EXHIBIT 10.2
 
EMPLOYMENT AGREEMENT
 
EMPLOYMENT AGREEMENT (this “Agreement”), dated as of March 4, 2008, by and
between Par Pharmaceutical, Inc., a Delaware corporation (“Par” or “Employer”),
and Gerard Martino (“Executive”).
 
RECITALS:
 
A. WHEREAS, Executive is presently employed by Employer in the capacity of
Executive Vice President and Chief Operating Officer; and
 
B. WHEREAS, Employer and Executive desire to cancel and replace Executive’s
existing Employment Agreement dated June 2007, and enter into this Agreement for
Executive to continue to perform the duties associated his position the terms
and conditions set forth herein.
 
In consideration of the mutual promises herein contained, the parties hereto
hereby agree as follows:
 
1. Employment.
 
1.1. General. Employer hereby employs Executive in the capacity of Executive
Vice President and Chief Operating Officer of Par at the compensation rate and
benefits set forth in Section 2 hereof for the Employment Term (as defined in
Section 3.1 hereof). Executive hereby accepts such employment, subject to the
terms and conditions herein contained. In all such capacity, Executive shall
perform and carry out such duties and responsibilities as may be assigned to him
from time to time by the Board and by the Chief Executive Officer of Par
reasonably consistent with Executive’s position and this Agreement, and shall
report to the Board and the Chief Executive Officer of Par.
 
1.2. Time Devoted to Position. Executive, during the Employment Term, shall
devote substantially all of his business time, attention and skills to the
business and affairs of Employer.
 
1.3. Certifications. Whenever the Chief Executive Officer of Par is required by
law, rule or regulation or requested by any governmental authority or by Par’s
auditors to provide certifications with respect to Par’s financial statements or
filings with the Securities and Exchange Commission or any other governmental
authority, Executive shall sign such certifications as may be reasonably
requested by the Chief Executive Officer of Par and/or the Board, with such
exceptions as Executive deems necessary to make such certifications accurate and
not misleading.
 
2. Compensation and Benefits.
 
 
 

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2.1. Salary. At all times Executive is employed hereunder, Employer shall pay to
Executive, and Executive shall accept, as full compensation for any and all
services rendered and to be rendered by him during such period to Employer in
all capacities, including, but not limited to, all services that may be rendered
by him to any of Employer’s subsidiaries, entities and organizations presently
existing or hereafter formed, organized or acquired by Employer, directly or
indirectly (each, a “Subsidiary” and collectively, the “Subsidiaries”), the
following: (i) a base salary at the annual rate of $470,000 (Four Hundred and
Seventy Thousand Dollars), or at such increased rate as the Board (through its
Compensation and Equity Awards Committee), in its sole discretion, may hereafter
from time to time grant to Executive hereof (as so adjusted, the “Base Salary”);
and (ii) any additional bonus and the benefits set forth in Sections 2.2, 2.3
and 2.4 hereof. The Base Salary shall be payable in accordance with the regular
payroll practices of Employer applicable to senior executives, less such
deductions as shall be required to be withheld by applicable law and regulations
or otherwise.
 
2.2. Bonus. Subject to Section 3.3 hereof, Executive shall be entitled to an
annual bonus during the Employment Term in such amount (if any) as determined by
the Board based on such performance criteria as it deems appropriate, including,
without limitation, Executive’s performance and Employer’s earnings, financial
condition, rate of return on equity and compliance with regulatory requirements.
The target amount of Executive’s annual bonus shall be equal to 50% (fifty
percent) of his Base Salary. At the time the Board determines the Executive’s
eligibility for a bonus, the Board shall set forth all material terms of the
bonus arrangement in a written document. The Employer shall pay the bonus by
March 1 following the end of the calendar year in which the bonus is earned.
 
2.3. Equity Awards. Executive shall be entitled to participate in long-term
incentive plans commensurate with his titles and positions, including, without
limitation, stock option, restricted stock, and similar equity plans of Employer
as may be offered from time to time.
 
2.4. Executive Benefits.
 
2.4.1. Expenses. Employer shall promptly reimburse Executive for expenses he
reasonably incurs in connection with the performance of his duties (including
business travel and entertainment expenses) hereunder, all in accordance with
Employer’s policies with respect thereto as in effect from time to time.
 
2.4.2. Employer Plans. Executive shall be entitled to participate in such
employee benefit and welfare plans and programs as Employer may from time to
time generally offer or provide to executive officers of Employer or its
Subsidiaries, including, but not limited to, participation in life insurance,
health and accident, medical plans and programs and profit sharing and
retirement plans.
 
2.4.3. Vacation. Executive shall be entitled to four (4) weeks of paid vacation
per calendar year, prorated for any partial year.
 
2.4.4. Life Insurance. Employer shall obtain (provided, that Executives
qualifies on a non-rated basis) a term life insurance policy, the premiums of
which shall be borne by Employer and the death benefits of which shall be
payable to Executive’s estate, or as otherwise directed by Executive, in the
amount of $1 million throughout the Employment Term.
 
 
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2.4.5. Automobile. Employer shall provide Executive with an automobile cash
allowance of one thousand and fifty dollars ($1,050) (gross) per month.
 
3. Employment Term; Termination.
 
3.1. Employment Term. Executive’s employment hereunder shall commence on the
date hereof and, except as otherwise provided in Section 3.2 hereof, shall
continue until the third (3rd) anniversary of the date of this Agreement (the
“Initial Term”). Thereafter, this Agreement shall automatically be renewed for
successive one-year periods commencing on the third (3rd) anniversary of the
date of this Agreement (the Initial Term, together with any such subsequent
employment period(s), being referred to herein as the “Employment Term”), unless
Executive or Employer shall have provided a Notice of Termination (as defined in
Section 3.4.2 hereof) in respect of its or his election not to renew the
Employment Term to the other party at least ninety (90) days prior to the end of
the Employment Term. Upon nonrenewal of the Employment Term pursuant to this
Section 3.1 or termination pursuant to Sections 3.2.1 through 3.2.6 hereof,
inclusive, Executive shall be released from any duties hereunder (except as set
forth in Section 4 hereof) and the obligations of Employer to Executive shall be
as set forth in Section 3.3 hereof only.
 
3.2. Events of Termination. The Employment Term shall terminate upon the
occurrence of any one or more of the following events:
 
3.2.1. Death. In the, event of Executive’s death, the Employment Term shall
terminate on the date of his death.
 
3.2.2. Without Cause By Executive. Executive may terminate the Employment Term
at any time during such Term for any reason whatsoever by giving a Notice of
Termination to Employer. The Date of Termination pursuant to this Section 3.2.2
shall be thirty (30) days after the Notice of Termination is given.
 
3.2.3. Disability. In the event of Executive’s Disability (as hereinafter
defined), Employer may, at its option, terminate the Employment Term by giving a
Notice of Termination to Executive. The Notice of Termination shall specify the
Date of Termination, which date shall not be earlier than thirty (30) days after
the Notice of Termination is given. For purposes of this Agreement, “Disability”
means disability as defined in any long-term disability insurance policy
provided by Employer and insuring Executive, or, in the absence of any such
policy, the inability of Executive for 180 days in any twelve (12) month period
to substantially perform his duties hereunder as a result of a physical or
mental illness, all as determined in good faith by the Board.
 
3.2.4. For Cause By Employer. Employer may terminate the Employment Term for
“Cause” based on objective factors determined in good faith by a majority of the
Board as set forth in a Notice of Termination to Executive specifying the
reasons for termination and the failure of the Executive to cure the same within
ten (10) days after Employer shall have given the Notice of Termination;
provided, however, that in the event the Board in good faith determines that the
underlying reasons giving rise to such determination cannot be cured, then the
ten (10) day period shall not apply and the Employment Term shall terminate on
the date the Notice of Termination is given. For purposes of this Agreement,
“Cause” shall mean (i) Executive’s conviction of, guilty or no contest plea to,
or confession of guilt of, a felony, or other crime involving moral turpitude;
(ii) an act or omission by Executive in connection with his employment that
constitutes fraud, criminal misconduct, breach of fiduciary duty, dishonesty,
gross negligence, malfeasance, willful misconduct or other conduct that is
materially harmful or detrimental to Employer; (iii) a material breach by
Executive of this Agreement; (iv) continuing failure to perform such duties as
are assigned to Executive by Employer in accordance with this Agreement, other
than a failure resulting from a Disability; (v) Executive’s knowingly taking any
action on behalf of Employer or any of its affiliates without appropriate
authority to take such action; (vi) Executive’s knowingly taking any action in
conflict of interest with Employer or any of its affiliates given Executive’s
position with Employer; and/or (vii) the commission of an act of personal
dishonesty by Executive that involves personal profit in connection with
Employer.
 
 
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3.2.5. Without Cause By Employer. Employer may terminate the Employment Term for
any reason or no reason whatsoever (other than for the reasons set forth
elsewhere in this Section 3.2) by giving a Notice of Termination to Executive.
The Notice of Termination shall specify the Date of Termination, which date
shall not be earlier than thirty (30) days after the Notice of Termination is
given or such shorter period if Employer shall pay to Executive that amount of
the Base Salary amount that would have been earned between the thirty (30) day
period and such shorter period in accordance with the Employer’s regular payroll
practices.
 
3.2.6. Employer’s Material Breach. Executive may terminate the Employment Term
upon Employer’s material breach of this Agreement and the continuation of such
breach for more than ten (10) days after written demand for cure of such breach
is given to Employer by Executive (which demand shall identify the manner in
which Employer has materially breached this Agreement). Employer’s material
breach of this Agreement shall mean (i) the failure of Employer to make any
payment that it is required to make hereunder to Executive when such payment is
due or within two (2) business days thereafter; (ii) the assignment to
Executive, without Executive’s express written consent, of duties inconsistent
with his positions, responsibilities and status with Employer, or a change in
Executive’s reporting responsibilities, titles or offices or any plan, act,
scheme or design to constructively terminate the Executive, or any removal of
Executive from his positions with Employer, except in connection with the
termination of the Employment Term by Employer for Cause, without Cause or
Disability or as a result of Executive’s death or voluntary resignation or by
Executive other than pursuant to this Section 3.2.6; (iii) a reduction by
Employer in Executive’s Base Salary; or (iv) a permanent reassignment of
Executive’s primary work location, without the consent of Executive, to a
location more than 35 miles from Employer’s executive offices in Woodcliff Lake,
New Jersey.
 
3.3. Certain Obligations of Employer Following Termination of the Employment
Term. Following termination of the Employment Term under the circumstances
described below, Employer shall pay to Executive or his estate, as the case may
be, the following compensation and provide the following benefits. All lump sum
payments owed by Employer shall be made to Executive within forty-five (45) days
of the Date of Termination in accordance with the Employer’s regular payroll
practices. In connection with Executive’s receipt of any or all compensation and
benefits to be received pursuant to this Section 3.3, Executive shall not have a
duty to seek subsequent employment during the period in which he is receiving
severance payments and the Severance Amount (as defined in Section 3.3.2 hereof)
shall not be reduced solely as a result of Executive’s subsequent employment by
an entity other than Employer. The Executive must execute within thirty (30)
days after the Date of Termination Employer’s standard form of Release Agreement
attached as Exhibit A hereto.
 
 
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3.3.1. For Cause. In the event that the Employment Term is terminated by
Employer for Cause, Employer shall pay to Executive, in a single lump-sum within
forty-five (45) days of the Date of Termination and in accordance with the
Employer’s regular payroll practices, an amount equal to any unpaid but earned
Base Salary through the Date of Termination. The Employer shall also pay any
annual bonus earned but unpaid as of the Date of Termination for any previously
completed fiscal year in accordance with the terms of the bonus, and such
employee benefits as to which Executive may be entitled under the employee
benefit plans of Employer.
 
3.3.2. Without Cause by Employer; Material Breach by Employer; Non-Renewal by
Employer. In the event that the Employment Term is terminated by Employer
pursuant to Section 3.2.5 hereof or by Executive pursuant to Section 3.2.6
hereof, or is not renewed by Employer pursuant to Section 3.1 hereof, Employer
shall pay to Executive severance in an amount equal to two (2) times his Base
Amount (the “Severance Amount”). Executive shall retain all vested benefits
granted pursuant to Section 2.3 hereof. For purposes hereof, “Base Amount” shall
mean the sum of Executive’s Base Salary in effect on the Date of Termination,
and if Executive’s termination is not a result of, in whole or in part,
Executive’s performance in respect of his duties hereunder, the amount of
Executive’s last annual cash bonus pursuant to Section 2.2 hereof. The Employer
shall pay the Severance Amount in installments, and shall first determine the
amount of each installment payment if the Severance Amount were paid in equal
semimonthly installments for two (2) years (the “Installment Payment”)
commencing on the forty-fifth (45th) day after the Date of Termination. The
Employer shall then withhold and accumulate the Installment Payments payable
beginning on the forty-fifth (45th) day after the Date of Termination through
the end of the sixth (6th) month after the Date of Termination (the time period,
the “Severance Holdback Period”) (the withheld payments, the “Severance Holdback
Amounts”). The Employer shall pay the Severance Holdback Amounts in a single
lump sum on the first (1st) day of the seventh (7th) month after the Date of
Termination (the “Severance Delayed Payment Date”). The Severance Holdback
Amounts paid to the Executive on the Severance Delayed Payment Date are to
accrue interest from the date each Severance Holdback Amount would have been
paid during the Severance Holdback Period absent the holdback requirement until
the Severance Delayed Payment Date. The interest rate is the prime rate as
published in The Wall Street Journal seven (7) days prior to the Severance
Delayed Payment Date. The Employer shall pay the accrued interest on the
Severance Delayed Payment Date. From the Severance Delayed Payment Date through
the end of two (2) years after the forty-fifth (45th) day after the Date of
Termination, the Employer shall pay the Installment Payments semimonthly.
Payment of the Severance Amount is subject to Executive’s continued compliance
with the terms of Section 4. The Employer shall also pay any annual bonus earned
but unpaid as of the Date of Termination for any previously completed fiscal
year in accordance with the terms of the bonus, and such employee benefits as to
which Executive may be entitled under the employee benefit plans of the
Employer.
 
 
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3.3.3. Without Cause By Executive; Election Not to Renew by Executive. In the
event that the Employment Term is terminated by Executive pursuant to Section
3.2.2 hereof or Executive elects not to renew this Agreement pursuant to Section
3.1 hereof, Employer shall pay to Executive, in a single lump-sum within
forty-five (45) days of the Date of Termination, an amount equal to any unpaid
but earned Base Salary through the Date of Termination, in accordance with
Employer’s regular payroll practices. The Employer shall also pay any annual
bonus earned but unpaid as of the Date of Termination for any previously
completed fiscal year in accordance with the terms of the bonus, and such
employee benefits as to which Executive may be entitled under the employee
benefit plans of the Employer.
 
3.3.4. Without Cause by Executive During Window Period. If a Change of Control
(as defined in Section 3.4.1 hereof) occurs, and the Executive continues
employment for six (6) months after the date of the Change of Control (as
defined in Section 3.4.1 hereof) (the “Stay Period”), the Executive may
terminate the Employment Term (the “Resignation”) during the ninety (90) days
following the Stay Period (the “Window Period”). The Executive must provide the
Resignation in a Notice of Termination to the Employer during the Window Period.
Upon the Resignation, the provisions of Sections 3.3.2 and 3.3.6 shall apply as
if the Resignation were a termination of the Employment Term without Cause by
the Employer under Section 3.2.5.
 
3.3.5. Death, Disability. In the event that the Employment Term is terminated by
reason of Executive’s death pursuant to Section 3.2.1 hereof or by Employer by
reason of Executive’s Disability pursuant to Section 3.2.3 hereof, Employer
shall pay to Executive, subject to, in the case of Disability, Executive’s
continued compliance with Section 4 hereof, the Severance Amount, less any life
insurance and/or disability insurance received by Executive or his estate
pursuant to insurance policies provided by Employer (including pursuant to
Section 2.4.4 hereof), and Executive shall retain all vested benefits granted
pursuant to Section 2.3 hereof. In the case of death, the Employer shall pay the
Severance Amount commencing on the thirtieth (30th) day after the Executive’s
date of death, and otherwise in accordance with the payment provisions of
Section 3.3.2 hereof without the holdback requirement. In the case of
Disability, the Employer shall pay the Severance Amount in accordance with the
payment provisions of Section 3.3.2 hereof. The Employer shall also pay any
annual bonus earned but unpaid as of the Date of Termination for any previously
completed fiscal year in accordance with the terms of the bonus, and such
employee benefits as to which Executive may be entitled under the employee
benefit plans of the Employer.
 
3.3.6. Post-Employment Term Benefits. In the event Executive is terminated
pursuant to Sections 3.2.1 through 3.2.6 hereof, inclusive, or either Employer
or Executive elects not to renew this Agreement pursuant to Section 3.1 hereof,
Employer shall reimburse Executive for any unpaid expenses pursuant to Section
2.4.1 hereof, and Executive will have the opportunity and responsibility to
elect COBRA continuation coverage pursuant to the terms of that law and will
thus be responsible for the execution of the continuation of coverage forms upon
termination of his insurance coverage. Except as provided immediately below,
Executive will be responsible for all COBRA premiums. If Executive is terminated
pursuant to Sections 3.2.3, 3.2.5 or 3.2.6 hereof, or Employer elects not to
renew this Agreement pursuant to Section 3.1 hereof, Executive shall be entitled
to participate, at Employer’s expense, in all medical and health plans and
programs of Employer in accordance with COBRA for a period of up to eighteen
(18) months (the “Benefits Period”), subject to Executive’s continued compliance
with the terms of Section 4 hereof; provided, that Executive’s continued
participation is permissible under the general terms and provisions of such
plans and programs; and provided, further, that in the event Executive becomes
entitled to equal or comparable benefits from a subsequent employer during the
Benefits Period, Employer’s obligation with respect thereto pursuant to this
Section 3.3.6 shall end as of such date. The Employer shall commence payment of
COBRA premiums on the forty-fifth (45th) day after the Date of Termination.
 
 
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3.3.7. Equity Awards.
 
(a) If, within twelve (12) months following a Change of Control (as defined in
Section 3.4.1 hereof) of Employer, the Employment Term is terminated other than
for Cause, then Executive (or his estate) shall have twenty-four (24) months
from the date of termination to exercise any vested equity awards; provided,
that the relevant equity award plan remains in effect and such equity awards
shall not have otherwise expired in accordance with the terms thereof. In
connection therewith, Employer agrees to use commercially reasonable efforts to
amend Executive’s Equity Award Agreements if necessary to effectuate the
provisions of this Section 3.3.7(a).
 
(b) In the event the Employment Term is terminated (i) by Employer pursuant to
Section 3.2.5 hereof and the reason for such termination is not related to the
performance of Executive in his duties with respect to Employer, or (ii) by
Executive pursuant to Section 3.2.6 hereof, then all equity awards theretofore
granted to Executive shall thereupon vest and Executive shall have twenty-four
(24) months from such date to exercise such options; provided, that the relevant
equity award plan remains in effect and such equity awards shall not have
otherwise expired in accordance with the terms thereof. In connection therewith,
Employer agrees to use commercially reasonable efforts to amend Executive’s
Equity Award Agreements if necessary to effectuate the provisions of this
Section 3.3.7(b).
 
(c) For grants of performance contingent restricted stock and time-based
restricted stock made during calendar year 2008 (the “2008 Grants” under the
2008 Long Term Incentive Program (the “2008 Program”), (i)(A) if after a Change
of Control (as defined n Section 3.4.1 hereof) the Employer or its successor
requires the Executive to remain employed for the Stay Period, (B) the Executive
continues employment for the Stay Period, and (C) the Change of Control (as
defined in Section 3.4.1 hereof) occurs within two (2) years after the date of
grant of the 2008 Grants, all 2008 Grants shall vest on the last day of the Stay
Period; or (ii) if there is a termination of the Employment Term under Section
3.2.5 or 3.2.6 after the date of a Change of Control (as defined in Section
3.4.1 hereof), all 2008 Grants shall vest on the Date of Termination; or (iii)
if a Change of Control (as defined in Section 3.4.1 hereof) occurs two (2) or
more years after the date of grant of the 2008 Grants, all 2008 Grants shall
vest on the date of the Change of Control (as defined in Section 3.4.1 hereof);
provided, however, that the 2008 Program remains in effect and the 2008 Grants
shall not have otherwise expired in accordance with the terms thereof. In
connection therewith, Employer agrees to use commercially reasonable efforts to
amend Executive’s 2008 Grant Agreements if necessary to effectuate the
provisions of this Section 3.3.7(c).
 
 
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3.4. Definitions.
 
3.4.1. “Change of Control” Defined. A “Change of Control” of the Employer means
any of the following events, unless otherwise defined in an Award Agreement or
Grant Agreement:
 
(a) Any individual, firm, corporation or other entity, or any group (as defined
in Section 13(d)(3) of Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) becomes, directly or indirectly, the beneficial owner (as
defined in the General Rules and Regulations of the Securities and Exchange
Commission with respect to Sections 13(d) and 13(g) of the Exchange Act) of more
than twenty (20%) percent of the then outstanding shares entitled to vote
generally in the election of directors of the Employer;
 
(b) The commencement of, or the first public announcement of the intention of
any individual, firm, corporation or other entity or of any group (as defined in
Section 13(d)(3) of the Exchange Act) to commence, a tender or exchange offer
subject to Section 14(d)(1) of the Exchange Act for any class of the Employer’s
capital stock; or
 
(c) The stockholders of the Employer approve (i) a definitive agreement for the
merger or other business combination of the Employer with or into another
corporation pursuant to which the stockholders of the Employer do not own,
immediately after the transaction, more than fifty (50%) percent of the voting
power of the corporation that survives and is a publicly owned corporation and
not a subsidiary of another corporation, (ii) a definitive agreement for the
sale, exchange or other disposition of all or substantially all of the assets of
the Employer, or (iii) any plan or proposal for the liquidation or dissolution
of the Employer.
 
Provided, however, that a Change of Control shall not be deemed to have taken
place if beneficial ownership is acquired by, or a tender or exchange offer is
commenced or announced by, the Employer, any profit-sharing, employee ownership
or other employee benefit plan of the Employer, any trustee of or fiduciary with
respect to any such plan when acting in such capacity, or any group comprised
solely of such capacity, or any group comprised solely of such entities.
 
3.4.2. “Notice of Termination” Defined. “Notice of Termination” means a written
notice that indicates the specific termination provision relied upon by Employer
or Executive and, except in the case of termination pursuant to Sections 3.2.1,
3.2.2 or 3.2.5 hereof, that sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employment Term
under the termination provision so indicated.
 
3.4.3. “Date of Termination” Defined. “Date of Termination” means such date as
the Employment Term is expired if not renewed or terminated in accordance with
Sections 3.1 or 3.2 hereof.
 
4. Confidentiality/Non-Solicitation/Non-Compete.
 
4.1. “Confidential Information” Defined. “Confidential Information” means any
and all information (oral or written) relating to Employer or any Subsidiary or
any person or entity controlling, controlled by, or under common control with
Employer or any Subsidiary or any of their respective activities, including, but
not limited to, information relating to: technology, research, test procedures
and results, machinery and equipment; manufacturing processes; financial
information; products; identity and description of materials and services used;
purchasing; costs; pricing; customers and prospects; advertising, promotion and
marketing; and selling, servicing and information pertaining to any governmental
investigation, except such information which becomes public, other than as a
result of a breach of the provisions of Section 4.2 hereof.
 
 
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4.2. Non-disclosure of Confidential Information. Executive shall not at any time
(other than as may be required or appropriate in connection with the performance
by him of his duties hereunder), directly or indirectly, use, communicate,
disclose or disseminate any Confidential Information in any manner whatsoever
for the benefit of any person or entity other than Employer (except as may be
required under legal process by subpoena or other court order).
 
4.3. Non-Solicitation. Executive shall not, while employed by Employer and for a
period of one (1) year following the Date of Termination, directly or
indirectly, hire, offer to hire, entice away or in any other manner persuade or
attempt to persuade any officer, employee, agent, lessor, lessee, licensor,
licensee, customer, prospective customer, or supplier of Employer or any of its
Subsidiaries to discontinue or alter his or its relationship with Employer or
any of its Subsidiaries.
 
4.4. Non-Competition. Executive shall not, while employed by Employer and for a
period of one (1) year following the Date of Termination, directly or indirectly
provide any services (whether in the management, sales, marketing, public
relations, finance, research, development, general office, administrative, or
other areas) as an employee, agent, stockholder, officer, director, consultant,
advisor, investor, or other representative of Employer’s competitors in the
branded or generic pharmaceutical industry in any state or country in which
Employer does or seeks to do business. Employer’s competitors include any
entity, individual, or affiliate of such company or individual that develops,
sells, markets, or distributes any products that compete with or are the same or
similar to those of Employer. However, the restrictions of this paragraph 4.4
shall not apply if the Employment Term is terminated by Employer pursuant to
Section 3.2.5 hereof or by Executive properly pursuant to Section 3.2.6 hereof;
nor shall this paragraph prohibit Executive from being a passive owner of not
more than one percent (1%) of any publicly-traded class of capital stock of any
entity engaged in a competing business.
 
4.5. Injunctive Relief. The parties hereby acknowledge and agree that (a) the
type, scope and periods of restrictions imposed in paragraph 4 are necessary,
fair and reasonable to protect Employer’s legitimate business interests and to
prevent the inevitable disclosure of Employer’s Confidential Information; (b)
Employer will be irreparably injured in the event of a breach by Executive of
any of his obligations under this Section 4; (c) monetary damages will not be an
adequate remedy for any such breach; (d) Employer will be entitled to injunctive
relief, in addition to any other remedy which it may have, in the event of any
such breach; and (e) the existence of any claims that Executive may have against
Employer, whether under this Agreement or otherwise, will not be a defense to
the enforcement by Employer of any of its rights under this Section 4.
 
 
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4.6. Non-exclusivity and Survival. The covenants of Executive contained in this
Section 4 are in addition to, and not in lieu of, any obligations that Executive
may have with respect to the subject matter hereof, whether by contract, as a
matter of law or otherwise, and such covenants and their enforceability shall
survive any termination of the Employment Term by either party and any
investigation made with respect to the breach thereof by Employer at any time.
 
5. Miscellaneous Provisions.
 
5.1. Severability. If, in any jurisdiction, any term or provision hereof is
determined to be invalid or unenforceable, (a) the remaining terms and
provisions hereof shall be unimpaired; (b) any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction; and (c) the invalid or
unenforceable term or provision shall, for purposes of such jurisdiction, be
deemed replaced by a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
or provision.
 
5.2. Execution in Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement (and all signatures need not appear on any
one counterpart), and this Agreement shall become effective when one or more
counterparts has been signed by each of the parties hereto and delivered to each
of the other parties hereto.
 
5.3. Notices. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed duly given upon receipt when delivered
by hand, overnight delivery or telecopy (with confirmed delivery), or three (3)
business days after posting, when delivered by registered or certified mail or
private courier service, postage prepaid, return receipt requested, as follows:
 
If to Employer, to:
 
Par Pharmaceutical, Inc.
300 Tice Boulevard
Woodcliff Lake, New Jersey 07677
Attention: Chairman
Telecopy No. 201-802-4620
 
 
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Copy to:
 
Christine A. Amalfe, Esq.
Gibbons, Del Deo, Dolan, Griffinger & Vecchione, P.C.
One Riverfront Plaza
Newark, New Jersey 07102-5496
Telecopy No.: (201) 639-6230
 
If to Executive, to:
 
Gerard Martino
c/o Par Pharmaceutical, Inc.
300 Tice Boulevard
Woodcliff Lake, New Jersey 07677
 
or to such other address(es) as a party hereto shall have designated by like
notice to the other parties hereto.
 
5.4. Amendment. No provision of this Agreement may be modified, amended, waived
or discharged in any manner except by a written instrument executed by both Par
and Executive.
 
5.5. Entire Agreement. This Agreement and, with respect to Section 3.3.7 hereof,
Executive’s Equity Award Agreements and governing equity award plans constitute
the entire agreement of the parties hereto with respect to the subject matter
hereof, and supersede all prior agreements and understandings of the parties
hereto, oral or written, including, but not limited to, the parties’ Employment
Agreement dated June 2007. Executive and Employer hereby agree that the
Employment Agreement dated June 2007, is hereby superseded and of no further
force and effect, and that this Agreement shall be effective as of the date
hereof. In the event of any conflict between Section 3.3.7 hereof and
Executive’s Equity Award Agreements and the governing equity award plans,
Section 3.3.7 shall govern.
 
5.6. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey applicable to contracts made
and to be wholly performed therein.
 
5.7. Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
 
5.8. Binding Effect; Successors and Assigns. Executive may not delegate any of
his duties or assign his rights hereunder. This Agreement shall inure to the
benefit of, and be binding upon, the parties hereto and their respective heirs,
legal representatives, successors and permitted assigns. Employer shall require
any successor (whether direct or indirect and whether by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of Employer, by an agreement in form and substance reasonably
satisfactory to Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Employer would be
required to perform if no such succession had taken place.
 
 
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5.9. Waiver, etc. The failure of either of the parties hereto to at any time
enforce any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of any such provision, nor to in any way affect the validity of
this Agreement or any provision hereof or the right of either of the parties
hereto thereafter to enforce each and every provision of this Agreement. No
waiver of any breach of any of the provisions of this Agreement shall be
effective unless set forth in a written instrument executed by the party against
whom or which enforcement of such waiver is sought, and no waiver of any such
breach shall be construed or deemed to be a waiver of any other or subsequent
breach.
 
5.10. Capacity, etc. Executive and Employer hereby represent and warrant to the
other that, as the case may be: (a) he or it has full power, authority and
capacity to execute and deliver this Agreement, and to perform his or its
obligations hereunder; (b) such execution, delivery and performance shall not
(and with the giving of notice or lapse of time or both would not) result in the
breach of any agreements or other obligations to which he or it is a party or he
or it is otherwise bound; and (c) this Agreement is his or its valid and binding
obligation in accordance with its terms.
 
5.11. Enforcement; Jurisdiction. If any party institutes legal action to enforce
or interpret the terms and conditions of this Agreement, the applicable court
shall award the prevailing party reasonable attorneys’ fees at all trial and
appellate levels, and the expenses and costs incurred by such prevailing party
in connection therewith, subject to the requirements of Treas. Reg.
§1.409A-3(i)(1)(iv). Any legal action, suit or proceeding, in equity or at law,
arising out of or relating to this Agreement shall be instituted exclusively in
the State or Federal courts located in the State of New Jersey, and each party
agrees not to assert, by way of motion, as a defense or otherwise, in any such
action, suit or proceeding, any claim that such party is not subject personally
to the jurisdiction of any such court, that the action, suit or proceeding is
brought in an inconvenient forum, that the venue of the action, suit or
proceeding is improper or should be transferred, or that this Agreement or the
subject matter hereof may not be enforced in or by any such court. Each party
further irrevocably submits to the jurisdiction of any such court in any such
action, suit or proceeding. Any and all service of process and any other notice
in any such action, suit or proceeding shall be effective against any party if
given personally or by registered or certified mail, return receipt requested or
by any other means of mail that requires a signed receipt, postage prepaid,
mailed to such party as herein provided. Nothing herein contained shall be
deemed to affect or limit the right of any party to serve process in any other
manner permitted by applicable law.
 
5.12. Arbitration.
 
(a) Any dispute under Section 3 hereof, including, but not limited to, the
determination by the Board of a termination for Cause pursuant to Section 3.2.4
hereof, or in respect of the breach thereof shall be settled by arbitration in
New Jersey. The arbitration shall be accomplished in the following manner.
Either party may serve upon the other party written demand that the dispute,
specifying the nature thereof, shall be submitted to arbitration. Within ten
(10) days after such demand is given in accordance with Section 5.3 hereof, each
of the parties shall designate an arbitrator and provide written notice of such
appointment upon the other party. If either party fails within the specified
time to appoint such arbitrator, the other party shall be entitled to appoint
both arbitrators. The two (2) arbitrators so appointed shall appoint a third
arbitrator. If the two arbitrators appointed fail to agree upon a third
arbitrator within ten (10) days after their appointment, then an application may
be made by either party hereto, upon written notice to the other party, to the
American Arbitration Association (the “AAA”), or any successor thereto, or if
the AAA or its successor fails to appoint a third arbitrator within ten (10)
days after such request, then either party may apply, with written notice to the
other, to the Superior Court of New Jersey, Bergen County, for the appointment
of a third arbitrator, and any such appointment so made shall be binding upon
both parties hereto.
 
 
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(b) The decision of the arbitrators shall be final and binding upon the parties.
The party against whom the award is rendered (the “non-prevailing party”) shall
pay all fees and expenses incurred by the prevailing party in connection with
the arbitration (including fees and disbursements of the prevailing party’s
counsel), as well as the expenses of the arbitration proceeding. The arbitrators
shall determine in their decision and award which of the parties is the
prevailing party, which is the non-prevailing party, the amount of the fees and
expenses of the prevailing party and the amount of the arbitration expenses. The
arbitration shall be conducted, to the extent consistent with this Section 5.12,
in accordance with the then prevailing rules of commercial arbitration of the
AAA or its successor. The arbitrators shall have the right to retain and consult
experts and competent authorities skilled in the matters under arbitration, but
all consultations shall be made in the presence of both parties, who shall have
the full right to cross-examine the experts and authorities. The arbitrators
shall render their award, upon the concurrence of at least two of their number,
not later than thirty (30) days after the appointment of the third arbitrator.
The decision and award shall be in writing, and counterpart copies shall be
delivered to each of the parties. In rendering an award, the arbitrators shall
have no power to modify any of the provisions of this Agreement, and the
jurisdiction of the arbitrators is expressly limited accordingly. Judgment may
be entered on the award of the arbitrators and may be enforced in any court
having jurisdiction.
 
5.13. Specified Employee. Notwithstanding any other provision of this Agreement,
if the Executive is a specified employee under Treas. Reg. §1.409A-1 as of the
Date of Termination, all payments to which the Executive would otherwise be
entitled during the first six (6) months following the Date of Termination shall
be accumulated and paid on the first day of the seventh (7th) month following
the Date of Termination, or if earlier within thirty (30) days of the
Executive’s date of death following the Date of Termination. This requirement
shall not apply to all payments on separation from service that satisfy the
short-term deferral rule of Treas. Reg. §1.409A-1(b)(4), or to the portion of
the payments on separation from service that satisfy the requirements for
separation pay due to an involuntary separation from service under Treas. Reg.
§1.409A-1(b)(9)(iii), or to any payments that are otherwise exempt from the six
(6) month delay requirement of the Treasury Regulations under Code Section 409A.
 
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto as of the date first above written.
 

 
PAR PHARMACEUTICAL, INC.
   
By: /s/ Stephen Montalto                                    
Name: Stephen Montalto
Title:   Senior Vice President,
Human Resources
     
/s/ Gerard Martino                                                
Gerard Martino

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