as the case may
be) policy of insurance. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.5&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Indemnity</I></B></FONT><FONT SIZE=2><B>.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Each party shall protect, defend, indemnify, hold
and save the other harmless from and against any and all losses, costs, liabilities or damages (including reasonable attorneys' fees and disbursements and court costs) arising by reason of:
(i)&nbsp;the injury or death of persons or damage to property against which such covenanting party is obligated to maintain insurance pursuant to Sections 9.1 through 9.3 above; (ii)&nbsp;the
ineffectiveness of the waiver of subrogation contained in Section&nbsp;94 hereof; or (iii)&nbsp;the invalidation of any such insurance policy by that party's insurer; provided, however, that
neither party shall be required to indemnify the other for any losses, costs, injuries, liabilities or damages of any kind to the extent arising out of the willful misconduct or gross negligence of
such other party or its officers, agents or employees. The parties' duty to indemnify each other under this Section&nbsp;9.5 shall survive the expiration or earlier termination of this Lease. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 10<BR>
ENVIRONMENTAL COMPLIANCE  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as disclosed by Tenant to Landlord in writing prior to the Term Commencement Date, Tenant represents, warrants and covenants to Landlord that Tenant shall
at no time use, or permit the Leased Premises to be used, in violation of any federal, state or local law, ordinance or regulation relating to the environmental conditions on, under or about the
Leased Premises, including, but not limited to, air quality, soil and surface and subsurface water conditions. Tenant shall assume sole and full responsibility and cost to remedy any such violations
that may affect the Leased Premises so long as the violations are not directly caused by Landlord and/or its successors and assigns or are not directly or indirectly caused by any third party not
employed by Tenant. Except as disclosed by Tenant to Landlord in writing and except for industry standard quantities commonly used by manufacturers of pharmaceuticals and related products in
compliance with all applicable laws, Tenant further represents, warrants and covenants to Landlord that Tenant shall at no time, generate, store or dispose of or allow or permit any third party to
use, generate, store or dispose of on, under or about the Leased Premises, or transport to or from the Leased Premises any hazardous wastes, toxic substances or related materials ("Hazardous
Materials"). For the purposes of this Article&nbsp;10, Hazardous Materials shall include, but not be limited to, asbestos, asbestos containing materials, the group of organic compounds known as
polychlorinated biphenyls, as well as substances defined as "hazardous substances" or "toxic substances" in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section&nbsp;9601, et seq.; Hazardous Materials Transportation Act, 49 U.S.C. Section&nbsp;1802; and Resource Conservation Recovery Act, 42 U.S.C. Section&nbsp;6901 et seq.;
and those substances defined as "hazardous wastes" in Section&nbsp;25117 of the California Health and Safety Code and in the regulations adopted and publications promulgated pursuant to said laws
and pursuant to California Health and Safety Code Sections 25249.8 and 25249.5, et seq. Tenant represents, warrants and covenants that it shall provide Landlord with written notification immediately
upon the discovery or notice by Tenant, its successors, assigns, licensees, invitees, officers, directors, employees, agents, partners or any other third party, that any representation, warranty, or
covenant of Tenant under this Section is inaccurate, incomplete, or untrue in any way. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 11<BR>
SIGNS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall have the right with the consent of Landlord, which shall not be unreasonably withheld, delayed or conditioned, to place any and all signs Tenant
desires in, on or about the Leased Premises, including, without limitation, any free-standing signs, and subject only to the obtaining of any necessary governmental or regulatory approval.
All signs other than those placed on the Building by Tenant shall be subject to Tenant's prior written approval, which approval Tenant may not unreasonably withhold. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 12<BR>
USE  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the term or any renewals hereof, Tenant may use the Leased Premises solely for light manufacturing purposes. Notwithstanding the foregoing, Tenant (or its
assignees or subtenants) may use the Leased Premises for any other lawful purpose; provided, however, such proposed use shall not increase the cost of Landlord's insurance required pursuant to
Article&nbsp;9 of this Lease unless Tenant agrees to pay such increased cost. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 13<BR>
ASSIGNMENT AND SUBLEASING  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant may, without Landlord's approval, assign, hypothecate, mortgage, and/or sublease all or any portion of this Lease, the Leased Premises, and/or any and all
rights appurtenant thereto. Upon any assignment or sublease, Tenant shall not be relieved of any of its obligations under this Lease. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 14<BR>
LEASEHOLD MORTGAGEE PROVISIONS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>14.1</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;If Tenant shall execute a deed of trust encumbering its leasehold interest hereunder (hereinafter
sometimes referred to as a "Mortgage"), and if the holder of said deed of trust (hereinafter referred to as the "Leasehold Mortgagee") shall deliver to Landlord an executed counterpart of said deed of
trust in recordable form together with written notice setting forth the name and address of the Leasehold Mortgagee, then, at any time until the Mortgage shall be satisfied or the Leasehold Mortgagee
shall give to Landlord written notice that the Mortgage has been satisfied. </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;&nbsp;&nbsp;&nbsp;Except
as provided in Articles 17, 18 and 19 hereof, and except for any termination of this Lease by reason of a default by Tenant hereunder, no cancellation, surrender,
acceptance of surrender or modification of this Lease shall be binding upon any Leasehold Mortgagee or affect the lien of any Mortgage, without the prior written consent of the Leasehold Mortgagee. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;&nbsp;&nbsp;&nbsp;No
notice, demand, election or other communication required or permitted to be given under this Lease (all of the foregoing hereinafter in this Subparagraph B
collectively being referred to as "Notices," and individually as the "Notice") which shall be given by Landlord to Tenant shall be binding upon or affect the Leasehold Mortgagee, unless a copy of the
Notice shall be given to the Leasehold Mortgagee within the time during which the Notice shall be required or permitted to be given to Tenant. In the case of an assignment of the Mortgage or change in
address of said Leasehold Mortgagee, the assignee thereof or the Leasehold Mortgagee may change the address to which copies of the Notices are to be sent as herein provided. Landlord shall not be
bound to recognize any assignment of any Mortgage unless Landlord shall be given a Notice of such assignment, including a copy thereof in recordable form, together with the name and address of the
assignee and, thereafter, until a further assignment, the assignee named in such assignment shall be deemed to be the Leasehold Mortgagee under this Article. If any Mortgage is held by </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

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<P><FONT SIZE=2>more
than one person, corporation or entity, no provision of this Lease requiring Landlord to give Notice or a copy thereof to any Leasehold Mortgagee shall be binding upon Landlord unless and until
all of the holders of the Mortgage shall deliver to Landlord an original executed counterpart of a designation, in recordable form, naming one of the holders as the individual or entity to receive all
Notices and copies thereof. All Notices and copies of Notices to be given to the Leasehold Mortgagee as provided in this Article shall be given in the same manner as set forth in this Lease for
Notices from Landlord or Tenant pursuant to Article&nbsp;23 hereof. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

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<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;&nbsp;&nbsp;&nbsp;Any
Leasehold Mortgagee shall have the right, but not the obligation, to perform any term, covenant, condition or agreement and to remedy any default by Tenant hereunder,
and Landlord shall accept such performance by any Leasehold Mortgagee with the same force and effect as if furnished by Tenant; provided, however, that any rights of the Leasehold Mortgagee shall not
thereby or hereby be subrogated to the rights of Landlord. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;&nbsp;&nbsp;&nbsp;If
Landlord shall give any notice of an Event of Default to Tenant pursuant to the provisions of Article&nbsp;19 hereof, and if such Event of Default shall not be
remedied within the applicable grace period set forth in Article&nbsp;19 hereof, and Landlord shall thereby, or otherwise, become entitled to give a notice of election to terminate this Lease, then,
Landlord shall, prior to giving such notice of election to terminate this Lease, give to the Leasehold Mortgagee not less than ten (10)&nbsp;days' additional written notice of the default, and shall
allow the Leasehold Mortgagee the same opportunity to cure any Event of Default as granted to Tenant pursuant to Article&nbsp;19 hereof; provided, however, that Leasehold Mortgagee shall have at
least (10)&nbsp;days following receipt of said notice to cure said Event of Default. The rights of the Leasehold Mortgagee under this Subparagraph D are in addition to such rights as are given to
the Leasehold Mortgagee under Subparagraph G of this Section&nbsp;14.1. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E.&nbsp;&nbsp;&nbsp;&nbsp;If
Tenant fails to perform or observe any term, covenant, condition or agreement to be performed by Tenant under this Lease, and if Landlord shall not elect to terminate
this Lease pursuant to Articles 17, 18 or 19 and shall instead bring a proceeding to dispossess Tenant and/or other occupants of the Leased Premises or to re-enter the Leased Premises or
to terminate this Lease, then Landlord shall, before commencing any proceeding pursuant to applicable law, give the Leasehold Mortgagee ten (10)&nbsp;days' written notice of the occurrence of any
Event of Default and shall allow the Leasehold Mortgagee the same opportunity to cure any Event of Default as granted Tenant pursuant to Article&nbsp;19 hereof; provided, however, that Leasehold
Mortgagee shall have at least ten (10)&nbsp;days following receipt of said notice to cure said Event of Default. The rights of the Leasehold Mortgagee under this Subparagraph E are in addition to
such rights as are given to the Leasehold Mortgagee under Subparagraph G of this Section&nbsp;14.1. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant
may delegate irrevocably to any Leasehold Mortgagee Tenant's right of election under Section&nbsp;365(h) of the Bankruptcy Code of 1978, as amended from time to
time, to remain in possession of the Leased Premises in the event of Landlord's bankruptcy, but no such delegation shall be binding upon Landlord unless and until either Tenant or any Leasehold
Mortgagee shall deliver to Landlord a signed counterpart, in recordable form, of a written instrument evidencing such delegation. Such delegation of authority may be affected by the terms of the
Mortgage itself, in which case the service upon Landlord of an executed counterpart of the Mortgage in accordance with this Article, together with written notice specifying the provisions therein
which delegate such authority to the Leasehold Mortgagee, shall be deemed sufficient notice to Landlord of the delegation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G.&nbsp;&nbsp;&nbsp;&nbsp;If
Tenant fails to perform or observe any term, covenant, condition or agreement on Tenant's part to be performed under this Lease, other than a term, covenant, condition
or agreement requiring the payment of a sum of money, and if the Event of Default is of such a nature that the same cannot practicably be cured by the Leasehold Mortgagee without taking possession of
the Leased Premises, or if the Event of Default is of such a nature that it cannot be cured by the Leasehold Mortgagee, and provided Landlord shall not be subject to any criminal liability, then
Landlord shall not serve a notice of election to terminate this Lease pursuant to Article&nbsp;19 hereof, or otherwise terminate the leasehold estate of Tenant hereunder by reason of such Event of
Default; provided, however, the Leasehold Mortgagee complies with the provisions set forth in Subparagraphs (G)(1), (2)&nbsp;and (3) below. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

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<UL>
<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;&nbsp;&nbsp;Leasehold
Mortgagee shall deliver to Landlord, prior to the date on which Landlord would be entitled to give notice of election to terminate or to commence proceedings
to terminate this Lease, a written instrument wherein the Leasehold Mortgagee unconditionally guarantees to Landlord that the Leasehold Mortgagee shall cure any Event of Default which cannot
practicably be cured by the Leasehold Mortgagee without taking possession of the Leased Premises and shall indemnify and hold harmless Landlord against all claims, demands, expenses, including, but
not limited to, reasonable attorneys' fees, damages, fines and penalties (all of the foregoing being hereinafter in this Subparagraph G referred to as "Damages") occasioned by any delay on the part of
Landlord in giving such notice of election or commencing such proceedings, and agrees that, if this Lease thereafter shall be terminated prior to the curing of such default, the Leasehold Mortgagee
shall pay to Landlord the cost to cure such default and the amount of the Damages, and if the Leasehold Mortgagee shall be an entity other than a life insurance company, bank or trust company
regulated by the State of California or by other governmental authority having jurisdiction, such instrument of guaranty shall be accompanied by security, reasonably satisfactory to Landlord,
sufficient to assure payment of the cost of curing such default and payment of the amount of the Damages. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;&nbsp;&nbsp;Leasehold
Mortgagee shall proceed diligently to obtain possession of the Leased Premises as mortgagee (through the appointment of a receiver or otherwise), and, upon
obtaining possession, shall promptly commence and duly prosecute to completion such action as may be necessary to cure any Event of Default which cannot be cured by the Leasehold Mortgagee without
taking possession of the Leasehold Premises. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;&nbsp;&nbsp;If
the Leasehold Mortgagee cannot cure an Event of Default, then the Leasehold Mortgagee shall promptly institute and diligently prosecute to completion foreclosure
proceedings, unless, in the meantime, the Leasehold Mortgagee shall acquire Tenant's estate hereunder, either in its own name or through a nominee, by exercise of a power of sale or by assignment in
lieu of foreclosure. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>14.2</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Leasehold Mortgagee shall not be required to continue to proceed to obtain possession, or to continue
in possession as mortgagee of the Leased Premises pursuant to Subparagraph G(2) of Section&nbsp;14.1 hereof, or to continue to prosecute foreclosure proceedings pursuant to Subparagraph G(3) of
Section&nbsp;14.1 hereof, if any Event of Default described therein shall be cured, and provided the Leasehold Mortgagee pays to Landlord all "Damages." Nothing herein shall preclude Landlord from
exercising any of its rights or remedies with respect to any other default by Tenant during any period when Landlord shall be forebearing termination of this Lease as set forth in Subparagraphs G(1),
(2)&nbsp;and (3)&nbsp;of Section&nbsp;14.1 hereof; provided, however, the Leasehold Mortgagee shall have all of the rights and protections set forth therein. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>14.3</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Lease shall terminate pursuant to Articles 17, 18 or 19 hereof, or shall otherwise terminate by
reason of a default of Tenant hereunder, and if within thirty (30)&nbsp;days after such termination the Leasehold Mortgagee, by written notice to Landlord, shall request Landlord to enter into a new
lease of the Leased Premises pursuant to this Section&nbsp;14.3 ("New Lease'), then Landlord shall enter into the New Lease with said Leasehold Mortgagee. Leasehold Mortgagee shall deliver to
Landlord written notice as required by this Section&nbsp;14.3 and a written instrument unconditionally guaranteeing the curing of all defaults of the Tenant under this Lease and all defaults of the
tenant under the New Lease which shall exist on the actual date of delivery of said New Lease, and, if the Leasehold Mortgagee shall be an entity other than a life insurance company, bank or trust
company regulated by the State of California or other governmental authority having jurisdiction, such instrument of guaranty shall be accompanied by security, reasonably satisfactory to Landlord,
sufficient to insure payment of the cost of curing all defaults. The New Lease shall commence, and rent and all obligations of the tenant thereunder shall accrue, as of the date of termination of this
Lease. The term of the New Lease shall continue for the period which would have constituted the remainder of the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>

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<P><FONT SIZE=2>term
of this Lease had this Lease not been terminated, and shall be upon all of the terms, covenants, conditions, conditional limitations and agreements contained herein which were in force and effect
immediately prior to the termination of this Lease. The New Lease, and this covenant, shall be superior to all rights, liens and interests, other than those to which this Lease shall have been subject
immediately prior to termination and those matters to which this Lease may, by its terms, become subject. The provisions of the immediately preceding sentence shall be self-executing, and
Landlord shall have no obligation to do anything, other than to execute the New Lease as herein provided, to assure the Leasehold Mortgagee or the tenant under the New Lease good title to the
leasehold estate granted thereby. Any subtenant in the Leased Premises whose sublease was in force and effect immediately prior to the delivery of the New Lease shall attorn to the tenant under the
New Lease, unless the tenant of the New Lease shall, at its option, elect to dispossess such subtenant or otherwise terminate the sublease held by such subtenant. Any subtenant who hereafter subleases
space within the Leased Premises shall be deemed to have agreed to the provisions of this Section&nbsp;14.3. The foregoing shall not be deemed to obligate Landlord to keep any sublease in force and
effect after the termination of this Lease, nor shall Landlord have any obligation to terminate any sublease or to dispossess any subtenant. Leasehold Mortgagee shall, simultaneously with the delivery
of the New Lease, pay to Landlord (a)&nbsp;all rent and other sums of money due under this Lease on the date of termination of this Lease and remaining unpaid; </FONT> <FONT SIZE=2><I>plus</I></FONT><FONT SIZE=2> (b)&nbsp;all rent and other sums of
money due under the New Lease for the period from the date of commencement of the term thereof to the date of
delivery of the New Lease; </FONT><FONT SIZE=2><I>plus</I></FONT><FONT SIZE=2> (c)&nbsp;all costs and expenses, including but not limited to reasonable attorneys' fees, court costs and litigation
expenses, incurred by Landlord in connection with termination of the Leased Premises, putting the Leased Premises in good condition and repair, and the preparation, execution and delivery of the New
Lease. Simultaneously, the Landlord shall pay over to the Leasehold Mortgagee any rentals, less costs and expenses of collection, received by Landlord, between the date of termination of the Lease and
the date of the New Lease, received from subtenants or other occupants of the Leased Premises which had not been applied by Landlord towards the cost of operating the Leased Premises or performing the
obligations of Tenant. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
more than one Leasehold Mortgagee exercises its right to obtain a new lease pursuant to this Section&nbsp;14.3, then only the Leasehold Mortgagee holding the lien of highest
priority shall be entitled to the New Lease free and clear of the rights of all other lienors. If the Leasehold Mortgagee shall exercise its right to obtain the New Lease, but shall fail to execute
the New Lease when tendered by Landlord, or shall fail to comply timely with the other provisions of this Section&nbsp;14.3, then the
Leasehold Mortgagee shall forfeit Leasehold Mortgagee's rights to the New Lease or any other rights under this Section&nbsp;14.3 and Landlord shall not be obligated to offer a New Lease to any other
Leasehold Mortgagee. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as provided in this Section&nbsp;14.3, no Mortgage now or hereafter deemed to be a lien upon this Lease shall extend or affect the reversionary interest and estate of Landlord
in and to the Leased Premises, or in any manner affect the Leased Premises from and after any expiration or termination of this Lease. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 15<BR>
SUBORDINATION; QUIET ENJOYMENT AND TITLE  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Landlord covenants that Landlord has a valid fee simple absolute estate in the Leased Premises and that the same is subject to no encumbrances, liens or defects
in title affecting the Leased Premises or the rights granted Tenant under this Lease, except for those lien(s) or encumbrance(s), for which Landlord shall provide Tenant, upon the execution of this
Lease, with a subordination, non-disturbance and attornment agreement, in the form attached hereto as Exhibit "F'. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Landlord
covenants that Tenant, upon paying the rent and performing the covenants herein undertaken on its part, may quietly and peaceably have, enjoy and hold the Leased Premises and
rights </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>

<HR NOSHADE>
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<!-- ZEQ.=3,SEQ=12,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="10",CHK=980447,FOLIO='12',FILE='DISK046:[05BHL4.05BHL1064]LL1064A.;9',USER='RFARRIN',CD='10-FEB-2005;04:02' -->
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<P><FONT SIZE=2>made
appurtenant hereby for the full term hereof without hindrance. This Lease shall, at Landlord's option, be subordinate to any mortgage or deed of trust that may hereafter be placed upon the Leased
Premises, and to any and all advances made or to be made thereunder and to interest thereon and to all renewals, replacements and extensions thereof; provided, however, that Landlord, at least twenty
(20)&nbsp;days following the placing of any such mortgage or deed of trust upon the Leased Premises or any portion thereof, shall deliver to Tenant a written agreement and any other documents of the
mortgagee named in any such mortgage or the trustee and the beneficiary in any such deed of trust recognizing this Lease and agreeing not to disturb Tenant's right to quiet possession under this
Lease, so long as Tenant is not in material default hereunder. Tenant shall have the right to reasonably approve any agreement and any other documents related to the subordination,
non-disturbance and attornment; provided that Tenant has approved such agreement and other documents, Tenant shall attorn to and recognize such mortgagee, beneficiary, lienholder or entity
as the Landlord under the Lease upon the foreclosure of any mortgage, lien, deed of trust or other encumbrance involved. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 16<BR>
LIENS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except for such as it may be contesting in good faith upon the posting of adequate bond, Tenant shall promptly pay and discharge all claims for work or labor
done, supplies furnished or services rendered at the request of Tenant and shall keep the Leased Premises free and clear of all mechanics' and materialmen's liens in connection therewith. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 17<BR>
CONDEMNATION  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>17.1</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the Leased Premises or any portion thereof are taken under the power of eminent domain, or sold under
the threat of the exercise of said power (all of which are referred to herein as "Condemnation"), this Lease shall terminate as to the part so taken as of the date the condemning authority takes title
or possession, whichever occurs first. If more than ten percent (10%) of the square feet of the Building, or more than twenty-five percent (25%) of the Land which is not occupied by any
building, including but not limited to the Parking Areas, is taken by Condemnation, Tenant may, at Tenant's option, to be exercised in writing only within ten (10)&nbsp;days after Landlord shall
have given Tenant written notice of such taking (or in the absence of such notice, within ten (10)&nbsp;days after the condemning authority shall have taken possession), terminate this Lease as of
the date the condemning authority takes such possession. If Tenant does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of
the Building and/or the Land remaining, except that the rent shall be reduced in the proportion that the square feet of the Building and/or the Land taken bears to the total square feet of the
Building and/or the Land. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>17.2&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Damages.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Landlord shall be entitled to the award for any Condemnation of the Leased
Premises, except that Tenant shall be entitled to the portion of any compensation awarded or paid upon any Condemnation that is allocable to the following: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;&nbsp;&nbsp;&nbsp;The
value of improvements, equipment and/or fixtures which were added to or placed in or upon the Leased Premises which are the property of Tenant hereunder, and which
constitute a portion of such taking; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;&nbsp;&nbsp;&nbsp;The
cost of removal of improvements, equipment and/or fixtures of Tenant which do not constitute a portion of such Condemnation, but removal of which is necessitated by
such Condemnation, and the depreciation in value caused such removal; and </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>13</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;&nbsp;&nbsp;&nbsp;The
excess of the market value, immediately before such Condemnation, of Tenant's leasehold interest in the portion of the Leased Premises taken over the Rent
attributable thereto under the terms of this Lease; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;&nbsp;&nbsp;&nbsp;All
costs of relocating Tenant's business and actual damages sustained by Tenant related to such Condemnation, including without limitation, damage from interruption of
Tenant's business, interference with access, loss of use, damage to goodwill, noise, dust, fumes and vibrations, and loss of general adaptability of the remaining portion of the Leased Premises for
Tenant (and/or Tenant's subtenant's or assignee's) desired use. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>17.3&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Notice and Execution.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Landlord agrees immediately upon service of process in
connection with any Condemnation relating to the Leased Premises to give to Tenant notice in writing thereof. Tenant reserves the right to appear in any proceedings in connection with such taking. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 18<BR>
DAMAGE OR DESTRUCTION  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>18.1&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Reconstruction.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If, during the term of this Lease, the Leased Premises or access to
the Leased Premises should be damaged or destroyed by any cause not contemplated within normal wear and tear, Landlord shall, except as hereinafter provided, diligently and promptly repair or rebuild
the same to the condition in which the same existed immediately prior to such damage or destruction. Notwithstanding the foregoing, if the Leased Premises are materially damaged by a casualty for
which Landlord did not carry insurance and such casualty was not commonly insured against by other comparable landlords, Landlord or Tenant shall have the right to terminate this Lease by delivering
written notice of such election within sixty (60)&nbsp;days thereafter. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>18.2&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Rent Abatement.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Rent due and payable hereunder shall be abated as provided
herein during any period in which, by reason of any damage or destruction to the Leased Premises, there is, in Tenant's and Landlord's reasonable judgment, interference with the operation of Tenant's
(and/or Tenant's assignee's or subtenant's) business in the Leased Premises. The amount of such abatement shall be
equal to the amount of Rent, multiplied by a fraction, the numerator of which is the total number of square feet of the Leased Premises affected by said damage, destruction, and any reconstruction or
restoration, and the denominator of which is the total number of square feet of the Leased Premises. If the Land, which is not occupied by the Building, is partially damaged, then Rent shall be
equitably reduced in accordance with this Section&nbsp;18.2. Such abatement shall continue for the period commencing with the damage or destruction and ending with completion of the repair or
reconstruction work which Landlord is obligated or undertakes to do. If continuation of business is not practical, in Tenant's and Landlord's reasonable judgment, all Rent due and payable hereunder
shall abate until reconstruction is completed or until business is totally or partially resumed, whichever is the earlier. In the event of partial resumption of business in the Leased Premises
following such damage or destruction, Rent shall continue to be proportionately abated until total resumption of such business is practical. There shall be no recapture of abated Rent upon
reconstruction or repair of the Leased Premises, the Parking Areas and/or access thereto, and full resumption of business by Tenant (and/or its assignees or subtenants). </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>18.3&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Excessive Damage or Destruction.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If the Leased Premises is damaged or destroyed to
the extent that the cost of repair is fifty percent (50%) or more of the fair market value of the Leased Premises and the damage and destruction is caused by an event for which Landlord was required
to maintain insurance under this Lease, Tenant shall have the right to terminate this Lease by delivering written notice of such election to the Landlord within sixty (60)&nbsp;days of the date of
the occurrence which caused such damage and destruction. If the Leased Premises is damaged or destroyed to the extent that the cost of repair is fifty percent (50%) or more of the fair market value of
the Leased Premises and the damage and destruction is caused by an event for which Landlord was not required to </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>14</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>maintain
insurance under this Lease, Landlord or Tenant shall have the right to terminate this Lease by delivering written notice of such election to the other within sixty (60)&nbsp;days
thereafter. If Tenant does not terminate this Lease, Landlord shall restore the Leased Premises to the same condition as the Leased Premises were in prior to such damage or destruction. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless
Tenant or Landlord elects to terminate this Lease, this Lease shall continue in full force and effect, except for the abatement of Rent, as provided in Section&nbsp;18.2 hereof,
and Landlord shall continue to diligently repair and restore the all or any portion of Leased Premises. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>18.4&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Disposition of Insurance Proceeds.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any insurance proceeds awarded or paid by reason
of damage to or destruction of all or any portion of the Leased Premises shall be paid and belong to Landlord. If this Lease is not terminated by reason of any such damage or destruction, then all
insurance proceeds payable by reason of loss to all or any portion of the Leased Premises shall be paid to Landlord for use in reconstruction of all or any portion of the Leased Premises, Upon
completion of the repairs or reconstruction of the Leased Premises and the Parking Areas, any remaining insurance proceeds shall be retained by Landlord. Any cost of repair or reconstruction in excess
of available insurance proceeds shall be borne by Landlord, and, except as expressly provided otherwise in this Article&nbsp;18, Landlord's obligations to repair or reconstruct under this
Article&nbsp;18 shall in no event be dependent or contingent upon the availability of adequate insurance proceeds therefor, or when or how the damage or destruction occurs. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 19<BR>
DEFAULT  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>19.1&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Events of Default.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Tenant shall be in default hereunder upon the occurrence of any
of the following events ("Events of Default'1); </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;&nbsp;&nbsp;&nbsp;Tenant's
failure to pay Rent when due, for a period of ten (10)&nbsp;days after Tenant's receipt from Landlord of a written notice of any such failure or Tenant's
failure to pay rent when due without notice if such failure occurs three (3)&nbsp;or more times during any twelve (12)&nbsp;month period. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;&nbsp;&nbsp;&nbsp;Tenant's
failure to perform any covenant or agreement undertaken by it herein, other than the payment of Rent, and such failure continues, without Tenant having commenced
to cure it, for thirty (30)&nbsp;days after receipt by Tenant of written notice thereof from Landlord. Any time provided in this Lease for the curing of any default by Tenant is hereby extended by
the period of time during which Tenant is prevented from curing such default by reason of strikes, acts of God, acts of the Landlord, war, or by reason of laws of governmental rules or regulations, or
by reason of conditions occasioned by war or other public emergency, or by reason of any other condition beyond the reasonable control of Tenant. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>19.2&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Remedies.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Upon the occurrence of an Event of Default by Tenant as set forth in
Section&nbsp;19.1, Landlord shall have the following rights and remedies, in addition to any and all other rights and remedies available to Landlord at law or in equity, including without limit
those provided under California Civil Code Sections 1951.2 and 1951.4, as amended or recodified from time to time: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>A.</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B><I>Terminate Lease.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Landlord shall have the right to terminate
this Lease and all rights of Tenant hereunder by giving written notice to Tenant. If the Lease is so terminated, then Landlord may recover from Tenant: (i)&nbsp;the worth at the time of award of any
unpaid rent that had been earned at the time of such termination; </FONT><FONT SIZE=2><I>plus</I></FONT><FONT SIZE=2> (ii)&nbsp;the worth at the time of award of the amount by which the unpaid rent
which would have been earned from the time of such termination until the time of award exceeds the amount of such rental loss Tenant proves could have been reasonably avoided; </FONT> <FONT SIZE=2><I>plus</I></FONT><FONT SIZE=2> (iii)&nbsp;the worth
at the time of award of the amount by which the unpaid rent for the balance of the Term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided; </FONT><FONT SIZE=2><I>plus</I></FONT><FONT SIZE=2> (iv)&nbsp;any other amount reasonably necessary to </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>15</FONT></P>

<HR NOSHADE>
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<UL>

<P><FONT SIZE=2>compensate
Landlord for all the actual and consequential damages proximately caused by Tenant's failure to perform Tenant's obligations under this Lease or which in the ordinary course of things would
be likely to result therefrom; and (v)&nbsp;at Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable California law.
As used in Subsections (A)(i)&nbsp;and (ii)&nbsp;above, the "worth at the time of award" is computed by allowing interest at ten percent (10%) per annum (but in no event in excess of the maximum
rate allowed by law). As used in Subsection (A)(iii)&nbsp;above, the "worth at the time of award' is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%). All amounts owing under this Subsection which are not paid when due shall bear interest at ten percent (10%) per annum (but in no event in excess
of the maximum rate allowed by law) from the date owing until paid and such interest shall be compounded monthly. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>B.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Re-enter Premises.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Landlord shall also have the right, with or without
terminating this Lease, to re-enter the Leased Premises and to remove all persons and Tenant's property from the Leased Premises and store the Tenant's property in a public warehouse or
elsewhere at the cost of and for the account of Tenant. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>C.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Maintain Lease; Relet Premises.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Unless Landlord elects to terminate this Lease,
Landlord may from time to time, without terminating this Lease, either recover any Rent as it becomes due or relet the Leased Premises or any part thereof for such term or terms and at such rental or
rentals and upon such other terms and conditions as Landlord in its reasonable discretion may deem advisable, with the right to clean and to make alterations and repairs to the Leased Premises at
Tenant's sole expense. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Landlord elects to relet as provided herein, then rent received by Landlord from such reletting shall be applied at Landlord's option: first, to the payment of any indebtedness other
than rent due hereunder from Tenant to Landlord; second, to the payment of any cost of such reletting (including reasonable attorneys' fees, court costs and commercially reasonable brokerage
commissions); third, to the payment of the cost of any cleaning, alterations and repairs to any portion of the Leased Premises which Tenant was obligated to clean or repair; fourth, to the payment of
rent due and unpaid hereunder; and the balance, if any, shall be applied in payment of future rent as the same may become due and payable hereunder. If the portion of such rentals received from such
reletting during any month which is applied to the payment of rent under the reletting lease is less than the rent payable during that month by Tenant hereunder, then Tenant shall pay any such
deficiency to Landlord immediately upon demand by Landlord. Such deficiency shall be calculated monthly and Tenant shall
pay such deficiency monthly. Tenant shall also pay to Landlord, upon Landlord's demand, the costs and expenses incurred by Landlord in such reletting, including attorneys' fees, court costs and
brokerage commissions and in making any alterations and repairs to the Leased Premises. Notwithstanding the foregoing, Tenant shall only be obligated to reimburse Landlord for those repairs Tenant was
obligated to repair pursuant to the terms and conditions of this Lease. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
re-entry, acts of maintenance or preservation, efforts to relet, or taking possession of the Leased Premises by Landlord or the appointment of a receiver upon initiative
of the Landlord to protect the Landlord's interest under the Lease shall be construed as an election to terminate this Lease unless an express written notice of such intention is delivered to Tenant
or unless the termination thereof is decreed by a court of competent jurisdiction. Notwithstanding any reletting of the Leased Premises without termination of this Lease by Landlord, Landlord may at
any time after such reletting elect to terminate this Lease, in which case, Landlord shall have all the rights and remedies provided by law or equity or this Lease upon termination. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>D.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Performance by Landlord.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If Tenant breaches or fails to perform any of Tenant's
obligations under this Lease and the breach or failure continues for thirty (30)&nbsp;days (or such shorter time period as may be specified otherwise in this Lease) after Landlord gives Tenant
written notice of the breach or </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>16</FONT></P>

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<P><FONT SIZE=2>failure,
Landlord, without thereby waiving or curing such may, but shall not be obligated to, perform any such obligation for the account and at the expense of Tenant together with interest thereon at
the rate of ten percent (10%) per annum, including without limit hiring an accountant to maintain Tenant's books and records and including reimbursement for reasonable attorneys' fees. Landlord may
also so perform any such obligation without notice in case of an emergency. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>E.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Secured Creditor Remedies.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Landlord may retain within the Leased Premises all of
Tenant's property and may take exclusive possession thereof to use or rent until all defaults have been cured. Notwithstanding the foregoing, Landlord may, at its option, at any time during the term
of this Lease, require Tenant to remove all or any portion of such property, or exercise any rights of a secured creditor under the California Uniform Commercial Code, as amended or recodified from
time to time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>F.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Receiver on Behalf of Landlord.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If, at Landlord's Commencement of any action arising
under this Lease, a receiver shall be appointed to take possession of the Leased Premises or to collect the rents derived therefrom, then the receiver may, if it shall be necessary or convenient in
order to collect such rents, conduct the business of Tenant then being carried on or in the Leased Premises, and may take possession of any of Tenant's property and records used in Tenant's business
and use the same in conducting such business, without compensation to Tenant for such use. Neither application for nor the appointment of a receiver shall be construed as an election by Landlord to
terminate this Lease, unless express written notice of such election is given to Tenant. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>G.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Late Charge.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If Tenant fails to make any payment of Rent within ten (10)&nbsp;days
after receipt of written notice from Landlord or if Tenant fails to make rent payments without notice three (3)&nbsp;or more times during any twelve (12)&nbsp;month period, Tenant shall pay
Landlord a reasonable late charge of one and one-half percent (1.5%) of the amount due and unpaid. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>H.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Bankruptcy and Insolvency.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In the event of the filing or commencement of any
proceeding by or against Tenant under the Federal Bankruptcy Code (as the same may be amended or recodified from time to time), the trustee, receiver or Tenant, as a debtor in possession, subject to
court approval, shall not have the right to assume this Lease or to assign this Lease or to pledge or hypothecate this Lease for security unless and until all of the following conditions are first
satisfied: (i)&nbsp;any defaults by Tenant under this Lease are cured or Landlord is provided "adequate assurance" that such defaults will be promptly cured; (ii)&nbsp;Landlord is compensated, or
"adequate assurance" is provided to Landlord that Landlord will be promptly compensated, for any actual pecuniary loss to Landlord resulting from any and all defaults by Tenant under this Lease; and
(iii)&nbsp;Landlord is provided "adequate assurance" of future performance of all of the covenants, agreements and obligations of Tenant under the terms of this Lease. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the purposes of this Subsection, "adequate assurance" of future performance of the terms and provisions of this Lease shall include adequate assurance: (a)&nbsp;of the source of
Rent and other consideration due under this Lease, and in the case of an assignment, that the financial condition and operating performance of the proposed assignee and its guarantors, if any, shall
be similar to the financial condition and operating performance of the debtor-Tenant as of the Term Commencement Date, as reasonably adjusted for inflation; (b)&nbsp;that assumption or assignment of
this Lease is subject to all the provisions of this Lease; and (c)&nbsp;of the performance of any other requirement hereafter imposed by any law or which landlords or courts are hereafter authorized
or permitted by law to impose on such an assumption, assignment, pledge or hypothecation. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>17</FONT></P>

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<P><FONT SIZE=2><A
NAME="page_lm1064_1_18"> </A> </FONT> <FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In any case under any chapter of the Federal Bankruptcy Code, (as the same may be amended or recodified from time to time), the trustee, receiver or Tenant, as debtor in possession,
shall timely perform all the obligations of the debtor-Tenant arising under this Lease from and after any order for relief until this Lease is assumed or rejected. This paragraph shall not affect the
trustee's or debtor-Tenant's obligations under any other paragraph of this Subsection, and acceptance of performance under this paragraph by Landlord shall not constitute a waiver or relinquishment of
Landlord's rights under this Lease. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
failure by the Trustee in any case under any chapter of the Bankruptcy Code to assume or reject this Lease sixty (60)&nbsp;days after the order for relief or within such additional
time as the Court, for cause, within such sixty (60)&nbsp;day period shall fix, shall be deemed a rejection, and the Trustee shall immediately surrender the Leased Premises to Landlord. This Lease
may not be assumed if it has expired before commencement of any bankruptcy proceeding. The Trustee, Receiver, or Tenant, as a debtor in possession, acting in accordance with the provisions contained
in this Subsection, shall not under any circumstances require Landlord to provide services or supplies incidental to this Lease before any assumption of this Lease, unless Landlord shall be
compensated under the terms of this Lease for any services and supplies provided under this Lease before such assumption. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 20<BR>
TENANT'S RIGHT TO CURE LANDLORD'S DEFAULT  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Landlord fails to perform any covenant or agreement herein undertaken and to be performed on Landlord's part, then, if the failure or default continues for
thirty (30)&nbsp;days after written notice to Landlord thereof (except if such failure cannot be cured during such thirty (30)&nbsp;day period due to reasons beyond Landlord's reasonable control
(financial condition excepted) and Landlord commences such cure during such thirty (30)&nbsp;day period and diligently prosecutes such cure to completion), Tenant may, but shall have no obligation
to, pay the same and cure such default on behalf of and at the expense of Landlord and do all necessary work and make all necessary payments in connection therewith including, but not limited to, the
payment of reasonable attorneys' fee incurred by Tenant, and upon demand Landlord will reimburse Tenant for the amount so paid, together with interest at the rate of ten percent (10%) per annum (but
in no event in excess of the maximum rate allowed by law). </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 21<BR>
ALTERATIONS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant, from time to time at its sole cost and expense, may without Landlord's permission, make non-structural alterations to the Leased Premises and
may store and install therein fixtures, equipment, furniture and property. International Medication Systems, Limited shall not make any structural alterations in excess of Fifty Thousand Dollars
($50,000.00) in cumulative cost without Landlord's consent, which shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, Landlord acknowledges its consent to the
non-structural and structural alterations described in Exhibit "G" attached hereto. Tenant's assignees or subtenants shall not make any structural alterations without Landlord's consent,
which shall not be unreasonably withheld or delayed. In connection with the alterations permitted hereunder, Tenant, its assignees or subtenants shall obtain all necessary approvals from all
governmental and regulatory agencies, including but not limited to, approvals relating to the alterations of the Building, zoning, land use, variances, waivers and permits, and environmental impact
reports, necessary for the completion of the alterations to the Building and Tenant's (and/or Tenant's assignees' or subtenants') use and occupancy of the Leased Premises. Landlord shall cooperate
fully with Tenant (and/or Tenant's assignees or subtenants) in connection with Tenant's (and/or Tenant's assignees' or subtenants') applications for approvals described herein. All work with respect
to any alterations shall be done in a good and workmanlike manner and prosecuted to completion. Tenant (and/or Tenant's assignees or subtenants) shall be entitled to remove any such
non-structural alterations </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>18</FONT></P>

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<P><FONT SIZE=2>installed
by Tenant (and/or Tenant's assignees or subtenants) at the expiration of the Term or the earlier termination of this Lease, provided Tenant (and/for Tenant's assignees or subtenants) shall
restore all damage caused by such removal. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 22<BR>
FIXTURES AND PERSONAL PROPERTY  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All trade fixtures, equipment, furniture and personal property (including signs) installed in, on or about the Building or the Land, or any portion thereof, by or
at Tenant's expense shall remain Tenant's property. At any time during the Term hereof, or within thirty (30)&nbsp;days after the expiration of the Term or the earlier termination of this Lease,
Tenant may, at its election, remove any or all such trade fixtures, equipment, furniture and personal property and repair the damage caused by any such removal, reasonable wear and tear excepted. If,
within thirty (30)&nbsp;days after the expiration of the Term or the earlier termination of this Lease, Tenant elects not to remove such trade fixtures, equipment, furniture or personal property,
then such trade fixtures, equipment, furniture or personal property shall become the property of Landlord. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 23<BR>
NOTICES  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>23.1&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Service.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;All notices required to given hereunder shall be in writing. Such notices
shall be hand delivered or sent by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2>If to Landlord:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="77%"><FONT SIZE=2>Mr. Dennis A. Jebbia<BR>
2468 Huntington Drive<BR>
San Marino, California 91108</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="77%"><FONT SIZE=2><BR>
Ms. Gloria Jebbia<BR>
2468 Huntington Drive<BR>
San Marino, California 91108</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="77%"><FONT SIZE=2><BR>
Gloria Jebbia, as Trustee of the<BR>
Norf James Jebbia Testamentary Trust<BR>
2468 Huntington Drive<BR>
San Marino, California 91108</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="21%"><FONT SIZE=2><BR>
If to Tenant:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="77%"><FONT SIZE=2><BR>
International Medication Systems, Limited<BR>
17890 Castleton Road, Suite 300<BR>
City of. Industry, California 91748<BR>
Attention: Mr. Joseph J. Lowden</FONT></TD>
</TR>
</TABLE></DIV>
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<P><FONT SIZE=2>or
at such other place as either Landlord or Tenant may, from time to time, respectively, designate in a written notice give to the other. Notices shall be deemed served upon receipt, as indicated on
the receipt obtained or returned to sender. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>23.2&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Change of Ownership.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;No change in ownership of the Leased Premises, or assignment
of this Lease or of the Rent provided for herein, shall be binding upon Tenant for any purpose whatever until Tenant has been furnished with written notice thereof by Landlord. Upon transfer of the
ownership of the Leased Premises by Landlord, Landlord shall be released from all liability under this Lease arising after the date of transfer, provided the transferee assumes the obligations of
Landlord under this Lease. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>19</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 24<BR>
ARBITRATION  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>24.1&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Arbitration.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any dispute between the parties (other than an unlawful detainer
action) shall be determined by arbitration in accordance with this Article&nbsp;24. If either party requests of the other that such matter be so determined, then: (a)&nbsp;each party shall, within
thirty (30)&nbsp;days hereafter, appoint an arbitrator and such party shall notify the other party of the name and address of the arbitrator so appointed; (b)&nbsp;if either party shall fail to
make such appointment and to serve notice thereof within the time prescribed, then the appointment of an arbitrator on behalf of such party shall be made in the same manner as provided in
clause&nbsp;(d) below for the appointment of a third arbitrator; (c)&nbsp;the arbitrators so appointed shall meet within ten (10)&nbsp;days after the second arbitrator is appointed and shall, if
possible, determine such matter within thirty (30)&nbsp;days after the second arbitrator is appointed, and their determination shall be binding on the parties; (d)&nbsp;if for any reason such two
arbitrators fail to agree on such matter within such period of thirty (30)&nbsp;days, they shall appoint a third arbitrator, and if they fail to agree upon such arbitrator within ten
(10)&nbsp;days after the time prescribed, either party on behalf of both may request such appointment by the then President of the Los Angeles Chapter of the American Arbitration Association for the
appointment of such third arbitrator, and the other party shall not raise any question as to the President's power to entertain the application and make the appointment; and (e)&nbsp;the
determination of such matter of any two of such three arbitrators shall be given within a period of thirty (30)&nbsp;days (or such longer period as may be reasonable in light of the circumstances)
after the appointment of the third arbitrator, and shall in all cases be binding upon the parties. If any arbitrator shall die, become disqualified or incapacitated, or shall fail or refuse to act
before such matter shall have been determined, then in place of such arbitrator, an arbitrator shall promptly be appointed in the same manner as the arbitrator who shall have died or become
disqualified or incapacitated, or who shall have failed or refused to act. All arbitration shall be finally determined in the City of Los Angeles and shall be governed (except for the method of such
section of arbitrators) in accordance with the Rules of the American Arbitration Association (or any successor thereto) and the judgment or the award rendered therein may be entered in any court
having jurisdiction. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>24.2&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Payment of Expenses.</I></B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Each party shall pay the fees and expenses of the arbitrator
appointed by or on behalf of it, and each shall pay one-half of the fees and expenses of the third arbitrator, if any. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 25<BR>
ATTORNEYS' FEES  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If either party commences an action against the other to enforce any obligation hereunder, the prevailing party shall be entitled to recover its costs and
reasonable attorneys' fees from the other, whether or not such action is pursued to judgment. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 26<BR>
MEMORANDUM OF LEASE  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon Tenant's request, Landlord and Tenant shall execute and acknowledge a Memorandum of Lease, which shall be recorded in the Official Records of Los Angeles
County. The Memorandum of Lease shall describe the Leased Premises as being subject to all rights, covenants and restrictions herein contained, shall specify the Term Commencement Date, and shall be
substantially in the form attached hereto as Exhibit "D". </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>20</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 27<BR>
HOLDING OVER  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Tenant remains in possession of the Leased Premises after the expiration of the Term without executing a new lease, such holding over shall be construed as a
tenancy from month-to-month, subject to all covenants and conditions herein contained, except that the Rent paid by Tenant pursuant to the terms hereof shall be increased to
One Hundred Ten Percent (110%) of the Rent during the last month of the Term. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 28<BR>
NO WAIVER  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No waiver of any default or breach of any covenant by either party hereunder shall be implied from the other party's failure to act on account of such default if
such default persists or is repeated, and no express waiver shall affect any default other than the default specified in the waiver, and then said waiver shall be operative only for the time and to
the extent therein stated. Waivers of any covenant, term or condition contained herein by either party shall not be construed as a waiver of any subsequent
breach of the same covenant, term or condition. The consent or approval by either party to or of any act by either party requiring further consent or approval shall not be deemed to waive or render
unnecessary their consent or approval to or of any subsequent similar acts. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 29<BR>
BINDING EFFECT  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except for the restrictions set forth in Article&nbsp;21 hereof, each and every covenant, term and condition contained herein shall be binding upon and inure to
the benefit of each of the parties, its successors and assigns. Each and all of the covenants, provisions and conditions of this Lease to be performed by or on the part of Landlord, whether to be
performed on the Leased Premises or elsewhere, and whether affirmative or negative in nature, are also intended to and shall bind Landlord, its successors and assigns, at any time and from time to
time, and shall inure to the benefit of the Tenant, its successors and assigns, and shall run with the Land for the term hereof. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 30<BR>
INTERPRETATION AND APPLICATION  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Lease shall be construed under the laws of the State of California. If any provision of this Lease or application thereof to any person or circumstances
shall to any extent be held to be invalid, the remainder of this Lease (including the application of such provision to persons or circumstances other than those to which it is held invalid) shall not
be affected thereby, and each provision of this Lease shall be valid and enforced to the fullest extent permitted by law. Both parties hereto assisted in the drafting of this Lease and its provisions
shall not be construed against either party. The captions of the paragraphs hereof are for convenience only and are not a part of this Lease and do not in any way limit or amplify the terms and
provisions of this Lease. Exhibits "A" through "G" are incorporated herein by this reference and are made a part of this Lease. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 31<BR>
COMPLETE AGREEMENT  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is expressly agreed that this Lease contains all of the terms, covenants, conditions, warranties and agreements of the parties relating in any manner to the
Tenant's rental, use and occupancy of the Land, the Building and the Leased Premises that no prior agreement or understanding pertaining to the same shall be valid or of any force or effect, and that
the terms, covenants, conditions and provisions of this Lease cannot be modified or added to except in writing signed by the parties hereto. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>21</FONT></P>

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<A NAME="page_lm1064_1_22"> </A>
<BR>
<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 32<BR>
TIME  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Time is of the essence hereof. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 33<BR>
EXECUTION REQUIRED  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Submission of this instrument for examination or signature by Tenant shall not constitute a reservation of or option for lease, and this instrument shall not be
effective as a lease or otherwise until execution and delivery by both Landlord and Tenant. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 34<BR>
LIMITATION OF LIABILITY  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The obligations of Tenant under this Lease shall be without recourse to the assets of any officer, shareholder, director or employee of Tenant. The sole recourse
of Landlord for any obligation of the Tenant under this Lease shall be limited to the assets of Tenant. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 35<BR>
ESTOPPEL CERTIFICATES  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant and Landlord, upon not less than thirty (30)&nbsp;days prior written notice to the other, shall execute, acknowledge and deliver an estoppel certificate
in the form of Exhibit "E' attached hereto. Any statement contained therein may be conclusively relied upon by a prospective lender, purchaser, or encumbrances to the Leased Premises. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>ARTICLE 36<BR>
SECURITY MEASURES  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant hereby acknowledges that the Rent payable to Landlord hereunder does not include the cost of any guard service or other security measures and that Landlord
shall have no obligation whatsoever to provide the same. Tenant assumes all responsibility for the protection of Tenant, its agents and invitees from acts of third parties. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>22</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_lm1064_1_23"> </A>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as of the date first written above. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2><B>"LANDLORD"</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=5><FONT SIZE=2><B>"TENANT"</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><BR><HR NOSHADE><FONT SIZE=2> Dennis A. Jebbia,<BR>
a married man</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=5><FONT SIZE=2><BR>
International Medication Systems, Limited,<BR>
a Delaware corporation</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3><HR NOSHADE></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="43%" VALIGN="TOP"><BR><HR NOSHADE><FONT SIZE=2> Gloria Jebbia,</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"><FONT SIZE=2><BR>
Its:</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="43%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>an unmarried woman</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%"><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
Its:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%"><HR NOSHADE></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="43%" VALIGN="TOP"><FONT SIZE=2>Gloria Jebbia, As Trustee Of<BR>
The Norf James Jebbia Testamentary<BR>
Trust Dated October&nbsp;18, 1982</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=2>23</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><B>EXHIBIT "A"  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Description of the Land)  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibit "A" to that certain Lease dated as of July&nbsp;24, 1990, by and between Dennis A. Jebbia, a married man as his sole and separate property, Gloria
Jebbia, an unmarried woman, and Gloria Jebbia. as Trustee of the Norf James Jebbia Testamentary Trust dated October&nbsp;18, 1982, as Landlord, and International Medication Systems, Limited, a
Delaware corporation, as Tenant. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Land is described as follows: </FONT></P>

<P><FONT SIZE=2>PARCEL
1: </FONT></P>

<P><FONT SIZE=2>THAT
PORTION OF LOT 4 OF E. J. BALDWIN'S SECOND SUBDIVISION, IN THE CITY OF SOUTH EL MONTE, IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 70 PAGE 92 OF MISCELLANEOUS
RECORDS, IN THE OFFICE OF THE COUNTY RECORDER INCLUDED WITHIN THE FOLLOWING DESCRIBED BOUNDARIES: </FONT></P>

<P><FONT SIZE=2>COMMENCING
AT THE INTERSECTION OF THE CENTER LINE OF RUSH STREET AND HOYT AVENUE, AS SAID CENTER LINES ARE SHOWN ON COUNTY SURVEYOR'S MAPS NO. B-384-2 ON FILE IN TEE OFFICE OF
TEE ENGINEER OF THE COUNTY OF LOS ANGELES; THENCE SOUTH 0 DEGREES 44 MINUTES 10 SECONDS WEST 660.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING ALONG SAID CENTER LINE OF HOYT AVENUE, SOUTH
0 DEGREES 44 MINUTES 10 SECONDS WEST 326.00 FEET; THENCE PARALLEL WITH SAID CENTER LINE OF RUSH STREET, SOUTH 89 DEGREES&nbsp;46 MINUTES 55 SECONDS EAST 340.00 FEET; THENCE PARALLEL WITH SAID CENTER
LINE OF HOYT AVENUE, NORTH 0 DEGREES 44 MINUTES 10 SECONDS EAST 326.00 FEET TO A LINE WHICH IS PARALLEL WITH SAID CENTER LINE OF. RUSH STREET AND WHICH PASSES THROUGH THE TRUE POINT OF BEGINNING;
THENCE ALONG SAID LAST MENTIONED PARALLEL LINE, NORTH 89 DEGREES 46 MINUTES 55 SECONDS WEST 340.00 FEET TO THE TRUE POINT OF BEGINNING. </FONT></P>

<P><FONT SIZE=2>EXCEPT
THE EASTERLY 20.00 FEET OF SAID LAND. </FONT></P>

<P><FONT SIZE=2>ALSO
EXCEPT THAT PORTION INCLUDED WITHIN SAID HOYT AVENUE. </FONT></P>

<P><FONT SIZE=2>PARCEL
2: </FONT></P>

<P><FONT SIZE=2>AN
EASEMENT OF ROADWAY, ROADWAY CONSTRUCTION, UTILITY AND INCIDENTAL PURPOSES, OVER THOSE PORTIONS OF LOTS 3 AND 4 OF E. J. BALDWIN'S SECOND SUBDIVISION, IN THE CITY OF SOUTH EL MONTE, IN THE COUNTY
OF LOS. ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 70 PAGE 92 OF MISCELLANEOUS RECORDS, IN THE OFFICE OF THE COUNTY RECORDER INCLUDED WITHIN A STRIP OF LAND 52.00 FEET WIDE, LYING 26.00
FEET ON EACH SIDE OF THE FOLLOWING DESCRIBED LAND: </FONT></P>

<P><FONT SIZE=2>COMMENCING
AT THE INTERSECTION OF THE CENTER LINE OF RUSH STREET AND HOYT AVENUE, AS SAID CENTER LINES ARE SHOWN AND MONUMENTED ON AND PER COUNTY SURVEYOR'S MAP NO. B&#151;384, SHEET 2, ON FILE
IN THE OFFICE OF THE COUNTY ENGINEER OF SAID COUNTY; THENCE ALONG SAID CENTER LINE OF HOYT AVENUE, SOUTH 0 DEGREES 44 MINUTES 10 SECONDS WEST 660.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE
PARALLEL WITH SAID CENTER LINE OF RUSH STREET, SOUTH 89 DEGREES 46 MINUTES 55 SECONDS EAST 660.00 FEET, MORE OR LESS, TO TEE WESTERLY LINE OF LOT 8 OF SAID E. J. BALDWIN'S SECOND SUBDIVISION. </FONT></P>


<P><FONT SIZE=2>EXCEPT
THEREFROM THAT PORTION INCLUDED WITHIN THE LINES OF PARCEL 1 ABOVE. </FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>

<P><FONT SIZE=2>ALSO
EXCEPT TEAT PORTION THEREOF INCLUDED WITHIN THE LINES OF SAID HOYT AVENUE. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>EXHIBIT "B"  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Description of the Leased Premises)  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibit "B' to that certain Lease dated as of July&nbsp;24, 1990, by and between Dennis A. Jebbia, a married man as his sole and separate property, Gloria
Jebbia, an unmarried woman, and Gloria Jebbia, as
Trustee of the Norf James Jebbia Testamentary Trust dated October&nbsp;18, 1982, as Landlord, and International Medication Systems, Limited, a Delaware corporation, as Tenant. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Leased Premises is depicted as follows: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>[DIAGRAM OMITTED]  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> EXHIBIT "C"  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Site Plan)  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibit "C" to that. certain Lease dated as of July&nbsp;24, 1990, by and between Dennis A. Jebbia, a married man as his sole and separate property, Gloria
Jebbia. an unmarried woman, and Gloria Jebbia, as Trustee of the Norf James Jebbia Testamentary Trust dated October&nbsp;18, 1982, as Landlord, and International Medication Systems, Limited, a
Delaware corporation. as Tenant. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Site Plan indicating the parking areas located adjacent to the Leased Premises is attached hereto and comprises this Exhibit "C". </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>[DIAGRAM OMITTED]  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> EXHIBIT "D"<BR>
(Memorandum of Lease)  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibit "D" to that certain Lease dated as of July&nbsp;24, 1990, by and between Dennis A. Jebbia, a married man as his sole and separate property, Gloria
Jebbia, an unmarried woman, and Gloria Jebbia, as Trustee of the Norf James Jebbia Testamentary Trust dated October&nbsp;18, 1982, as Landlord, and International Medication Systems, Limited, a
Delaware corporation, as Tenant. </FONT></P>

<P><FONT SIZE=2>RECORDING
REQUESTED BY: </FONT></P>

<P><FONT SIZE=2>International
Medication Systems, Limited<BR>
(A Delaware corporation) </FONT></P>

<P><FONT SIZE=2>AND
WHEN RECORDED, RETURN TO: </FONT></P>

<P><FONT SIZE=2>International
Medication Systems, Limited<BR>
(A Delaware corporation)<BR>
17890 Castleton Road, Suite 300<BR>
City of Industry, California 91748<BR>
Attention: Mr.&nbsp;Joseph J. Lowden </FONT></P>

<HR NOSHADE>
<P ALIGN="CENTER"><FONT SIZE=2><B>MEMORANDUM OF LEASE  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS MEMORANDUM OF LEASE ("Memorandum of Lease") is executed as of July&nbsp;24, 1990, by and between Dennis A. Jebbia, a married man, Gloria Jebbia, an
unmarried woman, and Gloria Jebbia, as Trustee of the Norf James Jebbia Testamentary Trust dated October&nbsp;18, 1982, as Landlord ("Landlord"), and International Medication Systems, Limited, a
Delaware corporation, as tenant ("Tenant"). </FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>
<P ALIGN="CENTER"><FONT SIZE=2><B>RECITALS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, Landlord and Tenant have executed that certain lease ("Lease") dated as of July&nbsp;24, 1990, covering that certain premises, including any and all
improvements and fixtures located thereon or attached thereto ("Leased Premises") located at 1878-86-90 Santa Anita Avenue, South El Monte, California 91733, and more
particularly described in Exhibit "A" attached hereto and incorporated herein by this reference; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
Landlord and Tenant desire to record notice of the Lease in the real estate records of Los Angeles County, State of California; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW,
THEREFORE, in consideration of the foregoing, Landlord and Tenant hereby declare as follows: </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.&nbsp;&nbsp;&nbsp;&nbsp;Terms.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Landlord hereby leases to Tenant and Tenant hereby hires from Landlord, the Leased Premises, subject
to the terms, covenants and conditions contained in the Lease. The Initial Term of the Lease is ten (10)&nbsp;years and Tenant may extend the Initial Term for three (3)&nbsp;additional periods of
five (5)&nbsp;years each </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2><B>2.</B></FONT></DT><DD><FONT SIZE=2>The Term Commencement Date is&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.&nbsp;&nbsp;&nbsp;&nbsp;Incorporation by Reference.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Lease is hereby incorporated by reference. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, Landlord and Tenant have executed this Memorandum of Lease as of the date and year first written above. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2><B>"LANDLORD"</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=5><FONT SIZE=2><B>"TENANT"</B></FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="43%" VALIGN="TOP"><BR><HR NOSHADE></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=5 VALIGN="TOP"><FONT SIZE=2><BR>
International Medication Systems,</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>Dennis A. Jebbia,</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=5><FONT SIZE=2>Limited, a Delaware corporation</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>a married man</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
<BR></FONT>
<HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><BR><HR NOSHADE><FONT SIZE=2> Gloria Jebbia,<BR>
an unmarried woman</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
Its:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><BR>
<BR></FONT>
<HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2>By:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="43%"><FONT SIZE=2><BR>
<BR></FONT>
<HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
Its:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><BR>
<BR></FONT>
<HR NOSHADE></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="43%" VALIGN="TOP"><FONT SIZE=2>Gloria Jebbia, As Trustee Of<BR>
The Norf James Jebbia Testamentary<BR>
Trust Dated October 18,1982</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="43%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

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<TABLE WIDTH="34%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2><BR>
STATE OF CALIFORNIA</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>
)</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>ss.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="78%"><FONT SIZE=2>COUNTY OF</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
before me, the undersigned, a Notary Public in and for said State, appeared DENNIS&nbsp;A. JEBBIA, personally known to me or proved to me on the basis of
satisfactory evidence to </FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>

<P><FONT SIZE=2>be
the person whose name he subscribed to the within instrument and acknowledged that he executed the same. </FONT></P>

<P><FONT SIZE=2>WITNESS
my hand and official seal. </FONT></P>

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<TD WIDTH="49%"><BR><HR NOSHADE><FONT SIZE=2> Signature</FONT></TD>
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&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><BR><HR NOSHADE><FONT SIZE=2> Name (typed or printed)<BR>
Notary Public in and for<BR>
Said County and State</FONT></TD>
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STATE OF CALIFORNIA</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>
)</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
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<TD WIDTH="78%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>ss.</FONT></TD>
</TR>
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<TD WIDTH="78%"><FONT SIZE=2>COUNTY OF</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&nbsp;</FONT></TD>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
before me, the undersigned, a Notary Public in and for said State, appeared GLORIA JEBBIA, personally known to me or proved to me on the basis of satisfactory
evidence to be the person whose name she subscribed to the within instrument and acknowledged that she executed the same. </FONT></P>

<P><FONT SIZE=2>WITNESS
my hand and official seal. </FONT></P>

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<TD WIDTH="49%"><HR NOSHADE><FONT SIZE=2> Signature</FONT></TD>
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<TD WIDTH="49%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><BR><HR NOSHADE><FONT SIZE=2> Name (typed or printed)<BR>
Notary Public in and for<BR>
said County and State</FONT></TD>
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<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2>STATE OF CALIFORNIA</FONT></TD>
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<TD WIDTH="16%" VALIGN="TOP"><FONT SIZE=2>)</FONT></TD>
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<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2>COUNTY OF</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP"><FONT SIZE=2>)</FONT></TD>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, before me, the undersigned, a Notary Public in and for said State, appeared GLORIA JEBBIA,
personally known to me or
proved to me on the basis of satisfactory evidence to be the person whose name she subscribed to the within instrument, as Trustee of Norf James Jebbia Testamentary Trust, and acknowledged that she
executed the same. </FONT></P>

<P><FONT SIZE=2>WITNESS
my hand and official seal. </FONT></P>

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<TD WIDTH="49%" ALIGN="CENTER"><HR NOSHADE><FONT SIZE=2> Signature</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><BR><HR NOSHADE><FONT SIZE=2> Name (typed or printed)<BR>
Notary Public in and for<BR>
said County and State</FONT></TD>
</TR>
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STATE OF CALIFORNIA.</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP"><FONT SIZE=2><BR>
)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP"><FONT SIZE=2>) ss.</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2>COUNTY OF</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP"><FONT SIZE=2>)</FONT></TD>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, before me, the undersigned, a Notary Public in and for said State, appeared
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> and
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> personally known to me or proved to me on the basis of satisfactory evidence
to be the persons who executed the within instrument as the <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> and
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, respectively,
of INTERNATIONAL MEDICATION SYSTEMS, LIMITED, a Delaware corporation, and acknowledged that INTERNATIONAL MEDICATION SYSTEMS, LIMITED executed it. </FONT></P>

<P><FONT SIZE=2>WITNESS
my hand and official seal. </FONT></P>

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</TR>
<TR VALIGN="TOP">
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&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><BR><HR NOSHADE><FONT SIZE=2> Name (typed or printed)<BR>
Notary Public in and for<BR>
said County and State</FONT></TD>
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<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><B>EXHIBIT "A" TO EXHIBIT "D"  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibit "A" to that certain Memorandum of Lease dated as of July&nbsp;24, 1990, by and between Dennis&nbsp;A. Jebbia, a married man as his sole and separate
property, Gloria Jebbia, an unmarried woman, and Gloria Jebbia, as Trustee of the Norf James Jebbia Testamentary Trust dated October&nbsp;18, 1982 ("Landlord"), and International Medication Systems,
Limited ("Tenant"). </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>EXHIBIT "E"  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Estoppel Certificate)  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibit "E" to that certain Lease dated as of July&nbsp;24, 1990, by and between Dennis&nbsp;A. Jebbia, a married man as his sole and separate property,
Gloria Jebbia, an unmarried woman, and Gloria Jebbia, as Trustee of the Norf James Jebbia Testamentary Trust dated October&nbsp;18, 1982, as Landlord, and International Medication Systems, Limited,
a Delaware corporation, as Tenant. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
undersigned, International Mediation Systems, Limited, a Delaware corporation ("Tenant"), hereby certifies as of the date of this certificate, to
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, as follows: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Attached
hereto is a true, correct and complete copy of that certain lease ("Lease") dated July&nbsp;24, 1990 between Dennis&nbsp;A. Jebbia, a married man as his sole
and separate property, Gloria Jebbia, an unmarried woman, and Gloria Jebbia, as Trustee of the Norf James Jebbia Testamentary Trust dated October&nbsp;18, 1982, ("Landlord"), and Tenant. The Lease
is now in full force and effect and has not been amended, modified or supplemented, except as set forth in Paragraph&nbsp;4 below. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
term of the Lease commenced on <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>.
</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
term of the Lease shall expire on <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, 19 <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, subject
to extension options and termination rights as specified in the Lease. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Lease has been amended, modified, supplemented, extended, renewed or assigned by the following described agreements, copies of which are attached hereto: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>;
</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>;
</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>;
and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>;
</FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant
has accepted and is now in possession of the Premises, pursuant to Article&nbsp;4 of the Lease, except for
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
amount of Monthly Basic Rent is $ <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
security deposits have been made under the Lease. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant
is paying the full Rent under the Lease, and all Rent has been paid in full as of the date hereof except as follows:<BR>
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>. No Rent under the Lease has been paid for more than thirty (30)&nbsp;days in advance of its due
date. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
the best of Tenant's knowledge, there are no defaults on the part of the Landlord under the Lease, except as follows:<BR>
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;&nbsp;&nbsp;Tenant
claims no set-off or counterclaim against Landlord under the Lease, and to the best of Tenant's knowledge, Tenant has no defense as to its obligations
under the Lease except as follows:<BR>
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>. </FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;&nbsp;&nbsp;Tenant
has no right to any concession (rental or otherwise) or similar compensation in connection with renting the Premises, except as provided in the Lease. </FONT></P>

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<TD COLSPAN=5><FONT SIZE=2>INTERNATIONAL MEDICATION SYSTEMS, LIMITED, a Delaware corporation</FONT></TD>
</TR>
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<TD WIDTH="44%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
By:</FONT></TD>
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&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
Its:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="44%"><BR><HR NOSHADE></TD>
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&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><BR><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="44%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
Its:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="44%"><BR><HR NOSHADE></TD>
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<P ALIGN="CENTER"><FONT SIZE=2><B>EXHIBIT "F"  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Subordination, Non-disturbance and Attornment Agreement)  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This AGREEMENT, made this 24th day of July, 1990, by and among INTERNATIONAL MEDICATION SYSTEMS, LIMITED, a Delaware corporation, having offices at 1886 Santa
Anita Avenue, South El Monte, California 91733 (hereinafter referred to as "Tenant"), SAN GABRIEL VALLEY BANK, a California banking corporation, having offices at 1127 Santa Anita Avenue, South El
Monte, California 91733 (hereinafter referred to as "Beneficiary"), and DENNIS&nbsp;A. JEBBIA, a married man, GLORIA JEBBIA, an unmarried woman, and GLORIA JEBBIA, as Trustee of the Norf James
Jebbia Testamentary Trust dated October&nbsp;18, 1982, all having offices at 2468 Huntington Drive, San Marino, California 91108 (hereinafter referred to as "Landlord"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
Tenant has entered into a certain lease (the "Lease") dated July&nbsp;24, 1990 with Landlord covering certain premises, any and all improvements and fixtures located thereon
or attached thereto, known as 1878-86-90 Santa Anita Avenue, South El Monte, California 91733 (the "Leased Premises") and more particularly described in Exhibit&nbsp;"A"
attached hereto and incorporated herein; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
Landlord intends to execute for the benefit of Beneficiary a certain Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (the "Deed of Trust"), which Deed
of Trust will convey the land and building of which the Leased Premises form a part; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
Tenant has requested Beneficiary to agree not to disturb Tenant's possessory rights in the Leased Premises in the event of foreclosure of the Deed of Trust, provided that Tenant
is not in default under the Lease and provided that Tenant attorns to Beneficiary or the purchaser at a foreclosure sale. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW,
THEREFORE, in consideration of the Leased Premises and mutual covenants hereinafter contained, the parties hereto mutually covenant and agree as follows: </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Lease and any extensions, renewals, replacements or modifications thereof, and all of the right, title and interest of Tenant in and to the Leased Premises are and
shall be subject and subordinate to the Deed of Trust and to all of the terms and conditions contained therein, and to any renewals, modifications, replacements, consolidations and extensions thereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beneficiary
consents to the Lease and, in the event of foreclosure of the Deed of Trust, or other acquisition of the Leased Premises by Beneficiary or exercise of the
power of sale in the Deed of Trust, Beneficiary agrees to recognize Tenant and further agrees that Tenant shall not be disturbed in its possession of the Leased Premises; provided, however, that
Beneficiary's agreement to recognize Tenant shall be subject to the condition that, at the time of foreclosure or at the time Beneficiary takes title to or possession of the Leased Premises no default
under the Lease exists and no event has occurred and no condition exists, which after the passage of time (after notice required by the Lease) unless Tenant is reasonably contesting the existence of
such default, which would entitle Landlord to </FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>terminate
the Lease under its terms and would cause the termination of the Lease, without any further action to Landlord, or would entitle such Landlord to dispossess the Tenant from the Leased
Premises. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant
agrees with Beneficiary that if Beneficiary shall succeed to the interest of Landlord under the Lease, Beneficiary shall not be (a)&nbsp;liable for any action or
omission of Landlord or any prior landlord under the Lease (except if Tenant has provided Beneficiary with a notice of default by Landlord or any prior landlord and given Beneficiary the opportunity
to cure said default as required by the Lease), or (b)&nbsp;subject to any offsets or defenses which Tenant might have against Landlord or any prior landlord, excluding such offsets or defenses
which arose out of Landlord's or any prior landlord's default and for which Tenant notified Beneficiary and Beneficiary was given an opportunity to cure as required by the Lease, or (c)&nbsp;bound
by any rent or additional rent which Tenant may have prepaid for a period greater than one (1)&nbsp;month, or (d)&nbsp;bound by any amendment or modification of the Lease made without
Beneficiary's consent. Tenant further agrees with Beneficiary that Tenant will not voluntarily subordinate the Lease to any lien or encumbrance without Beneficiary's consent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant
agrees with Beneficiary that if the interests of Landlord in and to the Leased Premises shall be transferred to and owned by Beneficiary by reason of foreclosure
or other proceedings brought by it, or by any other manner, Tenant shall be bound to Beneficiary under all of the terms, covenants and conditions of the Lease for the balance of the term thereof
remaining and any extensions or renewals thereof which may be affected in accordance with any option therefor in the Lease, with the same force and effect as if Beneficiary were the landlord under the
Lease, and Tenant does hereby attorn to Beneficiary as its landlord, said attornment to be effective and self-operative without the execution of any further instruments on the part of any
parties hereto immediately upon Beneficiary succeeding to the interest of Landlord in the Leased Premises. Tenant agrees, however, upon written request of Beneficiary, to execute an instrument in
confirmation of the foregoing provisions, satisfactory to Beneficiary, in which Tenant shall acknowledge such attornment and shall set forth the terms and conditions of its tenancy. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
modification, amendment, waiver or release of any provision of this Agreement or of any right, obligation, claim or cause of action arising hereunder shall be valid or
binding for any purpose whatsoever unless in writing and duly executed by the party against whom the same is sought to be executed. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement shall inure to the benefit of the parties hereto and their successors and assigns. As used herein, the term "Tenant" shall include Tenant and his
successors and assigns the term "Landlord" shall include Landlord and its successors and assigns, including anyone who shall have succeeded to landlord's interest in the Leased Premises by, through,
or under foreclosure of any deed of trust encumbering Landlord's leasehold estate in the Leased Premises or exercise of the power of sale in any such deed of trust; and the term "Beneficiary" shall
include Beneficiary and any of its successors and assigns, including anyone who shall have succeeded to Landlord's interest in the Leased Premises by, through, or under foreclosure of the Deed of
Trust or exercise of the power of sale therein. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tenant
and Landlord agree that this Agreement satisfies any condition or requirement in the Lease relating to the granting of a non-disturbance agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement shall not be modified or amended except in writing signed by all parties hereto. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
notices hereunder to Beneficiary shall be deemed to have been duly given if given by any of the following means: (a)&nbsp;personal service; (b)&nbsp;electronic
communication, whether by telex, telegram or telecopying (if confirmed in writing sent by registered or certified mail, with return receipt requested); or (c)&nbsp;mailed by United States registered
or certified mail, with return receipt requested, postage prepaid to Beneficiary at its address set forth in Exhibit&nbsp;B attached hereto (or at such other address and shall be given In writing by
Beneficiary to Tenant). Any notice or other communication sent pursuant to subsection&nbsp;(a) or (b) hereof shall be deemed received upon such personal service or </FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=8,SEQ=31,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="10",CHK=793133,FOLIO='blank',FILE='DISK046:[05BHL4.05BHL1064]LN1064A.;11',USER='RFARRIN',CD='10-FEB-2005;04:02' -->
<BR>

<P><FONT SIZE=2>upon
dispatch by electronic means, and, if sent pursuant to subsection&nbsp;(c) shall be deemed received five (5)&nbsp;days following deposit in the mail. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;&nbsp;&nbsp;This
Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same instrument. Signature and acknowledgment pages may be detached from the counterparts and attached to a single copy of this Agreement
to physically form one document, which may be recorded. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;&nbsp;&nbsp;In
the event any legal action or proceeding is commenced to interpret or enforce the terms of, or obligations arising out of, this Agreement, or to recover damages for
the breach thereof, the party prevailing in any such action or proceeding shall be entitled to recover from non-prevailing party all reasonable attorneys' fees, costs and expenses incurred
by the prevailing party. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first written above. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="78%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>"Tenant"</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2>"Landlord"</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2><BR>
INTERNATIONAL MEDICATION SYSTEMS, LIMITED, a Delaware Corporation</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="42%"><BR><HR NOSHADE><FONT SIZE=2> Dennis A. Jebbia,<BR>
a married man</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><BR><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="42%"><BR><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>Its:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2>Gloria Jebbia,<BR>
an unmarried woman</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><BR><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="42%"><BR><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>Its:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2>Gloria Jebbia, as Trustee of the Norf James Jebbia Testamentary Trust dated October&nbsp;18, 1982</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2><BR>
"Beneficiary"</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=5 VALIGN="TOP"><FONT SIZE=2><BR>
SAN GABRIEL VALLEY BANK, a California Banking corporation</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="42%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><BR><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="5%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>Its:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%"><HR NOSHADE></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=9,SEQ=32,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="10",CHK=554765,FOLIO='blank',FILE='DISK046:[05BHL4.05BHL1064]LN1064A.;11',USER='RFARRIN',CD='10-FEB-2005;04:02' -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="29%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TD WIDTH="80%" VALIGN="TOP"><FONT SIZE=2>STATE OF CALIFORNIA.</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="80%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP"><FONT SIZE=2>) SS.</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="80%" VALIGN="TOP"><FONT SIZE=2>COUNTY OF</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, before me, the undersigned, a Notary Public in and for said State, appeared
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> and
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> personally known to me or proved to me on the basis of satisfactory evidence
to be the persons who executed the within instrument as the <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> and
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, respectively,
of INTERNATIONAL MEDICATION SYSTEMS, LIMITED, a Delaware corporation, and acknowledged that INTERNATIONAL MEDICATION SYSTEMS, LIMITED executed it. </FONT></P>

<P><FONT SIZE=2>WITNESS
my hand and official seal. </FONT></P>

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<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><HR NOSHADE><FONT SIZE=2> Signature</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><BR><HR NOSHADE><FONT SIZE=2> Name (typed or printed)<BR>
Notary Public in and for said<BR>
Country and State</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="28%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2><BR>
STATE OF CALIFORNIA.</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP"><FONT SIZE=2><BR>
)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP"><FONT SIZE=2>) ss.</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2>COUNTY OF</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, before me, the undersigned, a Notary Public in and for said State, appeared
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, personally known to me or proved to me on the basis of satisfactory evidence to be the person who
executed the within instrument as the
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> of SAN GABRIEL VALLEY BANK, a California banking corporation, and acknowledged that SAN GABRIEL
VALLEY BANK executed it. </FONT></P>


<P><FONT SIZE=2>WITNESS
my hand and official seal. </FONT></P>

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<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><HR NOSHADE><FONT SIZE=2> Signature</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><BR><HR NOSHADE><FONT SIZE=2> Name (type or printed)<BR>
Notary Public in and for<BR>
Said County and State</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="28%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2>STATE OF CALIFORNIA.</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP"><FONT SIZE=2>) ss.</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2>COUNTY OF</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, before me, the undersigned, a Notary Public in and for said State, appeared DENNIS&nbsp;A. JEBBIA,
 personally known to
me or proved to me on the basis of satisfactory evidence to be the person whose name he subscribed to the within instrument and acknowledged that he executed the same. </FONT></P>

<P><FONT SIZE=2>WITNESS
my hand and official seal. </FONT></P>

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<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><HR NOSHADE><FONT SIZE=2> Signature</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><BR><HR NOSHADE><FONT SIZE=2> Name (type or printed)<BR>
Notary Public in and for<BR>
Said County and State</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=10,SEQ=33,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="10",CHK=655333,FOLIO='blank',FILE='DISK046:[05BHL4.05BHL1064]LN1064A.;11',USER='RFARRIN',CD='10-FEB-2005;04:02' -->

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<TABLE WIDTH="28%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2><BR>
STATE OF CALIFORNIA.</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP"><FONT SIZE=2><BR>
)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP"><FONT SIZE=2>) ss.</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2>COUNTY OF</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, before me, the undersigned, a Notary Public in and for said State, appeared GLORIA JEBBIA,
personally known to me or
proved to me on the basis of satisfactory evidence to be the person whose name she subscribed to the within instrument and acknowledged that she executed the s sine. </FONT></P>

<P><FONT SIZE=2>WITNESS
my hand and official seal. </FONT></P>

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<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><HR NOSHADE><FONT SIZE=2> Signature</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><BR><HR NOSHADE><FONT SIZE=2> Name (type or printed)<BR>
Notary Public in and for<BR>
Said County and State</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="28%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2><BR>
STATE OF CALIFORNIA.</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP"><FONT SIZE=2><BR>
)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP"><FONT SIZE=2>) ss.</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="81%" VALIGN="TOP"><FONT SIZE=2>COUNTY OF</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" VALIGN="TOP"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, before me, the undersigned, a Notary Public in and for said State, appeared GLORIA JEBBIA,
personally known to me or
proved to me on the basis of satisfactory evidence to be the person whose name she subscribed to the within instrument, as Trustee of the Norf James Jebbia Testamentary Trust, and acknowledged that
she executed the same. </FONT></P>

<P><FONT SIZE=2>WITNESS
my hand and official seal. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>EXHIBIT "A" TO EXHIBIT "F"  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibit "A" to that certain Subordination, Non-disturbance and Attornment Agreement dated as of July&nbsp;24, 1990, by and among International
Medication Systems, Limited, a Delaware corporation, ("Tenant") San Gabriel Valley Bank, a California banking corporation ("Beneficiary"), and Dennis&nbsp;A. Jebbia, a married man as his sole and
separate property, Gloria Jebbia, an unmarried woman, and Gloria Jebbia, as Trustee of the Norf James Jebbia Testamentary Trust dated October&nbsp;18, 1982 ("Landlord"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Leased Premises are legally described as follows: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>EXHIBIT "B" TO EXHIBIT "F"  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibit "B" to that certain Subordination, Non-disturbance and Attornment Agreement dated as of July&nbsp;24, 1990, by and among International
Medication Systems, Limited, a Delaware corporation ("Tenant"), San Gabriel Valley Bank, a California banking corporation ("Beneficiary"), and Dennis&nbsp;A. Jebbia, a married man as his sole and
separate property, Gloria Jebbia, an unmarried woman, and Gloria Jebbia, as Trustee of the Norf James Jebbia Testamentary Trust dated October&nbsp;18, 1982 ("Landlord"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
addresses for notice purposes are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>TENANT:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="65%"><FONT SIZE=2>International Medication Systems, Limited<BR>
17890 Castleton Road, Suite 300<BR>
City of Industry, California 91748<BR>
Attention: Mr.&nbsp;Joseph J. Lowden</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="65%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- insert table folio -->
<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=11,SEQ=34,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="10",CHK=511444,FOLIO='blank',FILE='DISK046:[05BHL4.05BHL1064]LN1064A.;11',USER='RFARRIN',CD='10-FEB-2005;04:02' -->

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<TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2><BR>
WITH A COPY TO:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="65%"><FONT SIZE=2><BR>
Brobeck, Phleger&nbsp;&amp; Harrison<BR>
444 South Flower Street, Suite 4300<BR>
Los Angeles, California 90017<BR>
Attention: Kenneth R. Bender, Esq.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2><BR>
BENEFICIARY:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="65%"><FONT SIZE=2><BR>
San Gabriel Valley Bank<BR>
1127 Santa Anita Avenue<BR>
South El Monte, California 91733<BR>
Attention: Ms.&nbsp;Terry Jenkins</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2><BR>
LANDLORD:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="65%"><FONT SIZE=2><BR>
Mr.&nbsp;Dennis A. Jebbia<BR>
2468 Huntington Drive<BR>
San Marino, California 91108</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="65%"><FONT SIZE=2><BR>
Ms.&nbsp;Gloria Jebbia<BR>
2468 Huntington Drive<BR>
San Marino, California 91108</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="32%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="65%"><FONT SIZE=2><BR>
Gloria Jebbia, as Trustee of the<BR>
Norf James Jebbia Testamentary Trust<BR>
2468 Huntington Drive<BR>
San Marino, California 91108</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2><B>EXHIBIT "G"  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> (Description of Approved Tenant Alterations)  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibit "G" to that certain Lease, dated as of July&nbsp;24, 1990, by and between International Medication Systems, Limited, a Delaware corporation, having
offices at 1886 Santa Anita Avenue, South El Monte, California 91733, as Tenant, and Dennis&nbsp;A. Jebbia, a married man as his sole and separate property, Gloria Jebbia, an unmarried woman, and
Gloria Jebbia, as Trustee of the Norf James Jebbia Testamentary Trust dated October&nbsp;18, 1982, as Landlord. </FONT></P>

<P><FONT SIZE=2>Portion
of the Leased Premises located at: </FONT></P>

<P><FONT SIZE=2>1878
Santa Anita Avenue, South El Monte, California 91733 </FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2>Reroofing.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2>Reorient
packaging lines within the Building. </FONT></DD></DL>

<P><FONT SIZE=2>1886
Santa Anita Avenue, South El Monte, California 91733 </FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2>Upgrade
of Water for Injection System.
<BR><BR></FONT>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>a)</FONT></DT><DD><FONT SIZE=2>Locate
new Finn-Aqua Still </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>b)</FONT></DT><DD><FONT SIZE=2>Locate
new WFI Holding Tank </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>c)</FONT></DT><DD><FONT SIZE=2>Tie
in New Injection System with existing water system
<BR><BR></FONT></DD></DL>
</DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2>Build
Three (3)&nbsp;new Aseptic Fill Rooms and obtain validation from appropriate regulatory bodies for such rooms.
<BR><BR></FONT>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>a)</FONT></DT><DD><FONT SIZE=2>Construct
new Preparation Room </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>b)</FONT></DT><DD><FONT SIZE=2>Construct
new Silicone and Stopper Washing Rooms </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>c)</FONT></DT><DD><FONT SIZE=2>Construct
Three (3)&nbsp;new Aseptic Fill Rooms </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>d)</FONT></DT><DD><FONT SIZE=2>Construct
new pack out areas and warehousing area
<BR><BR></FONT></DD></DL>
</DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>3.</FONT></DT><DD><FONT SIZE=2>Install
additional Air-conditioning and Piping for Water System and Rooms.
<BR><BR></FONT>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>a)</FONT></DT><DD><FONT SIZE=2>Install
Air-conditioning Units and delivery system </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>b)</FONT></DT><DD><FONT SIZE=2>Install
additional Water System Piping </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>c)</FONT></DT><DD><FONT SIZE=2>Install
additional underground drainage system </FONT></DD></DL>
</DD></DL>
<HR NOSHADE>
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<FONT SIZE=2><A HREF="#toc_lk1064_1">Exhibit 10.13</A></FONT><BR>

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<DOCUMENT>
<TYPE>EX-10.14
<SEQUENCE>11
<FILENAME>a2151158zex-10_14.htm
<DESCRIPTION>EXHIBIT 10.14
<TEXT>
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<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="lp1064_exhibit_10.14"> </A>
<A NAME="toc_lp1064_1"> </A>
<BR></FONT><FONT SIZE=2><B>Exhibit 10.14    <BR>    </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>AGREEMENT EXTENDING LEASE  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is hereby agreed on September&nbsp;8, 2003, by and between OWEN BROS. ENTERPRISES, a Partnership ("Lessor"), and INTERNATIONAL MEDICATION
SYSTEMS,&nbsp;LTD., a Delaware Corporation, ("Lessee"), that the Lease dated March&nbsp;9, 2000 and extended by Agreement(s) on
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> for the Premises
located at 10665 El Poche Street, South El Monte, California and covering a Three&nbsp;(3)&nbsp;years&nbsp;&amp; 9&nbsp;months term ending on December&nbsp;31, 2003 and to which Lease reference
is made for further particulars, shall continue in full force and effect including any Guarantee of Lease, for an additional Five&nbsp;(5)&nbsp;year(s), beginning on January&nbsp;1, 2004 and
ending on December&nbsp;31, 2008, subject to all terms, convenants and conditions in said Lease dated March&nbsp;9, 2000, except as follows: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Base Rent shall be $4,800.00 per month payable, in advance, on the First day of each month beginning January&nbsp;1, 2004, continuing monthly, in advance on the
First day of each month during the first Three&nbsp;(3)&nbsp;years, ending on December&nbsp;31, 2006. Base Rent for the period January&nbsp;1, 2007 through December&nbsp;31, 2008 shall be
adjusted as follows: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;On
January&nbsp;1, 2007 the monthly rent payable under paragraph&nbsp;1 ("Base Rent") above shall be adjusted by the increase, if any, from the date this Lease
commenced, in the Consumer Price Index of the Bureau of Labor Statistics of the U.S. Department of Labor for All Urban Consumers, Los&nbsp;Angeles-Riverside-Anaheim, California
(1982-84&nbsp;=&nbsp;100) "All Items," herein referred to as "C.P.I." </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
monthly rent payable in accordance with paragraph&nbsp;(a) of this Addendum shall be calculated as follows: the sum of Four Thousand E.ight Hundred Do11ars
($4,800.00), shall be multiplied by a fraction the numerator of which shall be the C.P.I. of the calendar two (2)&nbsp;months prior to the month(s) specified in paragraph&nbsp;(a) above during
which the adjustments is to take effect, and the denominator of which shall be the C.P.I. for the calendar month of November&nbsp;2003. The sum so calculated shall constitute the new monthly rent
hereunder, but in no event, shall such new monthly rent be less than the rent payable for the month immediately preceding the date for rent adjustment. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Lessor's
failure to request payment of the rent adjustment shall not constitute a waiver of the right to any adjustment provided for in the Lease or this addendum. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;In
the event the compilation and/or publication of the C.P.I. shall be transferred to any other governmental department or bureau or agency or shall be discontinued,
then the index most nearly, the same as the C.P.I. shall be used to make such calculation. In the event that Lessor or Lessee cannot agree on such alternative index, then the matter shall be submitted
for decision to the American Arbitration Association in accordance with the then rules of said association and the decision of the arbitrators shall be binding upon the parties. The cost of said
Arbitrators shall be paid equally by Lessor and Lessee. </FONT></P>

</UL>
</UL>

<P><FONT SIZE=2>IF
THIS AGREEMENT HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY FOR HIS APPROVAL, FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE CONDITION OF THE PREMISES AS TO THE
POSSIBLE PRESENCE OF ASBESTOS, STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE REAL ESTATE BROKER(S) OR THEIR AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS AGREEMENT OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF
THIS AGREEMENT, OR THE TRANSACTION RELATING THERETO. </FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
parties hereto have executed this Agreement at the place on the dates specified above to their respective signatures. </FONT></P>

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<TD WIDTH="49%"><FONT SIZE=2><B>Executed at </B></FONT><FONT SIZE=2>South El Monte, California</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>Executed at South El Monte, California</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>On Oct.&nbsp;16, 2003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>on 10-14-03</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><B>by LESSOR:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><B>by LESSEE:</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
OWEN BROS. ENTERPRISES, a Partnership</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><BR>
INTERNATIONAL MEDICATION SYSTEMS&nbsp;LTD., a Delaware Corporation</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
By John A. Owen</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><BR>
By Jack Zhang</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Title: Partner</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>Title: President/Chief Executive Officer</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Address: 4265 North Baldwin Avenue</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>By Mary Luo</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>El Monte, CA 91731</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>Title: Chief Operating Officer</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Tel. No. (626)&nbsp;442-5567</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>Address: 1886 Santa Anita Avenue<BR>
South El Monte, CA 91733<BR>
Tel. No. (626)&nbsp;442-6757</FONT></TD>
</TR>
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<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OPTION
TO RENEW THE LEASE. #1 </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Lessee
shall have the option to renew the term of the Lease (herein called "Option") for a Three&nbsp;(3)&nbsp;year period commencing January&nbsp;1, 2009 and
ending on December&nbsp;31, 2011. This Option may be exercised only by notice, in writing, delivered by the United States Post Office, Certified Mail to Lessor not earlier than October&nbsp;1,
2008 and no later than October&nbsp;31, 2008 (herein called "Rent Adjustment Date") and shall expire and be of no force or effect if not delivered to Lessor within the prescribed time. In the event
the Option is exercised, all provisions of the Lease shall continue, except the Base Rent during such period covered by the Option shall be increased to the "Prevailing Rent." The term "Prevailing
Rent" shall mean the price that a ready and willing tenant would pay, as of the Rent Adjustment Date, as monthly rent to a ready and willing landlord of property comparable to the Premises if such
property were exposed for lease on the open market for a reasonable period of time and taking into account all the purposes for which such property may he used. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;In
the event Lessor and Lessee are unable to agree on the Prevailing Rent within fifteen (15)&nbsp;days of the Rent Adjustment Date, then within ten (10)&nbsp;days
after the expiration of that period, each Party, at its respective cost and by giving notice to the other Party, shall appoint a qualified real estate appraiser with at least five (5)&nbsp;years
full-time commercial appraisal experience in the area in which the Premises are located to appraise and set the Prevailing Rent of the Premises. If a Party does not appoint an appraiser
within ten (10)&nbsp;days after the other Party has given notice of the name of its appraiser, the single appraiser appointed shall be the sole appraiser and shall set the Prevailing Rent of the
Premises. If the two appraisers are appointed by the Parties as stated in this paragraph, they shall meet within ten (10)&nbsp;days and set the Prevailing Rent of the Premises by taking the average
of the Prevailing Rent as set by each. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OPTION
TO RENEW THE LEASE. #2 </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Lessee
shall have the option to renew the term of the Lease (herein called "Option") for a Three&nbsp;(3)&nbsp;year period commencing January&nbsp;1, 2012 and
ending on December&nbsp;31, 2014. This Option may be exercised only by notice in writing, delivered by the United States Post Office, Certified Mail to Lessor not earlier than October&nbsp;1, 2011
and no later than October&nbsp;31, 2001 (herein called "Rent Adjustment Date") and shall expire and be of no force or effect if not delivered to Lessor within the prescribed time. in the event the
Option is exercised, all provisions of the Lease shall continue, except the Base Rent during such period covered by the Option shall he increased to the "Prevailing Rent." The term "Prevailing Rent"
shall mean the price that a ready and willing tenant would pay, as of the Rent Adjustment Date, as monthly rent to a ready and willing landlord of property comparable to the Premises if such property
were exposed for lease on the open market for a reasonable period of time and taking into account all the purposes for which such property may he used. </FONT></P>

</UL>
<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;In
the event Lessor and Lessee are unable to agree on the Prevailing Rent within fifteen&nbsp;(15)&nbsp;days of the Rent Adjustment Date, then within
ten&nbsp;(10)&nbsp;days after the expiration of that period, each Party, at its respective cost and by giving notice to the other Party, shall appoint a qualified real estate appraiser with at
least five&nbsp;(5)&nbsp;years full-time commercial appraisal experience in the area in which the Premises are located to appraise and set the Prevailing Rent of the Premises. If a
Party does not appoint an appraiser within ten&nbsp;(10)&nbsp;days after the other Party has given notice of the name of its appraiser, the single appraiser appointed shall be the sole appraiser
and shall set the Prevailing Rent of the Premises. If the </FONT><FONT SIZE=2><B>two</B></FONT><FONT SIZE=2> appraisers are appointed by the Parties as stated in this paragraph, they shall meet
within ten&nbsp;(10)&nbsp;days and set the Prevailing Rent of the Premises by taking the average of the Prevailing Rent as set by each. </FONT></P>

</UL>

<P><FONT SIZE=2><B>AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE GROSS<BR>
(DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)  </B></FONT></P>

<P><FONT SIZE=2>1.</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Basic Provisions ("Basic Provisions")</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Parties:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Lease ("Lease"), dated for reference purposes only March&nbsp;9, 2000 is made by and between
OWEN BROS. ENTERPRISES, a Partnership ("Lessor") and INTERNATIONAL MEDICATION SYSTEMS, LIMITED, a Delaware Corporation ("Lessee") (collectively the "Parties," or individually a "Party"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Premises:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;That certain real property, including all improvements therein or to be provided by Lessor under
the terms of this Lease, and commonly known as 10665 El Poche Street, South El Monte located in the County of Los Angeles, State of California and generally described as (describe briefly the nature
of the property and, if applicable, the </FONT><FONT SIZE=2><B>"Project"</B></FONT><FONT SIZE=2>, if the property is located within a Project) a concrete block industrial building approximately
10,000&nbsp;square feet ("Premises"). (See also Paragraph&nbsp;2) </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Term:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Three&nbsp;(3) years and 9&nbsp;months ("Original Term") commencing April&nbsp;1, 2000
("Commencement Date") and ending December&nbsp;31, 2003 ("Expiration Date"). (See also Paragraph&nbsp;3) </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Early Possession:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;March&nbsp;15, 2000 (</FONT><FONT SIZE=2><B>"Early Possession
Date"</B></FONT><FONT SIZE=2>). (See also Paragraphs 3.2 and 3.3) </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Base Rent:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;$4,500.00 per month (</FONT><FONT SIZE=2><B>"Base Rent"</B></FONT><FONT SIZE=2>), payable on the
First day of each month commencing April&nbsp;1, 2000 (See also Paragraph&nbsp;4) </FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></DT><DD><FONT SIZE=2>If
this box is checked, there are provisions in this Lease for the Base Rent to be adjusted and/or for common area maintenance charges. </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6</FONT><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Base Rent Paid Upon Execution:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;$4,500.00 as Base Rent for the period
April&nbsp;2000 </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.7</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Security Deposit:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;$4,500.00 (</FONT><FONT SIZE=2><B>"Security Deposit"</B></FONT><FONT SIZE=2>). (See also
Paragraph&nbsp;5) </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.8</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Agreed Use:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Automatic injector assembly and related process (See also Paragraph&nbsp;6) </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.9</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Insuring Party.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessor is the </FONT><FONT SIZE=2><B>"Insuring Party"</B></FONT><FONT SIZE=2>. The annual
"Base Premium" is $<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>. (See also Paragraph&nbsp;8) </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.10</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Real Estate Brokers:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(See also Paragraph&nbsp;15) </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Representation:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The following real estate brokers (collectively, the </FONT> <FONT SIZE=2><B>"Brokers"</B></FONT><FONT SIZE=2>) and brokerage relationships exist in this
transaction (check applicable boxes): </FONT></P>

</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></DT><DD><FONT
SIZE=2><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
represents Lessor exclusively (</FONT><FONT SIZE=2><B>"Lessor's
Broker"</B></FONT><FONT SIZE=2>)
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><FONT FACE="WINGDINGS">&#111;</FONT></FONT></DT><DD><FONT
SIZE=2><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
represents Lessee exclusively (</FONT><FONT SIZE=2><B>"Lessor's
Broker"</B></FONT><FONT SIZE=2>); or
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2><FONT FACE="WINGDINGS">&#253;</FONT></FONT></DT><DD><FONT SIZE=2>Jenkins
Industrial Properties,&nbsp;Inc. represent both Lessor and Lessee (</FONT><FONT SIZE=2><B>"Dual
Agency"</B></FONT><FONT SIZE=2>). </FONT></DD></DL>
<P ALIGN="RIGHT"><FONT SIZE=2>Initials JK and ML </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>1</FONT></P>

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<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Payment to Brokers:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Upon execution and delivery of this Lease by both Parties,
Lessor shall pay to the Broker the fee agreed to in their separate written agreement (or if there is no such agreement, the sum of 4.5% of the total Base Rent for the brokerage services rendered by
said Broker). </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.11</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Guarantor.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The obligations of the Lessee under this Lease are to be guaranteed by
(</FONT><FONT SIZE=2><B>"Guarantor"</B></FONT><FONT SIZE=2>). (See also Paragraph&nbsp;37) </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.12</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Addenda and Exhibits.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Attached hereto is an Addendum or Addenda consisting of Paragraphs&nbsp;50 through
56 and Exhibits&nbsp;A, all of which constitute a part of this Lease. </FONT></P>

<P><FONT SIZE=2>2.</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Premises.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Letting.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises, for the term,
at the rental, and upon all of the terms, covenants and conditions set forth in this Lease. Unless otherwise provided herein, any statement of size set forth in this Lease, or that may have been used
in calculating rental, is an approximation, which the Parties agree is reasonable and the rental based thereon is not subject to revision whether or not the actual size is more or less. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Condition.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessor shall deliver the Premises broom clean and free of debris on the Commencement Date or the
Early Possession Date, whichever first occurs (</FONT><FONT SIZE=2><B>"Start Date"</B></FONT><FONT SIZE=2>), and warrants that the existing electrical, plumbing, fire sprinkler, lighting, heating,
ventilating and air conditioning systems ("</FONT><FONT SIZE=2><B>HVAC</B></FONT><FONT SIZE=2>"), loading doors, if any, and all other such elements of the building, in the Premises, other than those
constructed by Lessee, shall be in good operating condition on said date and that the surface and structural elements of the roof, bearing walls and foundation of any buildings on the Premises (the
"</FONT><FONT SIZE=2><B>Building</B></FONT><FONT SIZE=2>") shall be free of material defects. If a non-compliance with said warranty exists as of the Start Date, Lessor shall, except as
otherwise provided in this Lease, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance, rectify same at Lessor's
expense. If, after the Start Date, Lessee does not give Lessor written notice of any non-compliance with this warranty within (i)&nbsp;six (6)&nbsp;months as to the HVAC systems or
(ii)&nbsp;thirty (30)&nbsp;days as to the remaining systems and other elements of the Building, correction of such non-compliance shall be the obligation of Lessee at Lessee's sole
cost and expense, except for the roof, foundations, and bearing walls which are handled as provided in paragraph&nbsp;7. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Compliance.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessor warrants that the improvements on the Premises comply with all applicable laws, covenants
or restrictions of record, building codes, regulations and ordinances ("</FONT><FONT SIZE=2><B>Applicable Requirements</B></FONT><FONT SIZE=2>") in effect on the Start Date. Said warranty does not
apply to the use to which Lessee will put the Premises or to any Alterations or Utility Installations (as defined in Paragraph&nbsp;7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible
for determining whether or not the zoning is appropriate for Lessee's intended use and acknowledges that past uses of the Premises may no longer be allowed. If the Premises do not comply with said
warranty, Lessor shall, except as otherwise provided, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance,
rectify the same at Lessor's expense. If Lessee does not give Lessor written notice of a non-compliance with this warranty within six (6)&nbsp;months following the Start Date, correction
of that non-compliance shall be the obligation of Lessee at Lessee's sole cost and expense. If the Applicable Requirements are hereafter changed (as opposed to being in existence at the
Start Date, which is addressed in Paragraph&nbsp;6.2(e) below) so as to require during the term of this Lease the construction of an addition to or an alteration of the Building. the remediation of
any Hazardous Substance, or the reinforcement or other physical modification of the Building ("Capital Expenditure"), Lessor and Lessee shall allocate the cost of such work as follows: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Subject
to Paragraph&nbsp;2.3(c) below, if such Capital Expenditures are required as a result of the specific and unique use of the Premises by Lessee as compared with
uses by tenants in general, Lessee shall be fully responsible for the cost thereof, provided, however that if such Capital </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

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<P><FONT SIZE=2>Expenditure;s
required during the last two (2)&nbsp;years of this Lease and the cost thereof exceeds six (6)&nbsp;months' Base Rent, Lessee may instead terminate this Lease unless Lessor notifies
Lessee, in writing within ten (10)&nbsp;days after receipt of Lessees termination notice that Lessor has elected to pay the difference between the actual cost thereof and the amount equal to six
(6)&nbsp;months' Base Rent. If Lessee elects termination, Lessee shall immediately cease the use of the Premises which requires such Capital Expenditure and deliver to Lessor written notice
specifying a termination date at least ninety (90)&nbsp;days thereafter. Such termination date shall, however, in no event be earlier than the last day that Lessee could legally utilize the Premises
without commencing such Capital Expenditure. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;If
such Capital Expenditure is not the result of the specific and unique use of the Premises by Lessee (such as, governmentally mandated seismic modifications), then
Lessor and Lessee shall allocate the obligation to pay for such costs pursuant to the provisions of Paragraph&nbsp;7.1(c); provided, however, that if such Capital Expenditure is required during the
last two years of this Lease or if Lessor reasonably determines that it is not economically feasible to pay its share thereof, Lessor shall have the option to terminate this Lease upon ninety
(90)&nbsp;days prior written notice to Lessee unless Lessee notifies Lessor, in writing, within ten (10)&nbsp;days after receipt of Lessor's termination notice that Lessee will pay for such
Capital Expenditure. If Lessor does not elect to terminate, and fails to tender its share of any such Capital Expenditure, Lessee may advance such funds and deduct same, with Interest, from Rent until
Lessor's share of such costs have been fully paid. If Lessee is unable to finance Lessors share, or if the balance of the Rent due and payable for the remainder of this Lease is not sufficient to
fully reimburse Lessee on an offset basis, Lessee shall have the right to terminate this Lease upon thirty&nbsp;(30)&nbsp;days written notice to Lessor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Notwithstanding
the above, the provisions concerning Capital Expenditures are intended to apply only to non-voluntary, unexpected, and new Applicable
Requirements. If the Capital Expenditures are instead triggered by Lessee as a result of an actual or proposed orange in use, change in intensity of use, or modification to the Premises then, and in
that event, Lessee shall be fully responsible for the cost thereof, and Lessee shall not have any right to terminate this Lease. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Acknowledgements.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessee acknowledges that: (a)&nbsp;it has been advised by Lessor and/or Brokers to
satisfy itself with respect to the condition of the Premises (including but not limited to the electrical, HVAC and fire sprinkler systems, security, environmental aspects, and compliance with
Applicable Requirements), and their suitability for Lessee's intended use; (b)&nbsp;Lessee has made such investigation as it deems necessary with reference to such matters and assumes all
responsibility therefor as the same relate to its occupancy of the Premises; and (C)&nbsp;neither Lessor, Lessor's agents, nor any Broker has made any oral or written representations or warranties
with respect to said matters other than as set forth in this Lease. In addition, Lessor acknowledges that: (a)&nbsp;Broker has made no representations, promises or warranties concerning Lessee's
ability to honor the Lease or suitability to occupy the Premises; and (b)&nbsp;it is Lessor's sole responsibility to investigate the financial capability and/or suitability of all proposed tenants. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Lessee as Prior Owner/Occupant.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The warranties made by Lessor in Paragraph&nbsp;2 shall be of no force or
effect if immediately prior to the Start Date Lessee was the owner or occupant of the Premises, In such event, Lessee shall be responsible for any necessary corrective work. </FONT></P>

<P><FONT SIZE=2>3.</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Term.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Term.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Commencement Date, Expiration Date and Original Term of this Lease are as specified in
Paragraph&nbsp;1.3. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Early Possession.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If Lessee totally or partially occupies the Premises prior to the Commencement Date, the
obligation to pay Base Rent shall be abated for the period of such early </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

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<P><FONT SIZE=2>possession.
All other terms of this Lease shall, however, be in effect during such period. Any such early possession shall not affect the Expiration Date. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;30.2</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Delay In Possession.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessor agrees to use its best commercially reasonable efforts to deliver possession of
the Premises to Lessee by the Commencement Date, If, despite said efforts, Lessor is unable to deliver possession as agreed, Lessor shall not be subject to any liability therefor, nor shall such
failure affect the validity of this Lease. Lessee shall not, however, be obligated to pay Rent or perform its other obligations until it receives possession of the Premises, If possession is not
delivered within sixty (60)&nbsp;days after the Commencement Date, Lessee may, at its option, by notice in writing within ten&nbsp;(10)&nbsp;days after the end of such sixty (60)&nbsp;day
period, cancel this Lease, in which event the Parties shall be discharged from all obligations hereunder. If such written notice is not received by Lessor within said ten (10)&nbsp;day period,
Lessee's right to cancel shall terminate. Except as otherwise provided, if possession is not tendered to Lessee by the Start Date and Lessee does not terminate this Lease, as aforesaid, any period of
rent abatement that Lessee would otherwise have enjoyed shall run from the date of delivery of possession and continue for a period equal to what Lessee would otherwise have enjoyed under the terms
hereof, but minus any days of delay caused by the acts or omissions of Lessee. If possession of the Premises is not delivered within four (4)&nbsp;months after the Commencement Date, this Lease
shall terminate unless other agreements are reached between Lessor and Lessee, in writing. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Lessee Compliance.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessor shall not be required to tender possession of the Premises to Lessee until Lessee
complies with its obligation to provide evidence of insurance (Paragraph&nbsp;8.5). Pending delivery of such evidence, Lessee shall be required to perform all of its obligations under this Lease
from and after the Start Date, including the payment of Rent, notwithstanding Lessor's election to withhold possession pending receipt of such evidence of insurance. Further, if Lessee is required to
perform any
other conditions prior to or concurrent with the Start Date, the Start Date shall occur but Lessor may elect to withhold possession until such conditions are satisfied. </FONT></P>

<P><FONT SIZE=2>4.</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Rent.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Rent Defined.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;All monetary obligations of Lessee to Lessor under the terms of this Lease (except for the
Security Deposit) are deemed to be rent ("Rent"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Payment.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessee shall cause payment of Rent to be received by Lessor in lawful money of the United States,
without offset or deduction (except as specifically permitted in this Lease), on or before the day on which it is due. Rent for any period during the term hereof which is for less than one
(1)&nbsp;full calendar month shall be prorated based upon the actual number of days of said month. Payment of Rent shall be made to Lessor at its address stated herein or to such other persons or
place as Lessor may from time to time designate in writing. Acceptance of a payment which is less than the amount then due shall not be a waiver of Lessor's rights to the balance of such Rent,
regardless of Lessor's endorsement of any check so stating. </FONT></P>

<P><FONT SIZE=2>5.</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Security Deposit.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessee shall deposit with Lessor upon execution hereof the Security Deposit as
security for Lessee's faithful performance of its obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or retain all or any portion
of said Security Deposit for the payment of any amount due Lessor or to reimburse or compensate Lessor for any liability, expense, loss or damage which Lessor may suffer or incur by reason thereof. If
Lessor uses or applies all or any portion of said Security Deposit, Lessee shall within ten (10)&nbsp;days after written request therefor deposit monies with Lessor sufficient to restore said
Security Deposit to the full amount required by this Lease. If the Base Rent increases during the term of this Lease, Lessee shall, upon written request from Lessor, deposit additional moneys with
Lessor so that the total amount of the Security Deposit shall at all times bear the same proportion to the increased Base Rent as the initial Security Deposit bore to the initial Base Rent. Should the
Agreed Use be amended to accommodate a material change in the business of Lessee or to accommodate a sublessee or assignee, </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

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<P><FONT SIZE=2>Lessor
shall have the right to increase the Security Deposit to the extent necessary, in Lessor's reasonable judgment, to account for any increased wear and tear that the Premises may suffer as a
result thereof. If a change in control of Lessee occurs during this Lease and following such change the financial condition of Lessee is, in Lessor's reasonable judgment, significantly reduced, Lessee
shall deposit such additional monies with Lessor as shall be sufficient to cause the Security Deposit to be at a commercially reasonable level based on said change in financial condition. Lessor shall
not be required to keep the Security Deposit separate from its general accounts. Within fourteen (14)&nbsp;days after the expiration or termination of this Lease, if Lessor elects to apply the
Security Deposit only to unpaid Rent, and otherwise within thirty (30)&nbsp;days after the Premises have been vacated pursuant to Paragraph&nbsp;7.4(c) below, Lessor shall return that portion of
the Security Deposit not used or applied by Lessor. No part of the Security Deposit shall be considered to be held in trust, to bear interest or to be prepayment for any monies to be paid by Lessee
under this Lease. </FONT></P>

<P><FONT SIZE=2>6.</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Use.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Use.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessee shall use and occupy the Premises only for the Agreed Use, and for no other purpose. Lessee
shall not use or permit the use of the Premises in a manner that is unlawful, creates damage, waste or a nuisance, or that disturbs owners and/or occupants of, or causes damage to neighboring
properties. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Hazardous Substances.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Reportable Uses Require Consent.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The term </FONT><FONT SIZE=2><B>"Hazardous
Substance"</B></FONT><FONT SIZE=2> as used in this Lease shall mean any product, substance, or waste whose presence, use, manufacture, disposal, transportation, or release, either by itself or in
combination with other materials expected to be on the Premises, is either: (i)&nbsp;potentially injurious to the public health, safety or welfare, the environment or the Premises,
(ii)&nbsp;regulated or monitored by any governmental authority, or (iii)&nbsp;a basis for potential liability of Lessor to any governmental agency or third party under any applicable statute or
common law theory.
Hazardous Substances shall include, but not be limited to, hydrocarbons, petroleum, gasoline, and/or crude oil or any products, by-products or fractions thereof. Lessee shall not engage in
any activity in or on the Premises which constitutes a Reportable Use of Hazardous Substances without the express prior written consent of Lessor and timely compliance (at Lessee's expense) with all
Applicable Requirements. </FONT><FONT SIZE=2><B>"Reportable Use"</B></FONT><FONT SIZE=2> shall mean (i)&nbsp;the installation or use of any above or below ground storage tank, (ii)&nbsp;the
generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration or business plan is
required to be filed with, any governmental authority, and/or (ii)&nbsp;the presence at the Premises of a Hazardous Substance with respect to which any Applicable Requirements requires that a notice
be given to persons entering or occupying the Premises or neighboring properties. In addition, Lessor may condition its consent to any Reportable Use upon receiving such additional assurances as
Lessor reasonably deems necessary to protect itself, the public, the Premises and/or the environment against damage, contamination, injury and/or liability, including, but not limited to, the
installation (and removal on or before Lease expiration or termination) of protective modifications (such as concrete encasements) and/or increasing the Security Deposit. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Duty to Inform Lessor.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has
come to be located in, on, under or about the Premises, other than as previously consented to by Lessor, Lessee shall immediately give written notice of such fact to Lessor, and provide Lessor with a
copy of any report, notice, claim or other documentation which it has concerning the presence of such Hazardous Substance. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Lessee Remediation.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessee shall not cause or permit any Hazardous Substance to be spilled or released in,
on, under, or about the Premises (including through the plumbing or sanitary sewer system) and shall promptly, at Lessee's expense, take all investigatory and/or remedial action reasonably
recommended, whether or not formally ordered or required, for the cleanup of any contamination of, </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

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<P><FONT SIZE=2>and
for the maintenance, security and/or monitoring of the Premises or neighboring properties, that was caused or materially contributed to by Lessee, or pertaining to or involving any Hazardous
Substance brought onto the Premises during the term of this Lease, by or for Lessee, or any third party. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Lessee Indemnification.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessee shall indemnify, defend and hold Lessor, its agents, employees, lenders and
ground lessor, if any, harmless from and against any and all loss of rents and/or damages, liabilities, judgments, claims, expenses, penalties, and attorneys' and consultants' fees arising out of or
involving any Hazardous Substance brought onto the Premises by or for Lessee, or any third party (provided, however, that Lessee shall have no liability under this Lease with respect to underground
migration of any Hazardous Substance under the Premises from adjacent properties). Lessee's obligations shall include, but not be limited to, the effects of any contamination or injury to person,
property or the environment created or suffered by Lessee, and the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this
Lease. </FONT></P>

<P><FONT SIZE=2><B>No termination, cancellation or release agreement entered into by Lessor and Lessee shall release Lessee from its obligations under this Lease with respect to Hazardous
Substances, unless specifically so agreed by Lessor in writing at the time of such agreement.</B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Lessor Indemnification.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessor and its successors and assigns shall indemnify, defend, reimburse and hold
Lessee, its employees and. lenders, harmless from and against any and all environmental damages. including the cost of remediation, which existed as a result of Hazardous Substances on the Premises
prior to the Start Date or which are caused by the gross negligence or willful misconduct of Lessor, its agents or employees. Lessor's obligations, as and when required by the Applicable Requirements,
shall include, but not be limited to, the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Investigations and Remediations.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessor shall retain the responsibility and pay for any investigations or
remediation measures required by governmental entities having jurisdiction with respect to the existence of Hazardous Substances on the Premises prior to the Start Date, unless such remediation
measure is required as a result of Lessee's use (including alterations) of the Premises, in which event Lessee shall be responsible for such payment. Lessee shall cooperate fully in any such
activities at the request of Lessor, including allowing Lessor and Lessor's agents to have reasonable access to the Premises at reasonable times in order to carry out Lessor's investigative and
remedial responsibilities, </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Lessor Termination Option.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If a Hazardous Substance Condition occurs during the term of this Lease, unless
Lessee is legally responsible therefor (in which case Lessee shall make the investigation and remediation thereof required by the Applicable Requirements and this Lease shall continue in full force
and effect, but subject to Lessor's rights under Paragraph&nbsp;6.2(d) and Paragraph&nbsp;13), Lessor may, at Lessor's option, either (i)&nbsp;investigate and remediate such Hazardous Substance
Condition, if required, as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue in full force and effect, or (ii)&nbsp;if the estimated cost to remediate such
condition exceeds twelve (12)&nbsp;times the then monthly Base Rent or $100000, whichever is greater, give written notice to Lessee, within thirty (30)&nbsp;days after receipt by Lessor of
knowledge of the occurrence of such Hazardous Substance Condition, of Lessor's desire to terminate this Lease as of the date sixty (60)&nbsp;days following the date of such notice. In the event
Lessor elects to give a termination notice, Lessee may, within ten (10)&nbsp;days thereafter, give written notice to Lessor of Lessee's commitment to pay the amount by which the cost of the
remediation of such Hazardous Substance Condition exceeds an amount equal to twelve (12)&nbsp;times the then monthly Base Rent or $100,000, whichever is greater. Lessee shall provide Lessor with
said funds or satisfactory assurance thereof within thirty (30)&nbsp;days </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>following
such commitment. In such event, this Lease shall continue in full force and effect, and Lessor shall proceed to make such remediation as soon as reasonably possible after the required funds
are available. If Lessee does not give such notice and provide the required funds or assurance thereof within the time provided, this Lease shall terminate as of the date specified in Lessor's notice
of termination. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Lessee's Compliance with Applicable Requirements.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Except as otherwise provided in this Lease, Lessee shall,
at Lessee's sole expense, fully, diligently and in a timely manner, materially comply with all Applicable Requirements, the requirements of any applicable fire insurance underwriter or rating bureau,
and the recommendations of Lessor's engineers and/or consultants which relate in any manner to the Premises, without regard to whether said requirements are now in effect or become effective after the
Start Date. Lessee shall, within ten (10)&nbsp;days after receipt of Lessor's written request, provide Lessor with copies of all permits and other documents, and other information evidencing
Lessee's compliance with any Applicable Requirements specified by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documents involved) of any threatened or
actual claim, notice, citation, warning, complaint or report pertaining to or involving the failure of Lessee or the Premises to comply with any Applicable Requirements. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Inspection; Compliance.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessor and Lessor's "Lender" (as defined in Paragraph&nbsp;30 below) and
consultants shall have the right to enter into Premises at any time, in the case of an emergency, and otherwise at reasonable times, for the purpose of inspecting the condition of one Premises and for
verifying compliance by Lessee with this Lease. The cost of any such inspections shall be paid by Lessor, unless a violation of Applicable Requirements, or a contamination is found to exist or be
imminent, or the inspection is requested or ordered by a governmental authority. In such case, Lessee shall upon request reimburse Lessor for the cost of such inspections, so long as such inspection
is reasonably related to the violation or contamination, </FONT></P>

<P><FONT SIZE=2>7.</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Maintenance; Repairs, Utility Installations; Trade Fixtures and Alterations.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Lessee's Obligations.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;In General.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Subject to the provisions of Paragraph&nbsp;2.2 (Condition), 2.3 (Compliance with Covenants,
Restrictions and Building Code), 6.3 (Lessee's Compliance with Applicable Requirements), 7.2 (Lessor's Obligations), 9 (Damage and Destruction), and 14 (Condemnation), Lessee shall, at Lessee's sole
expense, keep the Premises, Utility Installations, and Alterations in good order, condition and repair (whether or not the portion of the Premises requiring repairs, or the means of repairing the
same, are reasonably or readily accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee's use, any prior use, the elements or the age of such portion of the
Premises), including, but not limited to, all equipment or facilities, such as plumbing, heating, ventilating, air-conditioning, electrical, lighting facilities, boilers, pressure vessels,
fire protection system, fixtures, walls (interior and exterior), ceilings, floors, windows, doors, skylights, landscaping, driveways, parking tots, fences, signs, sidewalks and parkways located in,
on, or adjacent to the Premises. Lessee is also responsible for keeping the roof and roof drainage clean and free of debris, Lessor shall keep the surface and structural elements of the roof,
foundations, and bearing walls in good repair (see paragraph&nbsp;7.2). Lessee, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices.
Lessee's obligations shall include restorations, replacements or renewals when necessary to keep the Premises and all improvements thereon or a part thereof in good order, condition and state of
repair. Lessee shall, during the term of this Lease, keep the exterior appearance of the Building in a first-class condition (including, e.g., graffiti removal) consistent with the exterior appearance
of other similar facilities of comparable age and size in the vicinity, including, when necessary, the exterior repainting of the Building. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Service Contracts.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessee shall, at Lessees sole expense, procure and maintain contracts, with copies to
Lessor, in customary form and substance for, and with contractors specializing and </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=9,SEQ=9,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="11",CHK=273332,FOLIO='7',FILE='DISK046:[05BHL4.05BHL1064]LP1064A.;9',USER='RFARRIN',CD='10-FEB-2005;21:00' -->
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<P><FONT SIZE=2>experienced
in the maintenance of the following equipment and improvements ("Basic Elements"), if any, if and when installed on the Premises: (i)&nbsp;HVAC equipment, (ii)&nbsp;boiler, and
pressure vessels, (iii)&nbsp;fire extinguishing systems, including fire alarm and/or smoke detection, (iv)&nbsp;landscaping and irrigation systems, (v)driveways and parking lots,
(vi)&nbsp;clarifiers, (vii)&nbsp;basic utility feed to the perimeter of the Building, and (viii)&nbsp;any other equipment, if reasonably required by Lessor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Replacement.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Subject to Lessee's indemnification of Lessor as set forth in Paragraph&nbsp;8.7 below, and
without relieving Lessee of liability resulting from Lessee's failure to exercise and perform good maintenance practices, if the Basic Elements described in Paragraph&nbsp;7.1(b) cannot be repaired
other than at a cost which is in excess of 50% of the cost of replacing such Basic Elements, then such Basic Elements shall be replaced by Lessor, and the cost thereof shall be prorated between the
Parties and Lessee shall only be obligated to pay, each month during the remainder of the term of this Lease, on the date on which Base Rent is due, an amount equal to the product of multiplying the
cost of such replacement by a fraction, the numerator of which is one, and the denominator of which is the number of months of the useful life of such replacement as such useful life is specified
pursuant to Federal income tax regulations or guidelines for depreciation thereof (including interest on the unamortized balance as is then commercially reasonable in the judgment of Lessor's
accountants), with Lessee reserving the right to prepay its obligation at any time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;30.2</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Lessor's Obligations.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance with
Covenants, Restrictions and Building Code), 9 (Damage or Destruction) and 14 (Condemnation), it is intended by the Parties hereto that Lessor have no obligation, in any manner whatsoever, to repair
and maintain the Premises, or the equipment therein, all of which obligations are intended to be that of the Lessee, except for the surface and structural elements of the roof, foundations and bearing
walls, the repair of which shall be the responsibility of Lessor upon receipt of written notice that such a repair is necessary. It is the intention of the Parties that the terms of this Lease govern
the respective obligations of the Parties as to maintenance and repair of the Premises, and they expressly waive the benefit of any statute now or hereafter in effect to the extent it is inconsistent
with the terms of this Lease. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Utility Installations; Trade Fixtures; Alterations.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Definitions; Consent Required.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The term </FONT><FONT SIZE=2><B>"Utility
Installations"</B></FONT><FONT SIZE=2> refers to all floor and window coverings, air lines, power panels, electrical distribution, security and fire protection systems and signs, communication
systems, lighting fixtures, HVAC equipment, plumbing, and fencing in or on the Premises, The term </FONT><FONT SIZE=2><B>"Trade Fixtures"</B></FONT><FONT SIZE=2> shall mean Lessee's machinery and
equipment that can tie removed without doing material damage to the Premises. The term "Alterations" shall mean any
modification of the improvements, other than Utility Installations or Trade Fixtures, whether by addition or deletion. </FONT><FONT SIZE=2><B>"Lessee Owned Alterations and/or Utility
Installations"</B></FONT><FONT SIZE=2> are defined as Alterations and/or Utility Installations made by Lessee that are not yet owned by Lessor pursuant to Paragraph&nbsp;7.4(a). Lessee shall not
make any Alterations or Utility Installations to the Premises without Lessor's prior written consent. Lessee may, however, make non-structural Utility Installations to the interior of the
Premises (excluding the roof) without such consent but upon notice to Lessor, as long as they are not visible from the outside, do not involve puncturing, relocating or removing the roof or any
existing walls, and the cumulative cost thereof during this Lease as extended does not exceed $50,000 in the aggregate or $10,000 in any one year. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Consent.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any Alterations or Utility Installations that Lessee shall desire to make and which require the
consent of the Lessor shall be presented to Lessor in written form with detailed plans. Consent shall be deemed conditioned upon Lessee's: (i)&nbsp;acquiring all applicable governmental permits,
(ii)&nbsp;furnishing Lessor with copies of both the permits and the plans and specifications prior to commencement of the work, and (iii)&nbsp;compliance with all conditions of said permits and
other Applicable Requirements in a prompt and expeditious manner. Any Alterations or Utility Installations </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>shall
be performed in a workmanlike manner with good and sufficient materials. Lessee shall promptly upon completion furnish Lessor with as-built plans and specifications. For work which
costs an amount equal to the greater of one month's Base Rent, or $10,000, Lessor may condition its consent upon Lessee providing a lien and completion bond in an amount equal to one and
one-half times the estimated cost of such Alteration or Utility Installation and/or upon Lessee's posting an additional Security Deposit with Lessor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Indemnification.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have
been furnished to or for Lessee at or for use on the Premises, which claims are or may be secured by any mechanic's or materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10)&nbsp;days' notice prior to the commencement of any work in, on or about the Premises, and Lessor shall have the right to post notices of
non-responsibility. If Lessee shall contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense defend and protect itself, Lessor and the Premises
against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof. If Lessor shall require, Lessee shall furnish a surety bond in an
amount equal to one and one-half times the amount of such contested lien, claim or demand, indemnifying Lessor against liability for the same. if Lessor elects to participate in any such
action, Lessee shall pay Lessor's attorneys' fees and costs. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Ownership; Removal; Surrender; and Restoration.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Ownership.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Subject to Lessor's right to require removal or elect ownership as hereinafter provided, all
Alterations and Utility Installations made by Lessee shall be the property of Lessee, but considered
a part of the Premises. Lessor may, at any time, elect in writing to be the owner of all or any specified part of the Lessee Owned Alterations and Utility Installations. Unless otherwise instructed
per Paragraph&nbsp;7.4(b) hereof, all Lessee Owned Alterations and Utility Installations shall, at the expiration or termination of this Lease, become the property of Lessor and be surrendered by
Lessee with the Premises. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Removal.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;By delivery to Lessee of written notice from Lessor not earlier than ninety (90)&nbsp;and not
later than thirty (30)&nbsp;days prior to the end of the term of this Lease, Lessor may require that any or all Lessee Owned Alterations or Utility Installations be removed by the expiration or
termination of this Lease. Lessor may require the removal at any time of all or any part of any Lessee Owned Alterations or Utility Installations made without the required consent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Surrender/Restoration.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessee shall surrender the Premises by the Expiration Date or any earlier termination
date, with all of the improvements, parts and surfaces thereof broom clean and free of debris, and in good operating order, condition and state of repair, ordinary wear and tear excepted. "Ordinary
wear and tear" shall not include any damage or deterioration that would have been prevented by good maintenance practice. Lessee shall repair any damage occasioned by the installation, maintenance or
removal of Trade Fixtures, Lessee Owned Alterations and/or Utility Installations, furnishings, and equipment as well as the removal of any storage tank installed by or for Lessee, and the removal,
replacement, or remediation of any soil, material or groundwater contaminated by Lessee. Trade Fixtures shall remain the property of Lessee and shall be removed by Lessee. The failure by Lessee to
timely vacate the Premises pursuant to this Paragraph&nbsp;7.4(c) without the express written consent of Lessor shall constitute a holdover under the provisions of Paragraph&nbsp;26 below. </FONT></P>

</UL>

<P><FONT SIZE=2>8.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Insurance; Indemnity.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Payment of Premium Increases.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Lessee
shall pay to Lessor any insurance cost increase </FONT><FONT SIZE=2><B>("Insurance Cost Increase</B></FONT><FONT SIZE=2>") occurring during the term of this
Lease. "Insurance Cost Increase" is defined as any increase in the actual cost of the insurance required under Paragraph&nbsp;8.2(b), 8.3(a) and 8.3(b) ("Required Insurance"), over and above the
Base Premium as hereinafter defined calculated on an annual basis. "Insurance Cost Increase" shall include but not be limited to increases resulting from the nature of Lessee's occupancy, any act or
omission of Lessee, requirements of the holder of mortgage or deed of trust covering the Premises, increased valuation of the Premises and/or a premium rate increase. The parties are encouraged to
fill in the Base Premium in Paragraph&nbsp;1 .9 with a reasonable premium for the Required Insurance based on the Agreed Use of the Premises, If the parties fail to insert a dollar amount in
Paragraph&nbsp;1 .9, then the Base Premium shall be the lowest annual premium reasonably obtainable for the Required Insurance as of the commencement of the Original Term for the Agreed Use of the
Premises. In no event, however, shall Lessee be responsible for any portion of the increase in the premium cost attributable to liability insurance carried by Lessor under Paragraph&nbsp;8.1(b) in
excess of $2,000,000 per occurrence. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Lessee
shall pay any such Insurance Cost Increase to Lessor within thirty (30)&nbsp;days after receipt by Lessee of a copy of the premium statement or other reasonable
evidence of the amount due. If the insurance policies maintained hereunder cover other property besides the Premises, Lessor shall also deliver to Lessee a statement of the amount of such Insurance
Cost Increase attributable only to the Premises showing in reasonable detail the manner in which such amount was computed. Premiums for policy periods commencing prior to, or extending beyond the term
of this Lease, shall be prorated to correspond to the term of this Lease. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Liability Insurance.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Carried by Lessee.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessee shall obtain and keep in force a Commercial General Liability Policy of Insurance
protecting Lessee and Lessor against claims for bodily injury, personal injury and property damage based upon or arising out of the ownership, use, occupancy or maintenance of the Premises and all
areas appurtenant thereto. Such insurance shall be on an occurrence basis providing single limit coverage in an amount not less than $1,000,000 per occurrence with an </FONT> <FONT SIZE=2><B>"Additional Insured-Managers or Lessors of Premises
Endorsement"</B></FONT><FONT SIZE=2> and contain the "Amendment </FONT><FONT SIZE=2><B>of the Pollution Exclusion
Endorsement"</B></FONT><FONT SIZE=2> for damage caused by heat, smoke or fumes from a hostile fire. The Policy </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=12,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="11",CHK=788129,FOLIO='10',FILE='DISK046:[05BHL4.05BHL1064]LQ1064A.;8',USER='RFARRIN',CD='10-FEB-2005;04:02' -->
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<P><FONT SIZE=2>shall
not contain any intra-insured exclusions as between insured persons or organizations, but shall include coverage for liability assumed under this Lease as an insured contract" for the
performance of Lessee's indemnity obligations under this Lease. The limits of said insurance shall not, however, limit the liability of Lessee nor relieve Lessee of any obligation hereunder. All
insurance carried by Lessee shall be primary to and not contributory with any similar insurance carried by Lessor, whose insurance shall be considered excess insurance only. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Carried by Lessor.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessor shall maintain liability insurance as described in Paragraph&nbsp;8.2(a), in
addition to, and not in lieu of, the insurance required to be maintained by Lessee. Lessee shall not be named as an additional insured therein. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Property Insurance&#151;Building, Improvements and Rental Value.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Building and Improvements.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Insuring Party shall obtain and keep in force a policy or policies in the
name of Lessor, with loss payable to Lessor, any groundlessor, and to any Lender(s) insuring loss or damage to the Premises. The amount of such insurance shall be equal to the full replacement cost of
the Premises, as the same shall exist from time to time, or the amount required by any Lenders, but in no event more than the commercially reasonable and available insurable value thereof. If Lessor
is the Insuring Party, however, Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee's personal property shall be insured by Lessee under Paragraph&nbsp;8.4 rather than by
Lessor. If the coverage is available and commercially appropriate, such policy or policies shall insure against all risks of direct physical loss or damage (except the perils of flood and/or
earthquake unless required by a Lender or included in the Base Premium), including coverage for debris removal and the enforcement of any Applicable Requirements requiring the upgrading, demolition,
reconstruction or replacement of any portion of the Premises as the result of a covered loss. Said policy or policies shall also contain an agreed valuation provision in lieu of any coinsurance
clause, waiver of subrogation, and inflation guard protection causing an increase in the annual property insurance coverage amount by a factor of not less than the adjusted U.S. Department of Labor
Consumer Price Index for All Urban Consumers for the city nearest to where the Premises are located. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Rental Value.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Insuring Party shall obtain and keep in force a policy or policies in the name of Lessor,
with loss payable to Lessor and any Lender, insuring the loss of the full Rent for one (1)&nbsp;year. Said insurance shall provide that in the event the Lease is terminated by reason of an insured
loss, the period of indemnity for such coverage shall be extended beyond the date of the completion of repairs or replacement of the Premises, to provide for one full year's loss of Rent from the date
of any such loss. Said insurance shall contain an agreed valuation provision in lieu of any coinsurance clause, and the amount of coverage shall be adjusted annually to reflect the projected Rent
otherwise payable by Lessee, for the next twelve (12)&nbsp;month period. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Adjacent Premises.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If the Premises are part of a larger building, or of a group of buildings owned by Lessor
which are adjacent to the Premises, the Lessee shall pay for any increase in the premiums for the property insurance of such building or buildings if said increase s caused by Lessee's acts,
omissions, use or occupancy of the Premises. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Lessee's Property/Business Interruption Insurance.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Property Damage.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessee shall obtain and maintain insurance coverage on all of Lessee's personal property,
Trade Fixtures, and Lessee Owned Alterations and Utility Installations. Such insurance shall be full replacement cost coverage with a deductible of not to exceed $1,000 per occurrence. The proceeds
from any such insurance shall be used by Lessee for the replacement of personal property, Trade Fixtures and Lessee Owned Alterations and Utility Installations. Lessee shall provide Lessor with
written evidence that such insurance is in force. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Business Interruption.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessee shall obtain and maintain loss of income and extra expense insurance in
amounts as will reimburse Lessee for direct or indirect loss of earnings attributable to all </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>

<!-- ZEQ.=2,SEQ=13,EFW="2151158",CP="AMPHASTAR PHARMACEUTICALS, INC.",DN="11",CHK=358628,FOLIO='11',FILE='DISK046:[05BHL4.05BHL1064]LQ1064A.;8',USER='RFARRIN',CD='10-FEB-2005;04:02' -->
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<P><FONT SIZE=2>perils
commonly insured against by prudent lessees in the business of Lessee or attributable to prevention of access to the Premises as a result of such perils. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;No Representation of Adequate Coverage.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessor makes no representation that the limits or forms of coverage
of insurance specified herein are adequate to cover Lessee's property, business operations or obligations under this Lease. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Insurance Policies.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Insurance required herein shall be by companies duly licensed or admitted to transact
business in the state where the Premises are located, and maintaining during the policy term a "General Policyholders Rating" of at least B+, V, as set forth in the most current issue of "Best's
Insurance Guide", or such other rating as may be required by a Lender. Lessee shall not do or permit to be done anything which invalidates the required insurance policies. Lessee shall, prior to the
Start Date, deliver to Lessor certified copies of policies of such insurance or certificates evidencing the existence and amounts of the required insurance. No such policy shall be cancelable or
subject to modification except after thirty (30)&nbsp;days prior written notice to Lessor. Lessee shall, at least thirty (30)&nbsp;days prior to the expiration of such policies, furnish Lessor
with evidence of renewals or "insurance binders" evidencing renewal thereof, or Lessor may order such insurance and charge the cost thereof to Lessee, which amount shall be payable by Lessee to Lessor
upon demand. Such policies shall be for a term of at least one year, or the length of the remaining term of this Lease, whichever is less. If either Party shall fail to procure and maintain the
insurance required to be carried by it, the other Party may, but shall not be required to, procure and maintain the same. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Waiver of Subrogation.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Without affecting any other rights or remedies, Lessee and Lessor each hereby release
and relieve the other, and waive their entire right to recover damages against the other, for loss of or damage to its property arising out of or incident to the perils required to be insured against
herein. The effect of such releases and waivers is not limited by the amount of insurance carried or required, or by any deductibles applicable hereto. The Parties agree to have their respective
property damage insurance carriers waive any right to subrogation that such companies may have against Lessor or Lessee, as the case may be, so long as the insurance is not invalidated thereby. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.7</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Indemnity.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Except for Lessor's gross negligence or willful misconduct, Lessee shall indemnify, protect,
defend and hold harmless the Premises, Lessor and its agents, Lessor's master or ground lessor, partners and Lenders, from and against any and all claims, loss of rents and/or damages, liens,
judgments. penalties, attorneys' and consultants' fees, expenses and/or liabilities arising out of, involving, or in connection with, the use and/or occupancy of the Premises by Lessee, If any action
or proceeding is brought against Lessor by reason of any of the foregoing matters, Lessee shall upon notice defend the same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any such claim in order to be defended or indemnified. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.8</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Exemption of Lessor from Liability.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessor shall not be liable for injury or damage to the person or goods,
wares, merchandise or either property of Lessee, Lessee's employees, contractors, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or lighting
fixtures, or from any other cause, whether the said injury or damage results from conditions arising upon the Premises or upon other portions of the Building of which the Premises are a part, or from
other sources or places. Lessor shall not be liable for any damages arising from any act or neglect of any other tenant of Lessor. Notwithstanding Lessor's negligence or breach of this Lease, Lessor
shall under no circumstances be liable for injury to Lessee's business or for any loss of income or profit therefrom. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>

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<P><FONT SIZE=2>9.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Damage or Destruction.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Definitions.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;"Premises
Partial Damage" shall mean damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations, Utility Installations and Trade
Fixtures, which can reasonably be repaired in six (6)&nbsp;months or less from the date of the damage or destruction. Lessor shall notify Lessee in writing within thirty (30)&nbsp;days from the
date of the damage or destruction as to whether or not the damage is Partial or Total. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;"Premises
Total Destruction' shall mean damage or destruction to the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which
cannot reasonably be repaired in six (6)&nbsp;months or less from the date of the damage or destruction. Lessor shall notify Lessee in writing within thirty (30)&nbsp;days from the date of the
damage or destruction as to whether or not the damage is Partial or Total. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;"Insured
Loss" shall mean damage or destruction to improvements on the Premises, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which
was caused by an event required to be covered by the insurance described in Paragraph&nbsp;8.3(a), irrespective of any deductible amounts or coverage limits involved. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;"Replacement
Cost" shall mean the cost to repair or rebuild the improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior
thereto, including demolition, debris removal and upgrading required by the operation of Applicable Requirements, and without deduction for depreciation. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;"Hazardous
Substance Condition" shall mean the occurrence or discovery of a condition involving the presence of, or a contamination by, a Hazardous Substance as defined
in Paragraph&nbsp;6.2(a), in, on, or under the Premises. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Partial Damage&#151;Insured Loss.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If a Premises Partial Damage that is an Insured Loss occurs, then
Lessor shall, at Lessor's expense, repair such damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect; provided, however, that Lessee shall, at Lessor's election, make the repair of any damage or destruction the total cost to repair of which is $10,000 or less, and,
in such event, Lessor shall make any applicable insurance proceeds available to Lessee on a reasonable basis for that purpose. Notwithstanding the foregoing, if the required insurance was not in force
or the insurance proceeds are not sufficient to effect such repair, the Insuring Party shall promptly contribute the shortage in proceeds as and when required to complete said repairs. In the event,
however, such shortage was due to the fact that, by reason of the unique nature of the improvements, full replacement cost insurance coverage was not commercially reasonable and available, Lessor
shall have no obligation to pay for the shortage in insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate
assurance thereof, within ten (10)&nbsp;days following receipt of written notice of such shortage and request therefor. If Lessor receives said funds or adequate assurance thereof within said ten
(10)&nbsp;day period, the party responsible for making the repairs shall complete them as soon as reasonably possible and this Lease shall remain in full force and effect. If such funds or assurance
are not received, Lessor may nevertheless elect by written notice to Lessee within ten (10)&nbsp;days thereafter to: (i)&nbsp;make such restoration and repair as is commercially reasonable with
Lessor paying any shortage in proceeds, in which case this Lease shall remain in full force and effect; or (ii)&nbsp;have this Lease terminate thirty (30)&nbsp;days thereafter. Lessee shall not be
entitled to reimbursement of any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or earthquake shall be subject to Paragraph&nbsp;9.3,
notwithstanding that there may be some insurance coverage, but the net proceeds of any such insurance shall be made available for the repairs if made by either Party. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>13</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Partial Damage&#151;Uninsured Loss.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If a Premises Partial Damage that is not an Insured Loss occurs,
unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee's expense), Lessor may either: (i)&nbsp;repair such damage as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in full force and effect, or (ii)&nbsp;terminate this Lease by giving written notice to Lessee within thirty (30)&nbsp;days
after receipt by Lessor of knowledge of the occurrence of such damage. Such termination shall be effective sixty (60)&nbsp;days following the date of such notice. In the event Lessor elects to
terminate this Lease, Lessee shall have the right within ten (10)&nbsp;days after receipt of the termination notice to give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage without reimbursement from Lessor. Lessee shall provide Lessor
with said funds or satisfactory assurance thereof within thirty (30)&nbsp;days after making such commitment. In such event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such repairs as soon as reasonably possible after the required funds are available. If Lessee does not make the required commitment, this Lease shall terminate as of the date specified
in the termination notice. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Total Destruction.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding any other provision hereof, if a Premises Total Destruction occurs, this
Lease shall terminate sixty (60)&nbsp;days following such Destruction. If the damage or destruction was caused by the gross negligence or willful misconduct of Lessee, Lessor shall have the right to
recover Lessor's damages from Lessee, except as provided in Paragraph&nbsp;8.6. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.5</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Damage Near End of Term.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If at any time during the last six (6)&nbsp;months of this Lease there is damage
for which the cost to repair exceeds one (1)&nbsp;month's Base Rent, whether or not an Insured Loss, Lessor may terminate this Lease effective sixty (60)&nbsp;days following the date of occurrence
of such damage by giving a written termination notice to Lessee within thirty (30)&nbsp;days after the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee at that time has an
exercisable option to extend this Lease or to purchase the Premises, then Lessee may preserve this Lease by, (a)&nbsp;exercising such option and (b)&nbsp;providing Lessor with any shortage in
insurance proceeds (or adequate assurance thereof) needed to make the repairs on or before the earlier of (i)&nbsp;the date which is ten days after Lessee's receipt of Lessor's written notice
purporting to terminate this Lease, or (ii)&nbsp;the day prior to the date upon which such option expires. If Lessee duly exercises such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's commercially reasonable expense, repair such damage as soon as reasonably possible and this Lease
shall continue in full force and effect. If Lessee fails to exercise such option and provide such funds or assurance during such period, then this Lease shall terminate on the date specified in the
termination notice and Lessee's option shall be extinguished. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.6</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Abatement of Rent; Lessee's Remedies.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Abatement.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In the event of Premises Partial Damage or Premises Total Destruction or a Hazardous Substance
Condition for which Lessee is not responsible under this Lease, the Rent payable by Lessee for the period required for the repair, remediation or restoration of such damage shall be abated in
proportion to the degree to which Lessee's use of the Premises is impaired, but not to exceed the proceeds received from the Rental Value insurance. All other obligations of Lessee hereunder shall be
performed by Lessee, and Lessor shall have no liability for any such damage, destruction, remediation, repair or restoration except as provided herein. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Remedies.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If Lessor shall be obligated to repair or restore the Premises and does not commence, in a
substantial and meaningful way, such repair or restoration within ninety (90)&nbsp;days after such obligation shall accrue, Lessee may, at any time prior to the commencement of such repair or
restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice, of Lessee's election to terminate this Lease on a date not less than sixty (60)&nbsp;days following
the giving of such notice. If Lessee gives such notice and such repair or restoration is not commenced within thirty </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>14</FONT></P>

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<P><FONT SIZE=2>(30)&nbsp;days
thereafter, this Lease shall terminate as of the date specified in said notice. If the repair or restoration is commenced within said thirty (30)&nbsp;days, this Lease shall
continue in full force and effect. </FONT><FONT SIZE=2><B>"Commence"</B></FONT><FONT SIZE=2> shall mean either the unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever first occurs. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.7</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Termination&#151;Advance Payments.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Upon termination of this Lease pursuant to Paragraph&nbsp;6.2(g)
or Paragraph&nbsp;9, an equitable adjustment shall be made concerning advance Base Rent and any other advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much
of Lessee's Security Deposit as has not been, or is not then required to be, used by Lessor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.8</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Waive Statutes.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessor and Lessee agree that the terms of this Lease shall govern the effect of any damage
to or destruction of the Premises with respect to the termination of this Lease and hereby waive the provisions of any present or future statute to the extent inconsistent herewith. </FONT></P>

<P><FONT SIZE=2>10.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Real Property Taxes.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;30.2</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Definition of "Real Property Taxes."</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As used herein, the term </FONT><FONT SIZE=2><B>"Real Property
Taxes"</B></FONT><FONT SIZE=2>shall include any form of assessment; real estate, general, special, ordinary or extraordinary, or rental levy or tax (other than inheritance, personal income or estate
taxes; improvement bond; and/or license lee imposed upon or levied against any legal or equitable interest of Lessor in the Premises, Lessor's right to other income therefrom, and/or Lessors business
of leasing, by any authority having the direct or indirect power to tax and where the funds are generated with reference to the Building address and where the proceeds so generated are to be applied
by the city, county or other local taxing authority of a jurisdiction within which the Premises are located. The term "Real Property Taxes" shall also include any tax, fee, levy, assessment or charge,
or any increase therein, imposed by reason of events occurring during the term of this Lease, including but not limited to, a change in the ownership of the Premises. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Payment
of Taxes, Lessor shall pay the Real Property Taxes applicable to the Premises provided, however, that Lessee shall pay to Lessor the amount, if any, by which
Real Property Taxes applicable to the Premises increase over the fiscal tax year during which the Commencement Date occurs ("Tax </FONT><FONT SIZE=2><B>Increase").</B></FONT><FONT SIZE=2> Subject to
Paragraph&nbsp;10.2(b), payment of any such Tax Increase shall be made by Lessee to Lessor within thirty (30)&nbsp;days after receipt of Lessor's written statement setting forth the amount due and
the computation thereof. If any such taxes shall cover any period of time prior to or after the expiration or termination of this Lease, Lessee's share of such taxes shall be prorated to cover only
that portion of the tax bill applicable to the period that this Lease is in effect. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Advance
Payment. In the event Lessee incurs a late charge on any Rent payment, Lessor may, at Lessor's option, estimate the current Real Property Taxes, and require that
the Tax Increase be paid in advance to Lessor by Lessee, either: (i)&nbsp;in a lump sum amount equal to the amount due, at least twenty (20)&nbsp;days prior to the applicable delinquency date; or
(ii)&nbsp;monthly in advance with the payment of the Base Rent. If Lessor elects to require payment monthly in advance, the monthly payment shall be an amount equal to the amount of the estimated
installment of the Tax Increase divided by the number of months remaining before the month in which said installment becomes delinquent. When the actual amount of the applicable Tax Increase is known,
the amount of such equal monthly advance payments shall be adjusted as required to provide the funds needed to pay the applicable Tax Increase. If the amount collected by Lessor is insufficient to pay
the Tax Increase when due, Lessee shall pay Lessor, upon demand, such additional sums as are necessary to pay such obligations. All moneys paid to Lessor under this Paragraph may be intermingled with
other moneys of Lessor and shall not bear interest. In the event of a Breach by Lessee in the performance of its obligations under this Lease, then any balance of funds paid to Lessor under the
provisions of this Paragraph may at the option of Lessor, be treated as an additional Security Deposit. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>15</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Additional
Improvements. Notwithstanding anything to the contrary in this Paragraph&nbsp;10.2, Lessee shall pay to Lessor upon demand therefor the entirety of any
increase in Real Property Taxes assessed by reason of Alterations or Utility Installations placed upon the Premises by Lessee or at Lessee's request. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.3</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Joint Assessment.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If the Premises are not separately assessed, Lessee's liability shall be an equitable
proportion of the Tax Increase for all of the land and improvements included within the tax parcel assessed, such proportion to be conclusively determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information as may be reasonably available. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.4</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Personal Property Taxes.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessee shall pay, prior to delinquency, all taxes assessed against and levied upon
Lessee Owned Alterations, Utility Installations, Trade Fixtures, furnishings, equipment and all personal property of Lessee. When possible, Lessee shall cause such property to be assessed and billed
separately from the real property of Lessor. if any of Lessee's said personal property shall be assessed with Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee's
property within ten (10)&nbsp;days after receipt of a written statement. </FONT></P>

<P><FONT SIZE=2>11.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Utilities.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessee shall pay for all water, gas, heat, light, power, telephone, trash disposal and
other utilities and services supplied to the Premises, together with any taxes thereon. If any such services are not separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered. </FONT></P>

<P><FONT SIZE=2>12.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Assignment and Subletting.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Lessor's Consent Required.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Lessee
shall not voluntarily or by operation of law assign, transfer, mortgage or encumber (collectively, </FONT><FONT SIZE=2><B>"assign or
assignment"</B></FONT><FONT SIZE=2>) or sublet all or any part of Lessee's interest in this Lease or in the Premises without Lessor's prior written consent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;A
change in the control of Lessee shall constitute an assignment requiring consent. The transfer, on a cumulative basis, of twenty-five percent (25%) or more
of the voting control of Lessee shall constitute a change in control for this purpose. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;The
involvement of Lessee or its assets in any transaction, or series of transactions (by way of merger, sale, acquisition, financing, transfer, leveraged
buy-out or otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee's assets occurs, which results or will result in a reduction of the Net Worth of Lessee
by an amount greater than twenty-five percent (25%) of such Net Worth as it was represented at the time of the execution of this Lease or at the time of the most recent assignment to which
Lessor has consented, or as it exists immediately prior to said transaction or transactions constituting such reduction, whichever was or is greater, shall be considered an assignment of this Lease to
which Lessor may withhold its consent. </FONT><FONT SIZE=2><B>"Net Worth of Lessee"</B></FONT><FONT SIZE=2> shall mean the net worth of Lessee (excluding any guarantors) established under generally
accepted accounting principles. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;An
assignment or subletting without consent shall, at Lessor's option, be a Default curable after notice per Paragraph&nbsp;13.1(c), or a noncurable Breach without the
necessity of any notice and grace period. If Lessor elects to treat such unapproved assignment or subletting as a noncurable Breach, Lessor may either: (i)&nbsp;terminate this Lease, or
(ii)&nbsp;upon thirty (30)&nbsp;days written notice, increase the monthly Base Rent to one hundred ten percent (110%) of the Base Rent then in effect. Further, in the event of such Breach and
rental adjustment, (i)&nbsp;the purchase price of any option to purchase the Premises held by Lessee shall be subject to similar adjustment to one hundred ten percent (110%) of the price previously
in effect, and (ii)&nbsp;all fixed and non-fixed rental adjustments scheduled during the remainder of the Lease term shall be increased to One Hundred Ten Percent (110%) of the scheduled
adjusted rent. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>16</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;Lessee's
remedy for any breach of Paragraph&nbsp;12.1 by Lessor shall be limited to compensatory damages and/or injunctive relief. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.2</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Terms and Conditions Applicable to Assignment and Subletting.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Regardless
of Lessor's consent, any assignment or subletting shall not: (i)&nbsp;be effective without the express written assumption by such assignee or sublessee of
the obligations of Lessee under this Lease; (ii)&nbsp;release Lessee of any obligations hereunder; or (iii)&nbsp;alter the primary liability of Lessee for the payment of Rent or for the
performance of any other obligations to be performed by Lessee. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Lessor
may accept Rent or performance of Lessee's obligations from any person other than Lessee pending approval or disapproval of an assignment. Neither a delay in the
approval or disapproval of such assignment nor the acceptance of Rent or performance shall constitute a waiver or estoppel of Lessor's right to exercise its remedies for Lessee's Default or Breach. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Lessor's
consent to any assignment or subletting shall not constitute a consent to any subsequent assignment or subletting. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;In
the event of any Default or Breach by Lessee, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the performance of Lessees
obligations under this Lease, including any assignee or sublessee, without first exhausting Lessor's remedies against any other person or entity responsible therefore to Lessor, or any security held
by Lessor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;Each
request for consent to an assignment or subletting shall be in writing, accompanied by information relevant to Lessor's determination as to the financial and
operational responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/or required modification of the Premises, if any, together with
a fee of $1,000 or ten percent (10%) of the current monthly Base Rent applicable to the portion of the Premises which is the subject of the proposed assignment or sublease, whichever is greater, as
consideration for Lessor's considering and processing said request. Lessee agrees to provide Lessor with such other or additional information and/or documentation as may be reasonably requested. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;Any
assignee of, or sublessee under, this Lease shall, by reason of accepting such assignment or entering into such sublease, be deemed to have assumed and agreed to
conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said assignment or sublease, other than such obligations
as are contrary to or inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented to in writing. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.3</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Additional Terms and Conditions Applicable to Subletting.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The following terms and conditions shall apply to
any subletting by Lessee of all or any part of the Premises and shall be deemed included in all subleases under this Lease whether or not expressly incorporated therein: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Lessee
hereby assigns and transfers to Lessor all of Lessee's interest in all Rent payable on any sublease, and Lessor may collect such Rent aid apply same toward
Lessee's obligations under this Lease; provided, however, that until a Breach shall occur in the performance of Lessee's obligations, Lessee may collect said Rent. Lessor shall not, by reason of the
foregoing or any assignment of such sublease, nor by reason of the collection of Rent, be deemed liable to the sublessee for any failure of Lessee to perform and comply with any of Lessee's
obligations to such sublessee. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lessor stating that a Breach exists in the performance of
Lessee's obligations under this Lease, to pay to Lessor all Rent due and to become due under the sublease. Subessee shall rely upon any such notice from Lessor and shall pay all Rents to Lessor
without any obligation or right to inquire as to whether such Breach exists, notwithstanding any claim from Lessee to the contrary. </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>17</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;In
the event of a Breach by Lessee, Lessor may, at its option, require sublessee to attorn to Lessor, in which event Lessor shall undertake The obligations of the
sublessor under such sublease from the time of the exercise of said option to the expiration of such sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit
paid by such sublessee to such sublessor or for any, prior Defaults or Breaches of such sublessor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Any
matter requiring the consent of the sublessor under a sublease shall also require the consent of Lessor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;No
sublessee shall further assign or sublet all or any part of the Premises without Lessor's prior written consent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;Lessor
shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who shall have the right to cure the Default of Lessee within the grace
period, if any, specified in such notice. The sublessee shall have a right of reimbursement and offset from and against Lessee for any such Default cured by the sublessee. </FONT></P>

</UL>

<P><FONT SIZE=2>13.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Default; Breach; Remedies.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.1</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Default; Breach.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;A </FONT><FONT SIZE=2><B>"Default"</B></FONT><FONT SIZE=2> is defined as a failure by the
Lessee to comply with or perform any of the terms, covenants, conditions or rules under this Lease. A </FONT><FONT SIZE=2><B>"Breach"</B></FONT><FONT SIZE=2> is defined as the occurrence of one or
more of the following Defaults, and the failure of Lessee to cure such Default within any applicable grace period: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;The
abandonment of the Premises; or the vacating of the Premises without providing a commercially reasonable level of security, rind/or Security Deposit or where the
coverage of the property insurance described in Paragraph&nbsp;8.3 is jeopardized as a result thereof, or without providing reasonable assurances to minimize potential vandalism. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
failure of Lessee to make any payment of Rent or any Security Deposit required to be made by Lessee hereunder, whether to Lessor or to a third party, when due, to
provide reasonable evidence of insurance or surety bond, or to fulfill any obligation under this Lease which endangers or threatens life or property, where such failure continues for a period of three
(3)&nbsp;business days following written notice to Lessee. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;The
failure by Lessee to provide (i)&nbsp;reasonable written evidence of compliance with Applicable Requirements, (ii)&nbsp;the service contracts, (iii)&nbsp;the
rescission of an unauthorized assignment or subletting, (iv)&nbsp;a Estoppel Certificate, (v)&nbsp;a requested subordination, (vi)&nbsp;evidence concerning any guaranty and/or Guarantor,
(vii)&nbsp;any document requested under Paragraph&nbsp;42 (easements), or (viii)&nbsp;any other documentation or information which Lessor may reasonably require of Lessee under the terms of this
Lease, where any such failure continues for a period of ten (10)&nbsp;days following written notice to Lessee. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;A
Default by Lessee as to the terms, covenants, conditions or provisions of this Lease, or of the rules adopted under Paragraph&nbsp;40 hereof, other than those
described in subparagraphs 13.1(a), (b)&nbsp;or
(c), above, where such Default continues for a period of thirty (30)&nbsp;days after written notice; provided, however, that if the nature of Lessee's Default is such that more than thirty
(30)&nbsp;days are reasonably required for its cure, then it shall not be deemed to be a Breach if Lessee commences such cure within said thirty (30)&nbsp;day period and thereafter diligently
prosecutes such cure to completion. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;The
occurrence of any of the following events: (i)&nbsp;the making of any general arrangement or assignment for the benefit of creditors: (ii)&nbsp;becoming a </FONT> <FONT SIZE=2><B>"debtor"</B></FONT><FONT SIZE=2> as defined in 11 U.S.C. &sect; 101 or
any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is
dismissed within sixty (60)&nbsp;days); (iii)&nbsp;the appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>18</FONT></P>

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<P><FONT SIZE=2>where
possession is not restored to Lessee within thirty (30)&nbsp;days; or (iv)&nbsp;the attachment, execution or other judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessee's interest in this Lease, where such seizure is not discharged within thirty (30)&nbsp;days; provided, however, in the event that any provision of this subparagraph
(e)&nbsp;is contrary to any applicable law, such provision shall be of no force or effect, and not affect the validity of the remaining provisions. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;The
discovery that any financial statement of Lessee or of any Guarantor given to Lessor was materially false. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;If
the performance of Lessee's obligations under this Lease is guaranteed: (i)&nbsp;the death of a Guarantor; (ii)&nbsp;the termination of a Guarantor's liability
with respect to this Lease other than in accordance with the terms of such guaranty; (iii)&nbsp;a Guarantor's becoming insolvent or the subject of a bankruptcy filing; (iv)&nbsp;a Guarantor's
refusal to honor the guaranty; or (v)&nbsp;a Guarantor's breach of its guaranty obligation on an anticipatory basis, and Lessee's failure, within sixty (60)&nbsp;days following written notice of
any such event, to provide written alternative assurance or security, which, when coupled with the then existing resources of Lessee, equals or exceeds the combined financial resources of Lessee and
the Guarantors that existed at the time of execution of this Lease. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.2</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Remedies.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If Lessee fails to perform any of its affirmative duties or obligations, within ten
(10)&nbsp;days after written notice (or in case of an emergency, without notice), Lessor may, at its option, perform such duty or obligation on Lessee's behalf, including but not limited to the
obtaining of reasonably required bonds, insurance policies, or governmental licenses, permits or approvals. The costs and expenses of any such performance by Lessor shall be due and payable by Lessee
upon receipt of invoice therefor. If any check given to Lessor by Lessee shall not be honored by the bank upon which it is drawn, Lessor, at its option, may require all future payments to be made by
Lessee to be by cashier's check. In the event of a Breach, Lessor may, with or without further notice or demand, and without limiting Lessor in the exercise of any right or remedy which Lessor may
have by reason of such Breach: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Terminate
Lessee's right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Lessee shall immediately surrender possession to
Lessor. In such event Lessor shall be entitled to recover from Lessee: (i)&nbsp;the unpaid Rent which had been earned at the time of termination; (ii)&nbsp;the worth at the time of award of the
amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided;
(iii)&nbsp;the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves
could be reasonably avoided: and (iv)&nbsp;any other amount necessary to compensate Lessor to all the detriment proximately caused by me Lessee's failure o perform its obligations under this Lease
or which in the ordinary course of things would be likely to result therefrom, including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorneys' fees, and that portion of any leasing commission paid by Lessor in connection with this Lease applicable to the unexpired
term of this Lease. The worth at the time of award of the amount referred to in provision (iii)&nbsp;of the immediately preceding sentence shall be computed by discounting such amount at the
discount rate of the Federal Reserve Bank of the District within which the Premises are located at the time of award plus one percent (1%). Efforts by Lessor to mitigate damages caused by Lessee's
Breach of this Lease shall not waive Lessor's right to recover damages under Paragraph&nbsp;12. If termination of this Lease is obtained through the provisional remedy of unlawful detainer, Lessor
shall have the right to recover in such proceeding any unpaid Rent and damages as are recoverable therein, or Lessor may reserve the right to recover all or any part thereof in a separate suit. If a
notice and grace period required under Paragraph&nbsp;13.1 was not previously given, a notice to pay rent or quit, </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>19</FONT></P>

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<P><FONT SIZE=2>or
to perform or quit given to Lessee under the unlawful defamer statute shall also constitute the notice required by Paragraph&nbsp;13.1. In such case, the applicable grace period required by
Paragraph&nbsp;13.1 and the unlawful detainer statute shall run concurrently, and the failure of Lessee to cure the Default within the greater of the two such grace periods shall constitute both an
unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided for in this Lease and/or by said statute. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Continue
this Lease and Lessee's right to possession and recover the Rent as it becomes due, in which event Lessee may sublet or assign, subject only to reasonable
limitations. Acts of maintenance, efforts to relet, and/or the appointment of a receiver to protect the Lessor's interests, shall not constitute a termination of the Lessee's right to possession. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Pursue
any other remedy now or hereafter available under the laws or judicial decisions of the state wherein the Premises are located. The expiration or termination of
this Lease and/or the termination of Lessee's right to possession shall not relieve Lessee from liability under any indemnity provisions of this Lease as to matters occurring or accruing during the
term hereof or by reason of Lessee's occupancy of the Premises. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.3</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Inducement Recapture.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any agreement for free or abated rent or other charges, or for the giving or paying
by Lessor to or for Lessee of any cash or other bonus, inducement or consideration for Lessee's
entering into this Lease, all of which concessions are hereinafter referred to as "Inducement Provisions," shall be deemed conditioned upon Lessee's full and faithful performance of all of the terms,
covenants and conditions of this Lease. Upon Breach of this Lease by Lessee, any such Inducement Provision shall automatically be deemed deleted from this Lease and of no further force or effect, and
any rent, other charge, bonus, inducement or consideration theretofore abated, given or paid by Lessor under such an Inducement Provision shall be immediately due and payable by Lessee to Lessor,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or the cure of the Breach which initiated the operation of this paragraph shall not be deemed a waiver by
Lessor of the provisions of this paragraph unless specifically so stated in writing by Lessor at the time of such acceptance. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;30.2</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Late Charges.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessee hereby acknowledges that late payment by Lessee of Rent will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late
charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent shall not be received by Lessor within five (5)&nbsp;days after such amount shall be due, then, without any
requirement for notice to Lessee, Lessee shall pay to Lessor a one-time late charge equal to ten percent (10%) of each such overdue amount. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Lessor wilt incur by reason of such late payment. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>20</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2><A
NAME="page_lr1064_1_21"> </A> </FONT> <FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee's Default or Breach with respect to such overdue amount, nor prevent the exercise of any of the
other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for three (3)&nbsp;consecutive installments of Base Rent, then
notwithstanding any provision of this Lease to the contrary, Base Rent shall, at Lessor's option, become due and payable quarterly in advance. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.5</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Interest.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any monetary payment due Lessor hereunder, other than late charges, not received by Lessor, when
due as to scheduled payments (such as Base Rent) or within thirty (30)&nbsp;days following the date on which it was due for non-scheduled payment, shall bear interest from the date when
due, as to scheduled payments, or the thirty-first (31st) day after it was due as to non-scheduled payments. The interest ("Interest") charged shall be equal to the prime rate reported in
the Wall Street Journal as published closest prior to the date when due plus 4%, but shall not exceed the maximum rate allowed by law. Interest is payable in addition to the potential late charge
provided for in Paragraph&nbsp;13.4. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.6</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Breach by Lessor.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Notice of Breach.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessor shall not be deemed in breach of this Lease unless Lessor fails within a reasonable
time to perform an obligation required to be performed by Lessor. For purposes of this Paragraph, a reasonable time shall in no event be less than thirty (30)&nbsp;days after receipt by Lessor, and
any Lender whose name and address shall have been furnished Lessee in writing for such purpose, of written notice specifying wherein such obligation of Lessor has not been performed; provided,
however, that if the nature of Lessor's obligation is such that more than thirty (30)&nbsp;days are reasonably required for its performance, then Lessor shall not be in breach if performance is
commenced within such thirty (30)&nbsp;day period and thereafter diligently pursued to completion. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Performance by Lessee on Behalf of Lessor.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In the event that neither Lessor nor Lender cures said breach
within thirty (30)&nbsp;days after receipt of said written notice, or if having commenced said cure they do not diligently pursue it to completion, then Lessee may elect to cure said breach at
Lessee's expense and offset from Rent an amount equal to the greater of one month's Base Rent or the Security Deposit, and to pay an excess of such expense under protest, reserving Lessee's right to
reimbursement from Lessor. Lessee shall document the cost of said cure and supply said documentation to Lessor. </FONT></P>

<P><FONT SIZE=2>14.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Condemnation.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If the Premises or any portion thereof are taken under the power of eminent domain
or sold under the threat of the exercise of said power (collectively </FONT><FONT SIZE=2><B>"Condemnation"),</B></FONT><FONT SIZE=2> this Lease shall terminate as to the part taken as of the date the
condemning authority takes title or possession, whichever first occurs. If more than ten percent (10%) of any building portion of the premises, or more than twentyfive percent (25%) of the land area
portion of the premises not occupied by any building, is taken by Condemnation, Lessee may, at Lessee's option, to be exercised in writing within ten (10)&nbsp;days after Lessor shall have given
Lessee written notice of such taking (or in the absence of such notice, within ten (10)&nbsp;days after the condemning authority shall have taken possession) terminate this Lease as of the date the
condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises
remaining, except that the Base Rent shall be reduced in proportion to the reduction in utility of the Premises caused by such Condemnation. Condemnation awards and/or payments shall be the property
of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold, the value of the part taken, or for severance damages; provided, however, that Lessee shall be
entitled to any compensation for Lessee's relocation expenses, loss of business goodwill and/or Trade Fixtures, without regard to whether or not this Lease is terminated pursuant to the provisions of
this Paragraph. All Alterations and Utility Installations made to the Premises by Lessee, for purposes of Condemnation only, shall be considered </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>21</FONT></P>

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<P><FONT SIZE=2>the
property of the Lessee and Lessee shall be entitled to any and all compensation which is payable therefor. In the event that this Lease is not terminated by reason of the Condemnation, Lessor
shall repair any damage to the Premises caused by such Condemnation. </FONT></P>

<P><FONT SIZE=2>15.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Brokers' Fee.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.1</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Additional Commission.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In addition to the payments owed pursuant to Paragraph&nbsp;1.10 above, and unless
Lessor and the Brokers otherwise agree in writing, Lessor agrees that: (a)&nbsp;ii Lessee exercises any Option; (b)&nbsp;if Lessee acquires any rights to the Premises or other premises owned by
Lessor and located within the same Project, if any, within which the Premises is located; (c)&nbsp;if Lessee remains in possession of the Premises, with the consent of Lessor, after the expiration
of this Lease: or (d)&nbsp;if Base Rent is increased, whether by agreement or operation of an escalation clause herein, then, Lessor shall pay Brokers a fee in accordance with the schedule of said
Brokers in effect at the time of the execution of this Lease. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.2</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Assumption of Obligations.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any buyer or transferee of Lessor's interest in this Lease shall be deemed to
have assumed Lessors obligation hereunder. Each Broker shall be a third party beneficiary of the provisions of Paragraphs 1.10, 15,22 and 31. If Lessor fails to pay to a Broker any amounts due as and
for commissions pertaining to this Lease when due, then such amounts shall accrue Interest. In addition, if Lessor fails to pay any amounts to Lessee's Broker when due, Lessee's Broker may send
written notice to Lessor and Lessee of such failure and if Lessor fails to pay such amounts within ten (10)&nbsp;days after said notice, Lessee shall pay said monies to its Broker and offset such
amounts against Rent. In addition, Lessee's Broker shall be deemed to be a third party beneficiary of any commission agreement entered into by and/or between Lessor and Lessor's Broker. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.3</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Representations and Indemnities of Broker Relationships.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessee and Lessor each represent and warrant to
the other that it has had no dealings with any person, firm, broker or finder (other than the Brokers, if any) in connection with this Lease, and that no one other than said named Brokers is entitled
to any commission or finder's fee in connection herewith. Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold the other harmless from and against liability for compensation
or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings or actions of the indemnifying Party, including any costs, expenses, attorneys' fees
reasonably incurred with respect thereto. </FONT></P>

<P><FONT SIZE=2>16.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Estoppel Certificates.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Each
Party (as "</FONT><FONT SIZE=2><B>Responding Party</B></FONT><FONT SIZE=2>") shall within ten (10)&nbsp;days after written notice from the other Party (the
"Requesting Party") execute, acknowledge and deliver to the Requesting Party a statement in writing in form similar to the then most current "</FONT><FONT SIZE=2><B>Estoppel
Certificate"</B></FONT><FONT SIZE=2> form published by the American Industrial Real Estate Association, plus such additional information, confirmation and/or statements as may be reasonably requested
by the Requesting Party. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;If
the Responding Party shall fail to execute or deliver the Estoppel Certificate within such ten day period, the Requesting Party may execute an Estoppel Certificate
stating that: (i)&nbsp;the Lease is in full force and effect without modification except as may be represented by the Requesting Party; (ii)&nbsp;there are no uncured defaults in the Requesting
Party's performance; and (iii)&nbsp;if Lessor is the Requesting Party, not more than one month's rent has been paid in advance. Prospective purchasers and encumbrances may rely upon the Requesting
Party's Estoppel Certificate, and the Responding Party shall be estopped from denying the truth of the facts contained in said Certificate, </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;If
Lessor desires to finance, refinance, or sell the Premises, or any part thereof, Lessee and all Guarantors shall deliver to any potential lender or purchaser
designated by Lessor such financial statements' as may be reasonably required by such lender or purchaser, including but not limited to Lessee's financial statements for the past three
(3)&nbsp;years. All such financial statements shall be received </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>22</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>by
Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth. </FONT></P>

<P><FONT SIZE=2>17.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Definition of Lessor.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The term "Lessor" as used herein shall mean the owner or owners at the time
in question of the fee title to the Premises, or, if this is a sublease, of the Lessee's interest in the prior lease. In the event of a transfer of Lessor's title or interest in the Premises or this
Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit) any unused Security Deposit held by Lessor. Except as provided in Paragraph&nbsp;15, upon such transfer or assignment
and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of all liability with respect to the obligations and/or covenants under this Lease thereafter to be performed by
the Lessor. Subject to the foregoing, the obligations and/or covenants in this Lease to he performed by the Lessor shall be binding only upon the Lessor as hereinabove defined. Notwithstanding the
above, and subject to the provisions of Paragraph&nbsp;20 below, the original Lessor under this Lease, and all subsequent holders of the Lessor's interest in this Lease shall remain liable and
responsible with regard to the potential duties and liabilities of Lessor pertaining to Hazardous Substances as outlined in Paragraph&nbsp;6 above. </FONT></P>

<P><FONT SIZE=2>18.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Severability.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The invalidity of any provision of this Lease, as determined by a court of competent
jurisdiction, shall in no way affect the validity of any other provision hereof. </FONT></P>

<P><FONT SIZE=2>19.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Days.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise specifically indicated to the contrary, the word "days" as used in this
Lease shall mean and refer to calendar days. </FONT></P>

<P><FONT SIZE=2>20.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Limitation on Liability.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Subject to the provisions of Paragraph&nbsp;17 above, the obligations
of Lessor under this Lease shall not constitute personal obligations of Lessor, the individual partners of Lessor or its or their individual partners, directors, officers or shareholders, and Lessee
shall look to the Premises, and to no other assets of Lessor, for the satisfaction of any liability of Lessor with respect to this Lease, and shall not seek recourse against the individual partners of
Lessor, or its or their individual partners, directors, officers or shareholders, or any of their personal assets for such satisfaction. </FONT></P>


<P><FONT SIZE=2>21.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Time of Essence.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Time is of the essence with respect to the performance of all obligations to be
performed or observed by the Parties under this Lease. </FONT></P>

<P><FONT SIZE=2>22.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>No Prior or Other Agreements; Broker Disclaimer.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Lease contains all agreements between the
Parties with respect to any matter mentioned herein, and no other prior or contemporaneous agreement or understanding shall be effective. Lessor and Lessee each represents and warrants to the Brokers
that it has made, and is relying solely upon, its own investigation as to the nature, quality, character and financial responsibility of the other Party to this Lease and as to the nature, quality and
character of the Premises. Brokers have no responsibility with respect thereto or with respect to any default or breach hereof by either Party. The liability (including court costs and Attorneys'
fees), of any Broker with respect to negotiation, execution, delivery or performance by either Lessor or Lessee under this Lease or any amendment or modification hereto shall be limited to an amount
up to the fee received by such Broker pursuant to this Lease; provided, however, that the foregoing limitation on each Broker's liability shall not be applicable to any gross negligence or willful
misconduct of such Broker. </FONT></P>

<P><FONT SIZE=2>23.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Notices.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.1</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Notice Requirements.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;All notices required or permitted by this Lease shall be in writing and may be
delivered in person (by hand or by courier) or may be sent by regular, certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission, and shall
be deemed sufficiently given if served in a manner specified in this Paragraph&nbsp;23. The addresses noted adjacent to a Party's signature on this Lease shall be that Party's address for delivery
or mailing of notices. Either Party may by written notice to the other specify a different address for notice, except that upon Lessee's taking possession of the Premises, the Premises shall
constitute </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>23</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>Lessee's
address for notice. A copy of all notices to Lessor shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate in
writing. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;30.2</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Date of Notice.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any notice sent by registered or certified mail, return receipt requested, shall be deemed
given on the date of delivery shown on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given forty-eight (48)&nbsp;hours
after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by United States Express Mail or overnight courier that guarantee next day delivery shall be deemed
given twenty-four (24)&nbsp;hours after delivery of the same to the Postal Service or courier. Notices transmitted by facsimile transmission or similar means shall be deemed delivered
upon telephone confirmation of receipt, provided a copy is also delivered via delivery or mail. If notice is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next
business day. </FONT></P>

<P><FONT SIZE=2>24.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Waivers.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;No waiver by Lessor of the Default or Breach of any term, covenant or condition hereof by
Lessee, shall be deemed a waiver of any other term, covenant or condition hereof, or of any subsequent Default or Breach by Lessee of the same or of any other term, covenant or condition hereof.
Lessor's consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Lessor's consent to, or approval of, any subsequent or similar act by Lessee, or be construed as
the basis of an estoppel to enforce the provision or provisions of this Lease requiring such consent. The acceptance of Rent by Lessor shall not be a waiver of any Default or Breach by Lessee. Any
payment by Lessee may be accepted by Lessor on account of moneys or damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee in connection therewith, which such
statements and/or conditions shall be of no force or effect whatsoever unless specifically agreed to in writing by Lessor at or before the time of deposit of such payment. </FONT></P>


<P><FONT SIZE=2>25.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Recording.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Either Lessor or Lessee shall not record the Lease without prior written approval from
the other Party. </FONT></P>

<P><FONT SIZE=2>26.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>[STRICKEN FROM THE ORIGINAL]</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>27.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Cumulative Remedies.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;No remedy or election hereunder shall be deemed exclusive but shall, wherever
possible, be cumulative with all other remedies at law or in equity. </FONT></P>

<P><FONT SIZE=2>28.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Covenants and Conditions; Construction of Agreement.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;All provisions of this Lease to be observed
or performed by Lessee are both covenants and conditions. In construing this Lease, all headings and titles are for the convenience of the parties only and shall not be considered a part of this
Lease. Whenever required by the context, the singular shall include the plural and vice versa. This Lease shall not be construed as if prepared by one of the parties, but rather according to its fair
meaning as a whole, as if both parties had prepared it. </FONT></P>

<P><FONT SIZE=2>29.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Binding Effect; Choice of Law.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Lease shall be binding upon the parties, their personal
representatives, successors and assigns and be governed by the laws of the State in which the Premises are located. Any litigation between the Parties hereto concerning this Lease shall be initiated
in the county in which the Premises are located. </FONT></P>

<P><FONT SIZE=2>30.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Subordination; Attornment; Non-Disturbance.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;30.1</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Subordination.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Lease and any Option granted hereby shall be subject and subordinate to any ground
lease, mortgage, deed of trust, or other hypothecation or security device (collectively, "</FONT><FONT SIZE=2><B>Security Device</B></FONT><FONT SIZE=2>"), now or hereafter placed upon the Premises,
to any and all advances made on the security thereof and to all renewals, modifications, and extensions thereof. Lessee agrees that the holders of any such Security Devices (in this Lease together
referred to as "Lender") shall have no liability or obligation to perform any of the obligations of Lessor under this Lease. Any Lender may elect to have this Lease and/or any Option granted hereby
superior to the lien of its Security Device by giving written notice thereof to Lessee whereupon this Lease and such Options shall be deemed prior </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>24</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>to
such Security Device, notwithstanding the relative dates of the documentation or recordation thereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;30.2</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Attornment.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Subject to the non-disturbance provisions of Paragraph&nbsp;30.3, Lessee agrees
to attorn to a Lender or any other party who acquires ownership of the Premises by reason of a foreclosure of a Security Device, and that in the event of such foreclosure, such new owner shall not:
(i)&nbsp;be liable for any act or omission of any prior lessor or with respect to events occurring prior to acquisition of ownership; (ii)&nbsp;be subject to any offsets or defenses which Lessee
might have against any prior lessor; or (iii)&nbsp;be bound by prepayment of more than one (1)&nbsp;month's rent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;30.3</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Non-Disturbance.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;With respect to Security Devices entered into by Lessor after the execution of
this Lease, Lessee's subordination of this Lease shall be subject to receiving a commercially reasonable non-disturbance agreement (a "Non-Disturbance Agreement") from the
Lender which Non-Disturbance Agreement provides that Lessee's possession of the Premises, and this Lease, including any options to extend the term hereof, will not be disturbed so long as
Lessee is not in Breach hereof and attorns to the record owner of the Premises. Further, within sixty (60)&nbsp;days after the execution of this Lease, Lessor shall use its commercially reasonable
efforts to obtain a Non-Disturbance Agreement from the holder of any pre-existing Security Device which is secured by the Premises. In the event that Lessor is unable to
provide the Non-Disturbance Agreement within said sixty (60)&nbsp;days, then Lessee may, at Lessee's option, directly contact Lessor's lender and attempt to negotiate for the execution
and delivery of a Non-Disturbance Agreement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;30.4</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Self-Executing.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The agreements contained in this Paragraph&nbsp;30 shall be effective without
the execution of any further documents; provided, however, that, upon written request from Lessor or a Lender in connection with a sale, financing or refinancing of the Premises, Lessee and Lessor
shall execute such further writings as may be reasonably required to separately document any subordination, attornment and/or NonDisturbance Agreement provided for herein. </FONT></P>

<P><FONT SIZE=2>31.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Attorneys' Fees.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If any Party or Broker brings an action or proceeding involving the Premises to
enforce the terms hereof or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys' tees.
Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or judgment. The term, </FONT><FONT SIZE=2><B>"Prevailing
Party"</B></FONT><FONT SIZE=2> shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement,
judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys' fees award shall not be computed in accordance with any court fee schedule, but shall be such as to
fully reimburse all attorneys' fees reasonably incurred. In addition, Lessor shall be entitled to attorneys' fees, costs and expenses incurred in the preparation and service of notices of Default and
consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such Default or resulting Breach. </FONT></P>


<P><FONT SIZE=2>32.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Lessor's Access; Showing Premises; Repairs.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessor and Lessor's agents shall have the right to
enter the Premises at any time, in the case of an emergency, and otherwise at reasonable times for the purpose of showing the same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the Premises as Lessor may deem necessary. All such activities shall be without abatement of rent or liability to Lessee. Lessor may at any time
place on the Premises any ordinary </FONT><FONT SIZE=2><B>"For Sale"</B></FONT><FONT SIZE=2> signs and Lessor may during the last six (6)&nbsp;months of the term hereof place on the Premises any
ordinary </FONT><FONT SIZE=2><B>"For Lease"</B></FONT><FONT SIZE=2> signs. Lessee may at any time place on or about the Premises any ordinary </FONT><FONT SIZE=2><B>"For
Sublease"</B></FONT><FONT SIZE=2> sign. </FONT></P>

<P><FONT SIZE=2>33.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Auctions.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessee shall not conduct, nor permit to be conducted, any auction upon the Premises
without Lessor's prior written consent. Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to permit an auction. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>25</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>34.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Signs.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Except for ordinary "For Sublease" signs, Lessee shall not place any sign upon the Premises
without Lessor's prior written consent. All signs must comply with all Applicable Requirements. </FONT></P>

<P><FONT SIZE=2>35.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Termination; Merger.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Unless specifically stated otherwise in writing by Lessor, the voluntary or
other surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a termination hereof by Lessor for Breach by Lessee, shall automatically terminate any sublease or lesser
estate in the Premises; provided, however, that Lessor may elect to continue any one or all existing sub tenancies. Lessor's failure within ten (10)&nbsp;days following any such event to elect to
the contrary by written notice to the holder of any such lesser interest, shall constitute Lessor's election to have such event constitute the termination of such interest. </FONT></P>

<P><FONT SIZE=2>36.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Consents.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Except as otherwise provided herein, wherever in this Lease the Consent of a Party is
required to an act by or for the other Party, such consent shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs and expenses (including but not limited to architects',
attorneys', engineers' and other consultants' fees) incurred in the consideration of, or response to, a request by Lessee for any Lessor consent, including but not limited to consents to an
assignment, a subletting or the presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt of an invoice and supporting documentation therefor. Lessor's consent to any act,
assignment or subletting shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver of any then existing Default or
Breach, except as may be otherwise specifically stated in writing by Lessor at the time of such consent. The failure to specify herein any particular condition to Lessor's consent shall not preclude
the imposition by Lessor at the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for which consent is being given. In the event that
either Party disagrees with any determination made by the other hereunder and reasonably requests the reasons for such determination, the determining party shall furnish its reasons in writing and in
reasonable detail within ten (10)&nbsp;business days following such request. </FONT></P>

<P><FONT SIZE=2>37.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Guarantor.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;37.1</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Execution.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Guarantors, if any, shall each execute a guaranty in the form most recently published by the
American Industrial Real Estate Association, and each such Guarantor shall have the same obligations as Lessee under this Lease. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;37.2</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Default.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;It shall constitute a Default of the Lessee if any Guarantor fails or refuses, upon request to
provide: (a)&nbsp;evidence of the execution of the guaranty, including the authority of the party signing on Guarantor's behalf to obligate Guarantor, and in the case of a corporate Guarantor, a
certified copy of a resolution of its board of directors authorizing the making of such guaranty, (b)&nbsp;current financial statements, (c)&nbsp;an Estoppel Certificate, or (d)&nbsp;written
confirmation that the guaranty is still in effect. </FONT></P>

<P><FONT SIZE=2>38.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Quiet Possession.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Subject to payment by Lessee of the Rent and performance of all of the
covenants, conditions and provisions on Lessee's part to be observed and performed under this Lease, Lessee shall have quiet possession and quiet enjoyment of the Premises during the term hereof. </FONT></P>

<P><FONT SIZE=2>39.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Options.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;39.1</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Definition.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;"Option" shall mean: (a)&nbsp;the right to extend the term of or renew this Lease or to
extend or renew any lease that Lessee has on other property of Lessor; (b)&nbsp;the right of first refusal or first offer to lease either the Premises or other property of Lessor; (c)&nbsp;the
right to purchase or the right of first refusal to purchase the Premises or other property of Lessor. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;39.2</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Options Personal To Original Lessee.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Each Option granted to Lessee in this Lease is personal to the
original Lessee, and cannot be assigned or exercised by anyone other than said original </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>26</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>Lessee
and only while the original Lessee is in full possession of the Premises and, if requested by Lessor, with Lessee certifying that Lessee has no intention of thereafter assigning or subletting. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;39.3</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Multiple Options.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In the event that Lessee has any multiple Options to extend or renew this Lease, a later
Option cannot be exercised unless the prior Options have been validly exercised. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;39.4</FONT><FONT
SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;Effect of Default on Options.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Lessee
shall have no right to exercise an Option: (i)&nbsp;during the period commencing with the giving of any notice of Default and continuing until said Default is
cured; (ii)&nbsp;during the period of time any Rent is unpaid (without regard to whether notice thereof is given Lessee); (iii)&nbsp;during the time Lessee is in Breach of this Lease; or
(iv)&nbsp;in the event that Lessee has been given three (3)&nbsp;or more notices of separate Default, whether or not the Defaults are cured, during the twelve (12)&nbsp;month period immediately
preceding the exercise of the Option. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
period of time within which an Option may be exercised shall not be extended or enlarged by reason of Lessee's inability to exercise an Option because of the
provisions of Paragraph&nbsp;39.4(a). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;An
Option shall terminate and be of no further force or effect, notwithstanding Lessee's due and timely exercise of the Option, if, after such exercise and prior to the
commencement of the extended term, (i)&nbsp;Lessee fails to pay Rent for a period of thirty (30)&nbsp;days after such Rent becomes due (without any necessity of Lessor to give notice thereof),
(ii)&nbsp;Lessor gives to Lessee three (3)&nbsp;or more notices of separate Default during any twelve (12)&nbsp;month period, whether or not the Defaults are cured, or (iii)&nbsp;if Lessee
commits a Breach of this Lease. </FONT></P>

<P><FONT SIZE=2>40.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Multiple Buildings.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If the Premises are a part of a group of buildings controlled by Lessor,
Lessee agrees that it will observe all reasonable rules and regulations which Lessor may make from time to time for the management, safety, and care of said properties, including the care and
cleanliness of the grounds and including the parking, loading and unloading of vehicles, and that Lessee will pay its fair share of common expenses incurred in connection therewith. </FONT></P>

<P><FONT SIZE=2>41.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Security Measures.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessee hereby acknowledges that the rental payable to Lessor hereunder does not
include the cost of guard service or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the protection of the Premises,
Lessee, its agents and invitees and their property from the acts of third parties. </FONT></P>

<P><FONT SIZE=2>42.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Reservations.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Lessor reserves to itself the right, from time to time, to grant, without the
consent or joinder of Lessee, such easements, rights and dedications that Lessor deems necessary, and to cause the recordation of parcel maps and restrictions, so long as such easements, rights,
dedications, maps and restrictions do not unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate any such
easement rights, dedication, map or restrictions. </FONT></P>

<P><FONT SIZE=2>43.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Performance Under Protest.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If at any time a dispute shall arise as to any amount or sum of money
to be paid by one Party to the other under the provisions hereof, the Party against whom the obligation to pay the money is asserted shall have the right to make payment "under protest" and such
payment shall not be regarded as a voluntary payment and there shall survive the right on the part of said Party to institute suit for recovery of such sum. If it shall be adjudged that there was no
legal obligation on the part of said Party to pay such sum or any part thereof, said Party shall be entitled to recover such sum or so much thereof as it was not legally required to pay. </FONT></P>

<P><FONT SIZE=2>44.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Authority.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If either Party hereto is a corporation, trust, limited liability company, partnership,
or similar entity, each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on its behalf. Each party
shall, within thirty (30)&nbsp;days after request, deliver to the other party satisfactory evidence of such authority. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>27</FONT></P>

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<P><FONT SIZE=2>45.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Conflict.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any conflict between the printed provisions of this Lease and the typewritten or
handwritten provisions shall be controlled by the typewritten or handwritten provisions. </FONT></P>

<P><FONT SIZE=2>46.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Offer.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Preparation of this Lease by either Party or their agent and submission of same to the
other Party shall not be deemed an offer to lease to the other Party. This Lease is not intended to be binding until executed and delivered by all Parties hereto. </FONT></P>

<P><FONT SIZE=2>47.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Amendments.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Lease may be modified only in writing, signed by the Parties in interest at the
time of the modification, As long as they do not materially change Lessee's obligations hereunder, Lessee agrees to make such reasonable non-monetary modifications to this Lease as may be
reasonably required by a Lender in connection with the obtaining of normal financing or refinancing of the Premises. </FONT></P>

<P><FONT SIZE=2>48.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Multiple Parties.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If more than one person or entity is named herein as either Lessor or Lessee,
such multiple Parties shall have joint and several responsibility to comply with the terms of this Lease. </FONT></P>

<P><FONT SIZE=2>49.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>Mediation and Arbitration of Disputes.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;An Addendum requiring the Mediation and/or the Arbitration
of all disputes between the Parties and/or Brokers arising out of this Lease [&nbsp;&nbsp;&nbsp;&nbsp;] is [X] is not attached to this Lease. </FONT></P>

<P><FONT SIZE=2>LESSOR
AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE
PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES. </FONT></P>

<P><FONT SIZE=2><B>ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO:</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.  </B></FONT></P>


<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE
POSSIBLE PRESENCE OF
HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE SUITABILITY OF THE PREMISES FOR LESSEE'S INTENDED
USE.</B></FONT></P>

<P><FONT SIZE=2><B>WARNING: IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE
PREMISES IS LOCATED.</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>28</FONT></P>

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<P><FONT SIZE=2>The
parties hereto have executed this Agreement at the place on the dates specified above to their respective signatures. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Executed at&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;South El Monte, California</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>Executed at&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;South El Monte, California</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>on March&nbsp;20, 2000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>on 3-20-00</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><B>by LESSOR:</B></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><B>by LESSEE:</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
OWEN BROS. ENTERPRISES, a Partnership</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><BR>
INTERNATIONAL MEDICATION<BR>
SYSTEMS&nbsp;LTD., a Delaware Corporation</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>By John A. Owen</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>By Jack Zhang</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Title: Partner</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>Title: President/Chief Executive Officer</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2><BR>
Address: 4265 North Baldwin Avenue</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><BR>
By Mary Luo</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>El Monte, CA 91731</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>Title: Chief Operating Officer</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>Tel. No. (626)&nbsp;442-5567</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>Address: 1886 Santa Anita Avenue</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>South El Monte, CA 91733</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>Tel. No. (626)&nbsp;442-6757</FONT></TD>
</TR>
</TABLE>
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<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>NOTE:</FONT></DT><DD><FONT SIZE=2>These
forms are often modified to meet changing requirements of law and industry needs. Always write or call to make sure you are utilizing the most current form: AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION, 700 So. Flower Street, Suite 600, Los Angeles, California 90017. (213)&nbsp;687-8777. Fax No. (213)&nbsp;687-8616 </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2><B>&copy; Copyright 1997&#151;By American Industrial Real Estate Association. All rights reserved.<BR>
No part of these works may be reproduced in any form without permission in writing.</B></FONT></P>

<P ALIGN="RIGHT"><FONT SIZE=2><B>FORM STG-6-2/97</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>29</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>ADDENDUM TO STANDARD INDUSTRIAL LEASE  </B></FONT></P>


<P><FONT SIZE=2>Dated
March&nbsp;9, 2000 </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By
and Between OWEN BROS. ENTERPRISES, a Partnership, as Lessor and INTERNATIONAL MEDICATION SYSTEMS, LIMITED a Delaware Corporation, as Lessee </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;RENT
ADJUSTMENTS </FONT></P>

<P><FONT SIZE=2>[STRICKEN
FROM ORIGINAL RECORD] </FONT></P>

<P><FONT SIZE=2>50.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>OPTION TO RENEW THE LEASE.&nbsp;&nbsp;&nbsp;&nbsp;#1</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Lessee
shall have the option to renew the term of the Lease (herein called "Option") for a Three (3)&nbsp;year period commencing January&nbsp;1, 2004 and ending on
December&nbsp;31, 2006. This Option may be exercised only by notice, in writing, delivered by the United States Post Office, Certified Mail to Lessor not earlier than October&nbsp;1, 2003 and no
later than October&nbsp;31, 2003 (herein called "Rent Adjustment Date") and shall expire and be of no force or effect if not delivered to Lessor within the prescribed time. In the event the Option
is exercised, all provisions of the Lease shall continue, except the Base Rent during such period covered by the Option shall be increased to the "Prevailing Rent." The term "Prevailing Rent" shall
mean the price that a ready and willing tenant would pay, as of the Rent Adjustment Date, as monthly rent to a ready and willing landlord of property comparable to the Premises if such property were
exposed for lease on the open market for a reasonable period of time and taking into account all the purposes for which such property may he used. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;In
the event Lessor and Lessee are unable to agree on the Prevailing Rent within fifteen (15)&nbsp;days of the Rent Adjustment Date, then within ten (10)&nbsp;days
after the expiration of that period, each Party, at its respective cost and by giving notice to the other Party, shall appoint a qualified real estate appraiser with at least five (5)&nbsp;years
full-time commercial appraisal experience in the area in which the Premises are located to appraise and set the Prevailing Rent of the Premises. If a Party does not appoint an appraiser
within ten (10)&nbsp;days after the other Party has given notice of the name of' its appraiser, the single appraiser appointed shall be the sole appraiser and shall set the Prevailing Rent of the
Premises. If the two appraisers are appointed by the Parties as stated in this paragraph, they shall meet within ten (10)&nbsp;days and set the Prevailing Rent of the Premises by taking the average
of the Prevailing Rent as set by each. </FONT></P>

<P><FONT SIZE=2>51.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>TELECOMMUNICATION EQUIPMENT.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lessee
acknowledges that in conducting its investigation of the Premises to determine suitability of the Premises for Lessee's intended use, Lessee has considered its present and future
telecommunication needs and agrees that Lessor shall have no duty to modify, improve, repair or install any telephone cabling to or for the benefit of the Premises. Lessee, at Lessee's sole cost and
expense, shall he responsible for their telecommunication equipment and wiring located within the Premises and all inside wiring and intrabuilding network cable from the Premises to the terminal box
or boxes, servicing the Premises, including the administration, engineering, installation and maintenance of all such equipment and wiring. Lessee, upon Lessor's written request, shall obtain and pay
for an inside wire maintenance plan for the purpose of performing Lessee's obligations under this Paragraph. </FONT></P>

<P><FONT SIZE=2>52.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>SUPERFUND AREA.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lessee
hereby acknowledges that Lessor has advised Lessee that on or about January&nbsp;1, 1984, the United States Environmental Protection Agency declared the San Gabriel Valley,
within which the Premises are located, to be subject to remediation measures pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42. U.S.C.
Section&nbsp;9601, "Superfund" because of the presence of certain chlorinated solvents found in the ground water. </FONT></P>

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<P><FONT SIZE=2>53.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>HOLDING OVER</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lessee
shall surrender possession of the Premises immediately upon expiration of the Term or Termination of the Lease. If Lessee shall continue to occupy or possess the Premises after
such expiration or termination without the consent of the Lessor, then unless Lessor and Lessee have otherwise agreed in writing, Lessee shall be a tenant from month-to-month.
All the terms, provisions and conditions of this Lease shall apply to this month-to-month tenancy except those terms, provisions and conditions pertaining to the Term and
except the Base Rent. This month-to-month tenancy may be terminated by Lessor or Lessee upon thirty (30)&nbsp;days prior notice to the non-terminating party. The
Lessor may increase the Base Rent upon thirty (30)&nbsp;days prior notice to Lessee. In the event that the Lessee fails to surrender the Premises upon such termination or expiration, then Lessee
shall indemnify and hold Lessor harmless against all loss or liability resulting from or arising out of Lessee's failure to surrender the Premises, including, but not limited to, any amounts required
to be paid to any prospective tenant who was to have occupied the Premises after said termination or expiration and related attorneys' fees and brokerage commissions. No payment of money by Lessee to
Lessor after the termination of the Lease by Lessor, or after giving any notice of termination to Lessee by Lessor which Lessor is entitled to give Lessee under this Lease, shall reinstate, continue
or extend the Term of the Lease or shall affect any such notice given to Lessee prior to the payment of such money, it being agreed that after the service of such notice or the commencement of any
suit by Lessor to obtain possession of the Premises, Lessor may receive and collect when due any and all payments owed by Lessee under this Lease, and otherwise exercise its rights and remedies. The
making of such payments by Lessee shall not waive such notice, or in any manner affect any pending suit or judgement obtained. </FONT></P>

<P><FONT SIZE=2>54.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>REDEVELOPMENT AREA.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
City of South El Monte City Council. Ordinance No.&nbsp;98-1008, has adopted an improvement and district preliminary plan for possible redevelopment, in which the
Premises is located.
For further particulars, Lessee has herewith been advised to contact the City of South El Monte Planning Department. (626)579-6540. </FONT></P>

<P><FONT SIZE=2>55.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>OPTION TO RENEW THE LEASE.&nbsp;&nbsp;&nbsp;&nbsp;#2</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Lessee
shall have the option to renew the term of the Lease (herein called "Option") for a Three (3)&nbsp;year period commencing January&nbsp;1, 2007 and ending on
December&nbsp;31, 2009 This Option may be exercised only by notice, in writing, delivered by the United States Post Office, Certified Mail, to Lessor not earlier than October&nbsp;1, 2006 and no
later than October&nbsp;31, 2006 (herein called "Rent Adjustment Date") and shall expire and be of no force or effect if not delivered to Lessor within the prescribed time. In the event the Option
is exercised, all provisions of the Lease shall continue, except the Base Rent during such period covered by the Option shall be increased to the "Prevailing Rent." The term "Prevailing Rent" shall
mean the price that a ready and willing tenant would pay as of the Rent Adjustment Date, as monthly rent to a ready and willing landlord of property comparable to the Premises it such property were
exposed for lease on the open market for a reasonable period of time and taking into account all the purposes for which such property mutual be used. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;In
the event Lessor and Lessee are unable to agree on the Prevailing Rent within fifteen (15)&nbsp;days of the Rent Adjustment Date, then within ten (10)&nbsp;days
after the expiration of that period, each Party, at its respective cost and by giving notice to the other Party, shall appoint a qualified real estate appraiser with at least five (5)&nbsp;years
full-time commercial appraisal experience in the area in which the Premises are located to appraise and set the Prevailing Rent of the Premises. If a Party does not appoint an appraiser
within ten (10)&nbsp;days after the other Party has given notice of the name of its appraiser, the single appraiser appointed shall be the sole appraiser and shall set the Prevailing Rent of the
Premises. If the two appraisers are appointed by the Parties as stated in this paragraph, they shall meet within ten (10)&nbsp;days and set the Prevailing Rent of the Premises by taking the average
of the Prevailing Rent us set by each. </FONT></P>

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<BR>

<P><FONT SIZE=2>56.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></FONT><FONT SIZE=2><B>OPTION TO RENEW THE LEASE.&nbsp;&nbsp;&nbsp;&nbsp;#3</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Lessee
shall have the option to renew the term of the Lease (herein called "Option") for a Three </FONT><FONT SIZE=2><I>(~)</I></FONT><FONT SIZE=2> year period
commencing January&nbsp;1, 2010 and ending on December&nbsp;31, 2012. This Option may be exercised only by notice in writing delivered by the United States Post Office, Certified Mail, to Lessor
not earlier than October&nbsp;1, 2009 and no later than October&nbsp;31, 2009 (herein called "Rent Adjustment Date") and shall expire and be of no force or effect if not delivered to Lessor within
the prescribed time. In the event the Option is exercised, all provisions of the Lease shall continue, except the Base Rent during such period covered by the Option shall be increased to the
"Prevailing Rent." The term "Prevailing Rent" shall mean the price that a ready and willing tenant would pay, as of the Rent Adjustment Date, as monthly rent to a ready and willing landlord of
property comparable to the Premises if such property were exposed for lease on the open market for a reasonable period of time and taking into account all the purposes for which such property may be
used. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;In
the event Lessor and Lessee are unable to agree on the Prevailing Rent within fifteen (15)&nbsp;days of the Rent Adjustment Date, then within ten (10)&nbsp;days
after the expiration of that period, each Party, at its respective cost and by giving notice to the other Party, shall appoint a qualified real estate appraiser with at least five (5)&nbsp;years
full-time commercial appraisal experience in the area in which the Premises are located to appraise and set the Prevailing Rent of the Premises. If a Party does not appoint an appraiser
within ten (10)&nbsp;days after the other Party has given notice of the name of its appraiser, the single appraiser appointed shall be the sole appraiser and shall set the Prevailing Rent of the
Premises. If the two appraisers are appointed by the Parties as stated in this paragraph, they shall meet within ten (10)&nbsp;days and set the Prevailing Rent of the Premises by taking the average
of the Prevailing Rent as set by each. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>JENKINS<BR>
INDUSTRIAL PROPERTIES,&nbsp;INC.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>STANDARD BROKER DISCLOSURES AND INDEMNIFICATIONS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Addendum is attached as Exhibit </FONT><FONT SIZE=2><I>A</I></FONT><FONT SIZE=2> to the Standard Industrial/Commercial Single&#151;Tenant
Lease&#151;Gross Agreement, dated March&nbsp;9, 2000 in which OWEN BROS. ENTERPRISES a Partnership is referred to as ("Lessor") and INTERNATIONAL MEDICATION SYSTEMS, LIMITED, a Delaware
Corporation is referred to as ("Lessee"), (collectively the "Parties", or individually a "Party"). </FONT></P>

<P><FONT SIZE=2><B>I.&nbsp;&nbsp;&nbsp;&nbsp;Hazardous Materials  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;&nbsp;&nbsp;&nbsp;Lessor
represents and warrants to Jenkins Industrial Properties,&nbsp;Inc., hereinafter described as "Broker", that it has no knowledge of the existence of hazardous,
toxic, cancer-causing or reproductive toxicity materials (collectively, "Hazardous Substances") in, on, under or about the subject Premises except as may be disclosed to Broker in writing and
furnished as an exhibit to this instrument. The Parties anticipate that if a problem of Hazardous Substances does exist on the Premises, whether or not known to Lessor, subsequent Lessee's who had any
dealings with Broker are likely to name Broker as a defendant in any ensuing litigation. Lessor hereby agrees to indemnify, defend and hold harmless Broker, together with all its representatives,
employees, partners, directors, officers, shareholders, agents, successors, assigns, and each of them (collectively "Released Parties"), from any and all claims, liabilities, damages, demands,
obligations, costs, expenses, attorney's fees, actions, and settlements arising out of or related to the existence of any Hazardous Substances (giving those terms the broadest meaning accorded by the
statutes, regulations, the courts, and specifically including: (a)&nbsp;petroleum products; (b)&nbsp;friable as well as non-friable asbestos containing materials; and (c)&nbsp;all
materials which may be included within the definition of the mentioned terms in any state or federal law, whether or not excluded from that definition in other comparable laws) with respect to the
Premises, and any breach of a duty of disclosure as a result thereof. </FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;&nbsp;&nbsp;&nbsp;Broker
in this transaction has no special knowledge with respect to the existence or non-existence of hazardous, toxic, cancer-causing or reproductive
toxicity materials (collectively, "Hazardous Substances") which may exist in, on, under or about the subject Premises. To the extent Broker is supplied with any such information from Lessor, it will
promptly furnish that information to the Lessee. Save and except for that obligation, the Parties specifically agree that Broker has no independent duty to further investigate the existence or
non-existence of such materials. If it is subsequently found that a problem regarding Hazardous Substances (giving those terms the broadest meaning accorded by the statutes, regulations,
the courts, and specifically including: (a)&nbsp;petroleum products; (b)&nbsp;friable as well as non-friable asbestos containing materials; and (c)&nbsp;all materials which may be
included within the definition of the mentioned terms any in state or federal law, whether or not excluded from that definition in other comparable laws) does exist on the Premises, the Parties hereby
release, dismiss with prejudice and forever discharges Broker, together with all its representatives, employees, partners, directors, officers, shareholders, agents, successors, assigns, and each of
them (collectively "Released Parties"), from any and all claims, liabilities, damages, demands, obligations, costs, expenses, attorney's fees, actions, and causes of action of every nature, character
and description whether legal, equitable, statutory or contractual which client now has or may have in the future, known or unknown, against the Released Parties directly or indirectly arising out of
the representation or other matters undertaken pursuant to this Agreement. </FONT></P>

<P><FONT SIZE=2><B>II.&nbsp;&nbsp;&nbsp;&nbsp;Alquist-Priolo Special Earthquake Studies Zone Act  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The subject Premises is or may be situated in a Special Study Zone as designated under the Alquist-Priolo Special Zone Act, Sections 2621-2630,
inclusive, of the California Public
Resources Code; and, as such, the construction or development of the Premises of any structure for human occupancy may be subject to the findings of a geologic report prepared by a geologist
registered in the State of California, unless such report is waived by the city or county under the terms of that act. No representations on the subject are made by Broker or its agents or employees,
and the Lessee should make his own inquiry or investigation. </FONT></P>

<P><FONT SIZE=2><B>III.&nbsp;&nbsp;&nbsp;&nbsp;National Flood Insurance Program  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The subject Premises is or may be situated in a "flood zone" as set forth on H.U.D. "Special Flood Zone Area Maps." The law requires that as a condition of
obtaining financing on most properties located in flood zones", banks, savings and loan associations, and some insurance lenders will require that H.U.D. flood insurance be carried where the Premises
or its attachments are security for the loan. This requirement is mandated by the H.U.D. National Flood Insurance Program, which requirement became effective March&nbsp;1, 1976. The extent of
coverage available in your area and the cost of this coverage may vary, and for further information, you should consult your lender or your insurance carrier. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
representation or recommendation is made by Broker or its agents or employees to the legal effect, interpretation, or economic consequences of the National Flood Insurance Program and
related legislation. These are questions that you should address to your lender or your insurance carrier. </FONT></P>

<P><FONT SIZE=2><B>IV.&nbsp;&nbsp;&nbsp;&nbsp;Lessee's Agreement to Disclosure  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lessee has specifically been informed about and agrees to comply with, the provisions of California Health&nbsp;&amp; Safety Code Section&nbsp;25359.7 which
requires that Lessee notify Lessor in writing in all instances where the Lessee knows or has reasonable cause to believe that any release of a hazardous or toxic substance, (giving that term the
broadest meaning accorded by statutes, regulations, ordinances, and court decisions including petroleum products, fractions of crude oil and all forms of friable and non-friable asbestos
containing material) has come to be located in, on, under or about the subject Premises. In addition, the law requires the Lessee to provide notice to the Lessor in any instance when the Lessee must
file notification of a release of a hazardous or toxic material with a state or local agency and Lessee agrees to comply with that provision. Lessee further agrees that in any instance when it must
file with any state or local agency a business plan pursuant to Section&nbsp;25500 et. seq. of </FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>the
California Health&nbsp;&amp; Safety Code that it will provide Lessor with copies thereof, and acknowledges that Lessor may exercise a right to entry and inspection at any time during the lease
period upon reasonable notification for the purpose of determining the presence or absence of any hazardous or toxic materials as well as Lessee's compliance with all provisions of law with respect
thereto. </FONT></P>

<P><FONT SIZE=2><B>V.&nbsp;&nbsp;&nbsp;&nbsp;Americans With Disabilities Act  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The United States Congress has enacted the Americans with Disabilities Act. Among other things, this act is intended to make many business establishments equally
accessible to persons with a variety of disabilities; modifications to real property may be required. State and local laws also may mandate changes. The real estate brokers in this transaction are not
qualified to advise you as to what, if any, changes maybe required now, or in the future. Lessor and Lessee should consult the attorneys and qualified design professionals of their choice for
information regarding these matters. Real estate brokers cannot determine which attorneys or design professionals have the appropriate expertise in this area. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
undersigned parties understand and have had the opportunity to discuss with advisors the following statutory language of Section&nbsp;1542 of the California Civil Code: </FONT></P>

<UL>

<P><FONT SIZE=2><B>"A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him, must
have materially affected his settlement with the debtor"</B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Having
read such language and understood it, the releasing parties hereby waive the provisions of this Section&nbsp;1542 and any similar statute applicable to the granting of a general
release with respect to the matters hereinabove recited </FONT></P>

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<TD WIDTH="80%"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Lessee Jack Zhang, President/Chief Executive Officer</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>Date</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="CENTER"><FONT SIZE=2>3/20/00</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Lessee Mary Luo, Chief Operating Officer</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>Date</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="CENTER"><FONT SIZE=2>3/20/00</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="80%"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Lessor John A. Owen, Partner</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=2>Date</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="CENTER"><FONT SIZE=2>3/20/00</FONT><HR NOSHADE></TD>
</TR>
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<BR>
<P><br><A NAME="05BHL1063_11">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_lp1064_1">Exhibit 10.14</A></FONT><BR>
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<DOCUMENT>
<TYPE>EX-10.15
<SEQUENCE>12
<FILENAME>a2151158zex-10_15.htm
<DESCRIPTION>EXHIBIT 10.15
<TEXT>
<HTML>
<HEAD>
</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<BR>
<FONT SIZE=3 ><A HREF="#05BHL1063_12">QuickLinks</A></FONT>
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<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="lu1064_exhibit_10.15"> </A>
<A NAME="toc_lu1064_1"> </A>
<BR></FONT><FONT SIZE=2><B>Exhibit 10.15    <BR>    </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>[LOGO] </FONT></P>

<P><FONT SIZE=2>June&nbsp;11,
2001 </FONT></P>

<P><FONT SIZE=2>Mr.&nbsp;John
C. Armstrong<BR>
Box P 145<BR>
South Dartmouth, Massachusetts 02748 </FONT></P>

<P><FONT SIZE=2>Dear
John: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I
am writing to confirm our most recent understanding of the agreed upon details of our lease extension at our LaGrange Street facility: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I
would like to propose the following adjustments to our lease with you for this facility: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Exercise
three option years (03/15/02 through 03/14/05) and adjust annual rent to $6.00 per square foot (based on 46,000 square feet) commencing 08/15/01, running through
03/14/05
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Add
three option years to the 1ease period (so that we would have five&#151;one year option periods running from 03/15/05 through 03/14/10); all five option periods
would be at a rate of $7.00 per square foot </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you agree with the foregoing lease changes, please sign and return a copy of this letter. In that event, I'll have an amendment to the current lease generated for signature. </FONT></P>

<P><FONT SIZE=2>Sincerely, </FONT></P>

<P><FONT SIZE=2><B><I>ARMSTRONG PHARMACEUTICALS,&nbsp;INC.</I></B></FONT></P>

<P><FONT SIZE=2>Benjamin
Shepherd<BR>
Chief Operating Officer,<BR>
Cc: T. Amann </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accepted&nbsp;&amp;
agreed: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/&nbsp;&nbsp;</FONT><FONT
SIZE=2>JOHN C. ARMSTRONG</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

</UL>
<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><B>LEASE EXTENSION AGREEMENT  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AGREEMENT made as of this 8th of February, 1999, by and between JOHN C. ARMSTRONG, with a current address of Box P145, South Dartmouth, Massachusetts 02748
("Lessor"), and MEDEVA PHARM1ACEUTICALS MA,&nbsp;INC., a Delaware corporation, having an office at 423 LaGrange Street, West Roxbury, Massachusetts 02132 ("Lessee"). </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>WITNESSETH:  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS, by lease (the "Original lease") dated as of March&nbsp;15, 1965, by and among Robert W. Armstrong, Jr. and, John C. Armstrong, as Trustees of Robert W.
Armstrong, Jr., Family Trusts, under Declaration of Trust dated February&nbsp;1, 1962, duly recorded with Suffolk Deeds, and Robert W. Armstrong, Jr. and John C. Armstrong, as Trustees of John C.
Armstrong Family Trusts under Declaration of Trust dated February&nbsp;1, 1962, duly recorded with Suffolk Deeds, and Robert W. Armstrong, Jr. And John C. Armstrong, as Trustees of John C. Armstrong
Family Trusts under Declaration of Trust dated February&nbsp;1, 1962, duly recorded with said Deeds, collectively, as lessor (the "Original Lessor"), and Armstrong Laboratories,&nbsp;Inc., a
Massachusetts corporation and predecessor-in-interest to Lessee, as lessee (the "Original Lessee"), the Original Lessee leased certain premises known as 423 LaGrange Street,
West Roxbury, Massachusetts, as more particularly described in the Original Lease (the "Premises"); </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
the Original Lease was intended to supersede an earlier lease dated February&nbsp;1, 1962, as amended by and agreement dated May&nbsp;15, 1964, between the Original Lessor
and the Original Lessee covering the Premises; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
by agreements dated October&nbsp;20, 1969, December&nbsp;10, 1976, as of July&nbsp;1, 1985, as of May&nbsp;21, 1986, July&nbsp;27, 1988, November&nbsp;9, 1989,
May&nbsp;29, 1992, June&nbsp;14, 1993, March&nbsp;7, 1996 and May&nbsp;29, 1997 (collectively, the "Amendments"), the term of the Original Lease was extended and certain other provisions
thereof were modified in various respects (the Original Lease and the Amendments collectively, the "Lease"); </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
Lessor has succeeded to the interests of all prior lessors in and to the Lease; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
Lessee has succeeded to the interest of all prior lessees in and to the Lease; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
Lessor and Lessee desire to further amend the Lease: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;to
confirm the exercise by Lessee of its option to renew the Lease for a one year renewal term expiring on March&nbsp;14, 2002, and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;to
grant to Lessee three additional options to extend the term of the Lease for three successive one year terms expiring on March&nbsp;14, 2005, March&nbsp;14, 2006
and March&nbsp;14, 2007, respectively, on the terms herein specified; said options are in addition to the one year options granted to Lessee to extend the term of the Lease to March&nbsp;14, 2003
and March&nbsp;14, 2004, respectively; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW,
THEREFORE, in consideration of the mutual promises herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, Lessor and Lessee agree as
follows: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lessee
hereby exercises its options to extend the term of the Lease for a one-year term, expiring on March&nbsp;14, 2002 at the annual rent of $147,810, and
Lessor and Lessee each confirms to the other that the term of the Lease has been so extended to March&nbsp;14, 2002. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lessor
hereby grants to Lessee additional irrevocable options to renew the Lease for three successive renewal terms of one year each, expiring on March&nbsp;14, 2005,
March&nbsp;14, 2006 and March&nbsp;14, 2007, respectively, and, in each case at the annual rental of $147,810, exercisable by Lessee by giving to Lessor notice of the exercise thereof not later
than six months prior to the commencement date of the particular renewal term in question (namely six months prior to March&nbsp;15, 2005, March&nbsp;15, 2006 and March&nbsp;15, 2007,
respectively). Upon giving each such notice, the Lease forthwith shall be renewed for the particular term in question. </FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lessee,
at its election, may exercise the options to renew the term of the Lease set forth in Section&nbsp;2 above for one or more renewal terms simultaneously,
provided that the notice to such effect is given to Lessor not later than six months prior to the commencement of the earliest of such selected renewal terms. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
of the terms, covenants, and conditions of the Lease (except as herein modified and except those provisions which by their terms are no longer applicable) shall
continue in full force and effect during each renewal term, except that Lessee shall not have the right to renew this Lease for any term beyond the expiration of the last renewal term provided for
herein. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
Lessee does not exercise any of the options to renew the term of the Lease granted in Section&nbsp;2 above within the time specified hereinabove, the option to renew
for any successive renewal terms forthwith shall terminate. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement may not be changed or terminated orally, but only by an agreement in writing signed by the party to be charged. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Agreement shall be binding upon and inure to the benefit of Lessor and Lessee and their respective distributees, personal representatives, successors and assigns. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, Lessor and Lessee have duly executed this Agreement as of the date first above written. </FONT></P>

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<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>JOHN C. ARMSTRONG</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> John C. Armstrong, Lessor</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2><BR>
MEDEVA PHARMACEUTICALS MA, INC.<BR>
Lessee</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="50%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="43%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>BENJAMIN A. SHEPHERD</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Benjamin A. Shepherd<BR>
President</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>
<P><br><A NAME="05BHL1063_12">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_lu1064_1">Exhibit 10.15</A></FONT><BR>
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<DOCUMENT>
<TYPE>EX-10.16
<SEQUENCE>13
<FILENAME>a2151158zex-10_16.htm
<DESCRIPTION>EXHIBIT 10.16
<TEXT>
<HTML>
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NAME="ke1064_exhibit_10.16"> </A>
<A NAME="toc_ke1064_1"> </A>
<BR></FONT><FONT SIZE=2><B>Exhibit 10.16    <BR>    </B></FONT></P>

<UL>

<P><FONT SIZE=2><B> VOID AFTER 5:00&nbsp;P.M., CALIFORNIA TIME,<BR>
ON JANUARY 1,2005  </B></FONT></P>

<P><FONT SIZE=2>THIS
WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTNE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE
SECURITIES LAWS UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. </FONT></P>

</UL>

<P><FONT SIZE=2><I>Date: March&nbsp;20</I></FONT><FONT SIZE=2>, 2001 </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>AMPHASTAR PHARMACEUTICALS,&nbsp;INC.<BR>
STOCK PURCHASE WARRANT  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS WARRANT CERTIFIES THAT, for value received, CATHAY BANK or its registered assigns ("Holder") is entitled to purchase from AMPHAST AR
PHARMACEUTICALS,&nbsp;INC., a corporation organized under the laws of the State of California ("Company"), from time to time during the period specified in Section&nbsp;2 hereof,
sixty-two thousand (62,000) fully paid and nonassessable shares of Company's common stock (the "Common Stock"), at an exercise price of $15.00 per share (the "Exercise Price"). The number
of shares of Common Stock purchasable hereunder (the "Warrant Shares") and the Exercise Price are subject to adjustment as provided in Section&nbsp;5 hereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Warrant ("Warrant") is subject to the following terms, provisions and conditions: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Manner of Exercise; Issuance of Certificates; Payment for Shares; Cashless Exercise.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;This Warrant
may be exercised at any time during the Exercise Period (as defined below) by Holder hereof, in whole or in part, by the surrender of this Warrant, together with a completed exercise agreement in the
form attached hereto (the "Exercise Agreement"), to Company by 5&nbsp;p.m. California time on any Business Day (as defined below) at Company's principal executive offices (or such other office or
agency of Company as it may designate by notice to Holder hereof) and upon: (i)&nbsp;payment to Company in cash, by certified or official bank check or by wire transfer for the account of Company,
of the applicable Exercise Price for the Warrant Shares specified in the Exercise Agreement; or (ii)&nbsp;delivery to Company of written notice of an election to effect a Cashless Exercise (as
defined in Section&nbsp;1 (b)&nbsp;hereof) for the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued to Holder hereof or such
Holder's designee, as the record owner of such shares, as of the close of business on the date on which this Warrant shall have been surrendered and the completed Exercise Agreement shall have been
delivered and payment shall have been made for such shares as set forth above or, if such day is not a Business Day, on the next succeeding Business Day. The Warrant Shares so purchased, representing
the aggregate number of shares specified in the Exercise Agreement, shall be promptly delivered to Holder hereof, not exceeding three Business Days, after this Warrant shall have been so exercised
(the "Delivery Period"). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;This
Warrant may be exercised at any time or from time to time during the Exercise Period (as defined below), by presentation and surrender of this Warrant to Company at
its principal executive offices with a written notice of Holder's intention to effect a cashless exercise, including a calculation of the number of shares of Common Stock to be issued upon such
exercise in accordance with the terms hereof (a "Cashless Exercise"). In the event of a Cashless Exercise in lieu of paying the Exercise Price </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>1</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ke1064_1_2"> </A>
<BR>

<P><FONT SIZE=2>in
cash, Holder shall surrender this Warrant for that number of shares of Common Stock determined by multiplying (i)&nbsp;the number of Warrant Shares to which it would otherwise be entitled to upon
exercise by (ii)&nbsp;a fraction, the numerator of which shall be the difference between the then current Fair Market Value (as defined below) per share of the Common Stock and the Exercise Price,
and the denominator of which shall be the Fair Market Value per share of Common Stock. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Period of Exercise.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Warrant may be exercised from time to time (an "Exercise Date") during the period
(the "Exercise Period") beginning on the date hereof (the "Warrant Issue Date") and ending at 5:00&nbsp;p.m., California time, on January&nbsp;1,2005. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Registration Rights.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The registration rights of Holder shall be as set forth on Schedule&nbsp;3 attached
hereto. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Certain Agreements of Company.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Company hereby covenants and agrees as follows: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Shares Upon Issuance.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;All Warrant Shares will, upon issuance in accordance with the terms of this Warrant
and the relevant securities laws and regulations, (i)&nbsp;be validly issued, fully paid and nonassessable and (ii)&nbsp;be free from all preemptive rights of any shareholder. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Reservation of Shares.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;During the Exercise Period, Company shall at all times have authorized, and reserved
for the purpose of issuance upon exercise of this Warrant, a " sufficient number of shares of Common Stock, free from all liens, encumbrances (except for restrictions on transfer provided herein or
under applicable securities laws) and preemptive rights, to provide for the exercise in full of this Warrant. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Successors and Assigns.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Warrant will be binding upon any entity succeeding to Company by merger,
consolidation, or acquisition of all or substantially all of Company's assets. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Adjustments.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Common Stock Splits and Dividends.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;If outstanding shares of Common Stock of the Company shall be subdivided
into a greater number of shares or a dividend in the shares of Common Stock shall be paid in respect of the shares of Common Stock, the Exercise Price in effect immediately prior to such subdivision
or at the record date of such dividend shall simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend be proportionately reduced. If outstanding
shares of Common Stock shall be combined into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall, simultaneously with the effectiveness of such
combination, be proportionately increased. When any adjustment is required to be made in the Exercise Price, the number of shares of Common Stock purchasable upon the exercise of this Warrant shall be
changed to the number determined by dividing (i)&nbsp;an amount equal to the number of shares issuable upon the exercise of this Warrant immediately prior to such adjustment, multiplied by the
Exercise Price in effect immediately prior to such adjustment, by (ii)&nbsp;the Exercise Price in effect immediately after such adjustment. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Reclassification. Etc.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In case of any reclassification or change of the outstanding securities of the
Company or of any reorganization of the Company (or any other corporation the membership interests or securities of which are at the time receivable upon the exercise of this Warrant) or any similar
company reorganization on or after the date hereof, then and in each such case Holder, upon the exercise hereof at any time after the consummation of such reclassification, change, reorganization,
merger or conveyance, shall be entitled to receive, in lieu of the Common Stock or other securities and property receivable upon the exercise hereof prior to such consummation, the membership
interests or other securities or property to which Holder would have been entitled upon such consummation if Holder had exercised this Warrant immediately prior thereto, all subject to further
adjustment as provided in Section Sea) hereof; and in each </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ke1064_1_3"> </A>
<UL>
<BR>

<P><FONT SIZE=2>such
case, the terms of this Section&nbsp;S shall be applicable to the shares of membership interests or other securities properly receivable upon the exercise of this Warrant after such
consummation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Notices of Record Date.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In the event of (i)&nbsp;any taking by Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution or (ii)&nbsp;any capital reorganization of Company, any
reclassification, recapitalization or exchange of the capital stock of Company, or any merger or consolidation of Company with or into another corporation, or any transfer of all or substantially all
of the assets of Company to any other person, or any voluntary or involuntary dissolution, liquidation or winding up of Company, Company shall mail to Holder, at least ten (10)&nbsp;days prior to
the record date specified therein, a notice specifying (1)&nbsp;the date on which any such record is to be taken for the purpose of such dividend or distribution and a description of such dividend
or distribution, (2)&nbsp;the date on which any such reorganization, recapitalization, reclassification, exchange, consolidation, merger, dissolution, liquidation or winding up is expected to become
effective, and (3)&nbsp;the time, if any, that is to be fixed, as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or
other securities) for securities or other property deliverable upon such reorganization, reclassification,, exchange, consolidation, merger, dissolution, liquidation or winding up. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;No Fractional Shares.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;No fractional shares of Common Stock shall be issued upon exercise of this Warrant. In
lieu of any fractional shares to which Holder would otherwise be entitled, Company shall pay cash equal to the product of such fraction multiplied by the fair market value of one share of Company's
Common Stock on the date of exercise, as reasonably determined in good faith by the Board of Directors of Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Certain Definitions.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;"Business
Day" means any day, other than a Saturday or Sunday or a day on which banking institutions in the State of California are authorized or obligated by law,
regulation or executive order to close. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;"Fair
Market Value" shall mean, as of any date, the value of Common Stock determined as follows: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;&nbsp;If
the Common Stock is listed on any established stock exchange or a national market system including without limitation the Nasdaq National Market or The Nasdaq
SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system
for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Board of Directors of Company reasonably deems reliable; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;&nbsp;If
the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, Fair Market Value shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior to the day of determination; or </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)&nbsp;&nbsp;In
the absence of an established market for the Common Stock, the Fair Market Value shall be determined, in good faith, by the Board of Directors of Company. </FONT></P>

</UL>
</UL>
</UL>

<P><FONT SIZE=2>The
manner of determining the Fair Market Value of the Common Stock set forth in the foregoing definition shall apply with respect to any other security in respect of which a determination as to fair
market value must be made hereunder. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;No Rights or Liabilities as a Stockholder.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Warrant shall not entitle Holder hereof to any voting rights
or other rights as a stockholder of Company. No provision of this Warrant, in the absence </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ke1064_1_4"> </A>
<BR>

<P><FONT SIZE=2>of
affirmative action by Holder hereof to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of Holder hereof, shall give rise to any liability of such Holder for the
Exercise Price or as a stockholder of Company, whether such liability is asserted by Company or by creditors of Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Transfer: Replacement of Warrant.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Restriction on Transfer.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Warrant and the rights granted to Holder hereof are transferable in whole or
in part, at any time, upon surrender of this Warrant, together with a properly executed assignment in the form attached hereto, at the principal executive office of " Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Replacement of Warrant.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Upon receipt of evidence by Company of the loss, theft, destruction, or mutilation
of this Warrant, Company, at its expense, will execute and deliver, in lieu thereof, a new Warrant of like tenor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Cancellation: Payment of Expenses.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Upon the surrender of this Warrant in connection with any transfer,
exchange, or replacement as provided in this Section&nbsp;8, this Warrant shall be promptly canceled by Company. Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by Holder) and charges payable in connection with the preparation, execution, and delivery of this Warrant. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Notices.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any notices required or permitted to be given under the terms of this Warrant shall be sent by
certified or registered mail (return receipt requested) or delivered personally or by courier or by confirmed telecopy, and shall be effective five days after being placed in the mail, if mailed, or
upon receipt or refusal of receipt, if delivered personally or by courier, or by confirmed telecopy, in each case addressed to a party. The addresses for such communications shall be: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="63%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>If to Company:</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2>Amphastar Pharmaceuticals,&nbsp;Inc.<BR>
11570 6th Street Rancho<BR>
Cucamonga, CA 91730</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="48%"><FONT SIZE=2><BR>
Telephone No.: (626)&nbsp;459-5515<BR>
Facsimile No.: (909)&nbsp;980-5728<BR>
Attention: Dr.&nbsp;Jack Zhang, President<BR></FONT>
</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=2>If
to Holder, at such address as such Holder shall have provided in writing to Company, or at such other address as such Holder furnishes by notice given in accordance with this Section&nbsp;10. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Governing Law.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Warrant shall be governed by and construed in accordance with the internal laws of the
State of California applicable to contracts made and to be performed in the State of California. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Amendments.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;This Warrant and any provision hereof may only be amended by an instrument in writing signed by
Company and Holder hereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Descriptive Headings.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The descriptive headings of the several Sections of this Warrant are inserted for
purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK] </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ke1064_1_5"> </A>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN
WITNESS WHEREOF, Company has caused this Warrant to be signed by its duly authorized officer. </FONT></P>

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<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2><B>AMPHASTAR PHARMACEUTICALS,&nbsp;INC.</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="46%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=2><BR>
By:</FONT></TD>
<TD WIDTH="46%"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>JACK ZHANG</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2><BR>
Name: Dr.&nbsp;Jack Zhang</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2><BR>
Title: President</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

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<P style='page-break-before:always'></p>
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<BR>
<P><br><A NAME="05BHL1063_13">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ke1064_1">Exhibit 10.16</A></FONT><BR>

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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>14
<FILENAME>a2151158zex-21_1.htm
<DESCRIPTION>EXHIBIT 21.1
<TEXT>
<HTML>
<HEAD>
</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<BR>
<FONT SIZE=3 ><A HREF="#05BHL1063_14">QuickLinks</A></FONT>
<font size=3> -- Click here to rapidly navigate through this document</font>
<!-- TOC_END -->
<P ALIGN="RIGHT"><FONT SIZE=2><B>Exhibit 21.1  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="kc1063_subsidiaries_of_the_registrant"> </A>
<A NAME="toc_kc1063_1"> </A>
<BR></FONT><FONT SIZE=2><B>Subsidiaries of the Registrant    <BR>    </B></FONT></P>

<P><FONT SIZE=2>Armstrong
Pharmaceuticals,&nbsp;Inc., a Delaware corporation. </FONT></P>

<P><FONT SIZE=2>International
Medication Systems, Limited, a Delaware corporation. </FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>
<P><br><A NAME="05BHL1063_14">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_kc1063_1">Subsidiaries of the Registrant</A></FONT><BR>

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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>15
<FILENAME>a2151158zex-23_1.htm
<DESCRIPTION>EXHIBIT 23.1
<TEXT>
<HTML>
<HEAD>
</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<BR>
<FONT SIZE=3 ><A HREF="#05BHL1063_15">QuickLinks</A></FONT>
<font size=3> -- Click here to rapidly navigate through this document</font>
<!-- TOC_END -->
<P ALIGN="RIGHT"><FONT SIZE=2><B>Exhibit 23.1  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ke1063_consent_of_ernst___young_llp,___con03007"> </A>
<A NAME="toc_ke1063_1"> </A></FONT> <FONT SIZE=2><B>Consent of Ernst &amp; Young LLP, Independent Registered Public Accounting Firm    <BR>    </B></FONT></P>

<P><FONT SIZE=2>We
consent to the reference to our firm under the caption "Experts" and to the use of our report dated November&nbsp;29, 2004 (except for Notes&nbsp;1, 7, and 14, as to which the date is
February&nbsp;8, 2005) in the Registration Statement (Form&nbsp;S-1) and the related Prospectus of Amphastar Pharmaceuticals,&nbsp;Inc. for the registration of shares of its common stock. </FONT></P>


<P><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT
SIZE=2>ERNST &amp; YOUNG LLP</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>Orange
County, California<BR>
February 10, 2005 </FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<BR>
<P><br><A NAME="05BHL1063_15">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ke1063_1">Consent of Ernst &amp; Young LLP, Independent Registered Public Accounting Firm</A></FONT><BR>
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<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>16
<FILENAME>a2151158zex-23_2.htm
<DESCRIPTION>EXHIBIT 23.2
<TEXT>
<HTML>
<HEAD>
</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<BR>
<P ALIGN="RIGHT"><FONT SIZE=2><B>EXHIBIT 23.2  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT> <FONT SIZE=2><B>CONSENT OF INDEPENDENT REGISTERED<BR>
PUBLIC ACCOUNTING FIRM  </B></FONT></P>

<P><FONT SIZE=2>We hereby consent to the reference to our firm under the caption "Experts" and to the use of our report dated August&nbsp;20, 2004, with respect to the financial statements
of Armstrong Pharmaceuticals,&nbsp;Inc. included in the Registration Statement on Form&nbsp;S-1 and related Prospectus of Amphastar Pharmaceuticals,&nbsp;Inc. dated
February&nbsp;11, 2005. </FONT></P>

<P><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT
SIZE=2>CARLIN, CHARRON&nbsp;&amp; ROSEN LLP</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>Carlin,
Charron&nbsp;&amp; Rosen LLP </FONT></P>

<P><FONT SIZE=2>Westborough,
Massachusetts<BR>
February&nbsp;11, 2005 </FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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