**EXHIBIT 10.3****SEPARATION AND RELEASE AGREEMENT**     This Separation and Release Agreement (“Agreement”) is made by and between **PAR PHARMACEUTICALCOMPANIES, INC.,**and **PAR PHARMACEUTICAL, INC.**(collectively referred to as “THE COMPANY”), and**MICHAEL GRAVES**(“EMPLOYEE”), a specified employee of THE COMPANY. The Effective Date of thisAgreement shall be as set forth in Paragraph 9 herein.**RECITALS**     A. For purposes of this Agreement, “THE COMPANY” means PAR PHARMACEUTICAL COMPANIES, INC., andPAR PHARMACEUTICAL, INC., and each and any of their parent and subsidiary corporations, affiliates,departments, divisions, and/or joint ventures.     B. EMPLOYEE has been employed by THE COMPANY as President of the Generic Products Division.     C. As a result of EMPLOYEE’s separation from THE COMPANY, and to fully and finally resolve allissues concerning EMPLOYEE’s employment relationship with THE COMPANY, THE COMPANY and EMPLOYEEhave decided to enter into this Agreement.          For and in consideration of the mutual promises and covenants in this Agreement, the partiesagree as follows:**OPERATIVE PROVISIONS**          1. Separation of Employment. THE COMPANY and EMPLOYEE agree that EMPLOYEE shallseparate from THE COMPANY effective at the end of business on November 15, 2006 (“SeparationDate”).          2. Pay, Benefits and Stock Options Upon Separation.               (a) Separation Pay. THE COMPANY agrees to pay EMPLOYEE one hundred and sixty ninethousand dollars, ($169,000.00), in one lump sum, payable on January 1, 2007. The aforementionedpayment shall be subject to all appropriate federal and state withholding and employment taxes.EMPLOYEE hereby agrees that he is entitled to no other payment from THE COMPANY as the result ofhis separation other than as set forth herein.               (b) Benefits/Termination. THE COMPANY shall, for a period of one (1) year from theSeparation Date, pay EMPLOYEE’s portion of COBRA medical coverage at his level of family coveragein effect on the Separation Date and in addition shall maintain in effect for EMPLOYEE the grouplife insurance and disability plans in which EMPLOYEE currently participates (subject to changes insuch plans or coverage that are generally applicable to other employees and to the requirements ofsuch plans and applicable law); provided, that such benefits shall immediately terminate ifEMPLOYEE becomes eligible for coverage, as an
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employee rather than as a dependent, under another employer’s benefit program prior to theexpiration of the one-year period. Following the termination of such benefits, if employee is noteligible for coverage, as an employee rather than as a dependent, under another employer’s benefitprogram, EMPLOYEE will have the opportunity to elect continuation coverage pursuant to COBRA for anadditional six (6) month period and will thus be then responsible for the execution of the COBRAcontinuation of coverage forms. All other benefits, except those in which EMPLOYEE has vestedrights under the terms of an employee benefit plan or as otherwise provided herein, terminate as ofEMPLOYEE’s Separation Date.               (c) Stock Options. EMPLOYEE agrees that as of the Separation Date, he has beengranted options to purchase 164,853 shares of THE COMPANY’s common stock. Of this amount, 18,863options are currently not vested. These unvested options shall vest as of the Separation Date.EMPLOYEE shall have twenty-four (24) months from such date to exercise all options, at the exerciseprice related to the respective option grants, provided that the relevant stock option plan remainsin effect and such options have not otherwise expired; and provided further that options that havean exercise price that is less than the closing price of THE COMPANY’S share price on the New YorkStock Exchange on the Separation Date shall expire on December 31, 2007. Except as noted above,EMPLOYEE’S exercise of such options is governed by the terms of the applicable plan.               (d) Restricted Stock. EMPLOYEE agrees that as of the Separation Date, he has beengranted 37,869 shares of THE COMPANY’s restricted stock. Of this amount, 33,362 shares arecurrently not vested. These unvested shares shall vest as of the Separation Date.               (e) Unused Vacation. THE COMPANY shall, on the Separation Date, pay EMPLOYEE for hisunused vacation days, which THE COMPANY and EMPLOYEE agree total twenty-four and one-half (24.5)days.               (f) Outplacement Services. THE COMPANY shall, on the Separation Date, pay EMPLOYEEten thousand dollars ($10,000.00) to be utilized by EMPLOYEE for executive-level outplacementservices.               (g) The payments and benefits contained in this Section 2 are contingent upon EMPLOYEE’scontinued compliance with Sections 5, 8, 11, 12, 13 and 14 of this Agreement.          3. Earned Salary. EMPLOYEE acknowledges and agrees that he has been paid in full forall work performed for THE COMPANY, and is entitled to no further payments or bonuses from THECOMPANY whatsoever for services rendered or any other reason, except as set forth herein.          4. Sufficiency of Consideration. No Admission of Liability. The parties agree thatthe consideration paid to EMPLOYEE by the terms of this Agreement is good and sufficientconsideration for this Agreement. EMPLOYEE acknowledges that neither this Agreement, nor paymentof any consideration pursuant to this Agreement, shall be takenor
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construed to be an admission or concession of any kind with respect to alleged liability oralleged wrongdoing by THE COMPANY.          5. No Disparagement. THE COMPANY agrees to refrain from any publication or any typeof communication, oral or written, of a defamatory or disparaging statement pertaining to EMPLOYEE.EMPLOYEE agrees to refrain from any publication or any type of communication, oral or written, ofa defamatory or disparaging statement pertaining to THE COMPANY, its past, present and futureofficers, agents, directors, supervisors, employees or representatives. Nothing in this Sectionshall be construed as prohibiting THE COMPANY or EMPLOYEE from making any disclosures as requiredby law or statute, including the release of such information as is required to be disclosed by THECOMPANY or EMPLOYEE in connection with any legal proceeding, filing with the Securities andExchange Commission (“SEC”) under the Securities Exchange Act of 1934, or as otherwise required bylaw.          6. Indemnification and Advancement of Legal Fees.               (a) Mandatory Indemnification. In accordance with Section 5.1 of THE COMPANY’sBylaws, and as more definitively set forth therein, THE COMPANY agrees to indemnify and holdharmless, to the fullest extent now or hereafter permitted by applicable law, EMPLOYEE if he is, oris threatened to be made, a party to or otherwise involved in any Proceeding, (as defined in theBylaws), by reason of the fact that EMPLOYEE is or was an Authorized Representative, (as defined inthe Bylaws), against all expenses (including attorneys’ fees and disbursements), judgments, fines(including excise taxes and penalties) and amounts paid in settlement actually and reasonablyincurred by EMPLOYEE in connection with such Proceeding, whether the basis of EMPLOYEE’sinvolvement in the Proceeding is an alleged act or omission in EMPLOYEE’s capacity as an AuthorizedRepresentative or in another capacity while serving in such capacity or both.               (b) Advancement of Expenses. In accordance with Section 5.2 of THE COMPANY’s Bylaws,THE COMPANY shall promptly pay all expenses (including attorneys’ fees and disbursements) actuallyand reasonably incurred by EMPLOYEE in defending or appearing (otherwise than as a plaintiff) inany Proceeding in advance of the final disposition of such Proceeding upon receipt of anundertaking by or on behalf of EMPLOYEE to repay all amounts so advanced if it shall ultimately bedetermined by a final, unappealable judicial decision that EMPLOYEE is not entitled to beindemnified for such expenses under the Bylaws or otherwise.               (c) Permissive Indemnification and Advancement of Expenses. In accordance withSection 5.3 of THE COMPANY’s Bylaws, THE COMPANY may, as determined by the Board in its discretion,from time to time indemnify EMPLOYEE if he is, or is threatened to be made, a party to or otherwiseinvolved in any Proceeding by reason of the fact that EMPLOYEE is or was an AuthorizedRepresentative, against all expenses (including attorneys’ fees and disbursements), judgments,fines (including excise taxes and penalties) and amounts paid in settlement actually and reasonablyincurred by EMPLOYEE in connection with such Proceeding, whether the basis of EMPLOYEE’sinvolvement in the Proceeding is an alleged act or omission in EMPLOYEE’s capacity as an AuthorizedRepresentative or in another capacity while serving in such capacity or both. THE COMPANY may, asdetermined by the
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Board in its discretion from time to time, pay expenses actually and reasonably incurred byEMPLOYEE by reason of EMPLOYEE’s involvement in such a Proceeding in advance of the finaldisposition of the Proceeding.          7. General Release and Waiver of Claims. Solely in connection with EMPLOYEE’semployment relationship with THE COMPANY, and in consideration of the promises and covenants madeby THE COMPANY in this Agreement, EMPLOYEE hereby knowingly and voluntarily compromises, settlesand releases THE COMPANY from any and all past, present, or future claims, demands, obligations, orcauses of action, whether based on tort, contract, statutory or other theories of recovery foranything that has occurred up to and including the date of EMPLOYEE’s execution of this Agreement.The released claims include those EMPLOYEE may have or has against THE COMPANY, or which may lateraccrue to or be acquired by EMPLOYEE against THE COMPANY and its predecessors, successors ininterest, assigns, parent and subsidiary organizations, affiliates, and partners, and its past,present, and future officers, directors, shareholders, agents, and employees, and their heirs andassigns. EMPLOYEE specifically agrees to release and waive all claims for wrongful termination andany claim for retaliation or discrimination in employment under federal or state law or regulationincluding, but not limited to, discrimination based on age, sex, race, disability, handicap,national origin or any claims under Title VII of the Civil Rights Act of 1964, the AgeDiscrimination in Employment Act of 1967 as amended by the Older Workers’ Benefits Protection Actof 1990 (ADEA and OWBPA), the Americans with Disabilities Act of 1990 (ADA), the New Jersey LawAgainst Discrimination (LAD), the Consolidated Omnibus Budget Reconciliation Act (COBRA), theEmployee Retirement Income Security Act (ERISA), the Immigration Reform and Control Act (IRCA), theFair Labor Standards Act (FLSA), the Conscientious Employee Protection Act (CEPA), the FamilyMedical Leave Act (FMLA), the New Jersey Family Leave Act (NJFLA) and the New Jersey wage and hourlaws. The release of claims agreed to herein specifically excludes any claims relating to a breachof this Agreement.          8. Covenant Not to Sue.               (a) Each party represents and agrees that such party has not filed any lawsuits orarbitrations against the other party, or filed or caused to be filed any charges or complaintsagainst the other party with any municipal, state or federal agency charged with the enforcement ofany law or any self-regulatory organization.               (b) THE COMPANY represents that it is currently not aware of any basis for any cause of actionagainst EMPLOYEE relative to any matter that involved THE COMPANY and that occurred up to andincluding the date of THE COMPANY’s execution of this Agreement.               (c) EMPLOYEE agrees, not inconsistent with EEOC Enforcement Guidance or Non-Waivable EmployeeRights Under EEOC-Enforced Statutes dated April 11, 1997, and to the fullest extent permitted bylaws, not to sue or file a charge, complaint, grievance or demand for arbitration against THECOMPANY in any claim, arbitration, suit, action, investigation or other proceeding of any kindwhich relates to any matter that involved THE COMPANY, and that occurred up to and including thedate of EMPLOYEE’s execution of this Agreement, unless required to do so by court order, subpoenaor other directive by a court,
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administrative agency, arbitration panel or legislative body, or unless required to enforcethis Agreement. Nothing in this Agreement shall prevent EMPLOYEE from (i) commencing an action orproceeding to enforce this Agreement, or (ii) exercising EMPLOYEE’s right under the OWBPA tochallenge the validity of EMPLOYEE’s waiver of ADEA claims set forth in this Agreement.          9.**Consideration and Revocation Periods: Effective Date.**EMPLOYEE also understandsand acknowledges that the ADEA requires THE COMPANY to provide EMPLOYEE with at least twenty one(21) calendar days to consider this Agreement (“Consideration Period”) prior to its execution.EMPLOYEE also understands that he is entitled to revoke this Agreement at any time during the seven(7) days following EMPLOYEE’s execution of this Agreement (“Revocation Period”) by notifying THECOMPANY in writing of his revocation. This Agreement shall become effective on the day after theseven-day Revocation Period has expired unless timely notice of EMPLOYEE’s revocation has beendelivered to THE COMPANY (the “Effective Date”).          10. Return of Company Property. On his Separation Date, EMPLOYEE agrees forthwith todeliver to THE COMPANY all of THE COMPANY’s property in his possession or under his custody andcontrol, including but not limited to all keys, and tangible items, notebooks, documents, recordsand other data relating to research or experiments conducted by any person relating to theproducts, formulas, formulations, processes or methods of manufacture of THE COMPANY, and to itscustomers and pricing of products, except that EMPLOYEE shall be entitled to keep the cellulartelephone and Blackberry device provided to him by THE COMPANY, provided that EMPLOYEE agreesforthwith to deliver the Blackberry device to THE COMPANY, wherein THE COMPANY will remove allconfidential and proprietary information from the Blackberry device and return it to EMPLOYEE.          11. Confidential Information. “Confidential Information” means any and allinformation (oral or written) relating to THE COMPANY or any of its subsidiaries or any personcontrolling, controlled by, or under common control with THE COMPANY or any of its subsidiaries orany of their respective activities, including, but not limited to, information relating to:technology; research; test procedures and results; machinery and equipment; manufacturingprocesses; financial information; products; identity and description of materials and servicesused; purchasing; costs; pricing; customers and prospects; advertising, promotion and marketing;and selling, servicing and information pertaining to any governmental investigation, except suchinformation which becomes public, other than as a result of a breach of the provisions hereof.               EMPLOYEE acknowledges that during EMPLOYEE’s employment with THE COMPANY, EMPLOYEE has hadaccess to Confidential Information. EMPLOYEE agrees that at all times hereafter EMPLOYEE will (i)hold in trust, keep confidential and not disclose to any third party or make any use of theConfidential Information of THE COMPANY or its customers; (ii) not cause the transmission, removalor transport of Confidential Information of THE COMPANY or its customers, and (iii) not publish,disclose, or otherwise disseminate Confidential Information of THE COMPANY or its customers exceptas otherwise permitted under applicable law.
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          12. Covenants Not to Solicit. EMPLOYEE acknowledges and agrees that for a period ofone (1) year following the Separation Date, EMPLOYEE shall be restrained from directly orindirectly, hiring, offering to hire, enticing away or in any other manner persuading or attemptingto persuade any officer or employee of THE COMPANY or any of its subsidiaries to discontinue oralter his or its relationship with THE COMPANY or any of its subsidiaries; provided that thiscovenant shall not be applicable to hiring or offer to hire pursuant to a response to a generaladvertisement by a subsequent employer with which EMPLOYEE is affiliated, so long as these methodsare not utilized to solicit or attract only employees of THE COMPANY or to target employees of THECOMPANY.          13. Confidentiality. EMPLOYEE agrees to keep both the existence and the terms of thisAgreement completely confidential, except that EMPLOYEE may discuss this Agreement with EMPLOYEE’sfamily, and his attorney, accountant, or other professional person who may assist EMPLOYEE inevaluating, reviewing, or negotiating this Agreement, and as otherwise permitted or required underapplicable law. EMPLOYEE understands and agrees that his disclosure of the terms of this Agreementcontrary to the terms set forth herein will constitute a breach of this Agreement; provided thatEMPLOYEE may disclose his covenant not to solicit set forth in Paragraph 12 to a successor employeror potential successor employer.          14. No Public Statements. EMPLOYEE and THE COMPANY represent and warrant that theywill refrain from making any public statement regarding EMPLOYEE’s separation from THE COMPANY forninety (90) days following the Separation Date, absent written approval from the other. However,THE COMPANY is permitted to make any disclosures regarding EMPLOYEE’s status or this agreement asrequired by law or regulations, including release of such information or that is required to bedisclosed by THE COMPANY in its filings under the Securities Exchange Act of 1934 with theSecurities and Exchange Commission (“SEC”).          15. Disclosure of Information. EMPLOYEE represents and warrants that he is not awareof any material non-public information concerning THE COMPANY, its business or its affiliates thathe has not disclosed to the Board of Directors of THE COMPANY prior to the date of this Agreementor that is required to be disclosed by THE COMPANY in its filings under the Securities Exchange Actof 1934 with the SEC and that has not been so disclosed.          16. Cooperation. EMPLOYEE hereby agrees that:               (a) EMPLOYEE will make himself available to THE COMPANY either by telephone or, if THE COMPANYbelieves necessary, in person upon reasonable notice, to assist THE COMPANY in connection with anymatter relating to services performed by him on behalf of THE COMPANY prior to the Separation Date.               (b) EMPLOYEE further agrees that he will cooperate fully with THE COMPANY in relation to anyinvestigation or hearing with the SEC or any other governmental agency, as well as in the defenseor prosecution of any claims or actions now in existence, including but not limited to ongoingcommercial litigation matters, shareholder derivative actions, and class action law suits, or whichmay be brought or threatened in the future against or on behalf of THE COMPANY, its directors,shareholders, officers, or employees.
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               (c) EMPLOYEE will cooperate in connection with such claims or actions referred to in Paragraph16(b) above including, without limitation, his being available to meet with THE COMPANY to preparefor any proceeding (including depositions, fact-findings, arbitrations or trials), to provideaffidavits, to assist with any audit, inspection, proceeding or other inquiry, and to act as awitness in connection with any litigation or other legal proceeding affecting THE COMPANY. THECOMPANY shall reimburse EMPLOYEE for any reasonable travel expenses incurred by EMPLOYEE inconnection therewith and shall also, in the event that EMPLOYEE’s participation as set forth hereinexceeds one business day, pay employee a per diem rate of fourteen hundred dollars ($1,400) foreach subsequent day.               (d) EMPLOYEE further agrees that should he be contacted (directly or indirectly) by anyindividual or any person representing an individual or entity that is or may be legally orcompetitively adverse to THE COMPANY in connection with any claims or legal proceedings, he willpromptly notify THE COMPANY of that fact in writing, but in no event later than the next businessday, or immediately if he already has been so contacted. Such notification shall include areasonable description of the content of the communication with the legally or competitivelyadverse individual or entity.               (e) Notwithstanding the provisions herein, EMPLOYEE acknowledges that his cooperationobligation requires him to participate truthfully and accurately in all matters contemplated underthis Section 16.               (f) THE COMPANY shall assist the EMPLOYEE in the preparation and filing of his final reportsfor the year 2006 as an officer of THE COMPANY under Section 16 of the Securities Exchange Act of1934, as amended.          17. Injunctive Relief. EMPLOYEE acknowledges that his failure to abide by Sections 5,11, 12, 13 and 14 of this Agreement will result in immediate and irreparable damage to THE COMPANYand will entitle THE COMPANY to injunctive relief from a court having appropriate jurisdiction.          18. Representation by Attorney. EMPLOYEE acknowledges that he has been given theopportunity to be represented by independent counsel in reviewing this Agreement, and that EMPLOYEEunderstands the provisions of this Agreement and knowingly and voluntarily agrees to be bound bythem.          19. No Reliance Upon Representations. EMPLOYEE hereby represents and acknowledgesthat in executing this Agreement, EMPLOYEE does not rely and has not relied upon any representationor statement made by THE COMPANY or by any of THE COMPANY’s past or present agents,representatives, employees or attorneys with regard to the subject matter, basis or effect of thisAgreement other than as set forth in this Agreement.          20. Tax Advice.               (a) THE COMPANY makes no representations regarding the federal or state tax consequences ofthe payments or benefits referred to above and provided for herein, and shall not be responsiblefor any tax liability, interest or penalty including but not limited to those which may arise underInternal Revenue Service Code Section 409A, incurred by
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EMPLOYEE which in any way arises out of or is related to said payments or benefits. With theexception of the regular payroll deductions for federal and state withholding and employment taxes,EMPLOYEE agrees that it shall be his sole responsibility to pay any amount that may be due andowing as federal or state taxes, interest and penalties, including but not limited to those whichmay arise under Internal Revenue Service Code Section 409A, arising out of the payments or benefitsprovided for herein.               (b) EMPLOYEE agrees and understands that he is not relying upon THE COMPANY or its counsel forany tax advice regarding the tax treatment of the payments made or benefits received pursuant tothis Agreement, and EMPLOYEE agrees that he is responsible for determining the tax consequences ofall such payments and benefits hereunder, including but not limited to those which may arise underInternal Revenue Service Code Section 409A, and for paying taxes, if any, that he may owe withrespect to such payments or benefits.               (c) EMPLOYEE further agrees to (i) hold harmless THE COMPANY and its attorneys against, andindemnify THE COMPANY and its attorneys for, any and all losses and/or damages arising from claimsby the Internal Revenue Service (“IRS”), or any other taxing authority or other governmental agency(whether federal, state or local), which may be made against THE COMPANY and its attorneys arisingout of or relating to the payments or benefits hereunder and (ii) reimburse THE COMPANY and itsattorneys for any resulting payment, including without limitation, all penalties and interestpayable to the IRS, or any other taxing authority or governmental agency.               (d) EMPLOYEE and THE COMPANY further agree that they and their attorneys will give mutualnotice of any such claims. EMPLOYEE agrees that he will cooperate in the defense of such claim.In any action commenced against EMPLOYEE to enforce the provisions of this paragraph, THE COMPANYand its attorneys shall be entitled to recover their attorneys’ fees, costs, disbursements, and thelike incurred in prosecuting the action.          21. Entire Agreement. This Agreement constitutes the entire Agreement between theparties relating to EMPLOYEE’s separation from and release of employment-related claims against THECOMPANY, and it shall not be modified except in writing signed by the party to be bound.          22. Severability. If a court finds any provision of this Agreement invalid orunenforceable as applied to any circumstance, the remainder of this Agreement and the applicationof such provision shall be interpreted so as best to effect the intent of the parties hereto. Theparties further agree to replace any such void or unenforceable provision of this Agreement with avalid and enforceable provision that will achieve, to the extent possible, the economic, business,or other purposes of the void or unenforceable provision.          23. Governing Law and Jurisdiction. Notwithstanding any agreement to the contrary,this Agreement shall be governed by the laws of the State of New Jersey and any claims hereundershall be pursued in the state or federal courts located in the State of New Jersey.
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           24. Survival of Terms. EMPLOYEE understands and agrees that the terms set out in thisAgreement, including the confidentiality and non-solicitation provisions, shall survive the signingof this Agreement and the receipt of benefits thereunder.          25. Construction. The terms and language of this Agreement are the result of arm’slength negotiations between both parties hereto and their attorneys. Consequently, there shall beno presumption that any ambiguity in this Agreement should be resolved in favor of one party andagainst another. Any controversy concerning the construction of this Agreement shall be decidedneutrally without regard to authorship.          26. Copies. This Agreement may be executed in counterparts, and each counterpart,when executed, shall have the efficacy of a signed original.     **EMPLOYEE AGREES THAT: (1) HE HAS FULLY READ THIS AGREEMENT; (2) HE HAS TAKEN THE TIMENECESSARY TO REVIEW COMPLETELY AND FULLY UNDERSTAND THIS AGREEMENT; AND (3) HE FULLY UNDERSTANDSTHIS AGREEMENT, ACCEPTS IT, AGREES TO IT, AND AGREES THAT IT IS FULLY BINDING UPON HIM FOR ALLPURPOSES.**      **EMPLOYEE******