exv10w3



 




EXHIBIT 10.3




SEPARATION AND RELEASE AGREEMENT




     This Separation and Release Agreement (“Agreement”) is made by and between PAR PHARMACEUTICAL
COMPANIES, 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 this
Agreement shall be as set forth in Paragraph 9 herein.



RECITALS




     A. For purposes of this Agreement, “THE COMPANY” means PAR PHARMACEUTICAL COMPANIES, INC., and
PAR 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 all
issues concerning EMPLOYEE’s employment relationship with THE COMPANY, THE COMPANY and EMPLOYEE
have decided to enter into this Agreement.



          For and in consideration of the mutual promises and covenants in this Agreement, the parties
agree as follows:




OPERATIVE PROVISIONS




          1. Separation of Employment. THE COMPANY and EMPLOYEE agree that EMPLOYEE shall
separate from THE COMPANY effective at the end of business on November 15, 2006 (“Separation
Date”).




          2. Pay, Benefits and Stock Options Upon Separation.




               (a) Separation Pay. THE COMPANY agrees to pay EMPLOYEE one hundred and sixty nine
thousand dollars, ($169,000.00), in one lump sum, payable on January 1, 2007. The aforementioned
payment 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 of
his separation other than as set forth herein.




               (b) Benefits/Termination. THE COMPANY shall, for a period of one (1) year from the
Separation Date, pay EMPLOYEE’s portion of COBRA medical coverage at his level of family coverage
in effect on the Separation Date and in addition shall maintain in effect for EMPLOYEE the group
life insurance and disability plans in which EMPLOYEE currently participates (subject to changes in
such plans or coverage that are generally applicable to other employees and to the requirements of
such plans and applicable law); provided, that such benefits shall immediately terminate if
EMPLOYEE becomes eligible for coverage, as an


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employee rather than as a dependent, under another employer’s benefit program prior to the
expiration of the one-year period. Following the termination of such benefits, if employee is not
eligible for coverage, as an employee rather than as a dependent, under another employer’s benefit
program, EMPLOYEE will have the opportunity to elect continuation coverage pursuant to COBRA for an
additional six (6) month period and will thus be then responsible for the execution of the COBRA
continuation of coverage forms. All other benefits, except those in which EMPLOYEE has vested
rights under the terms of an employee benefit plan or as otherwise provided herein, terminate as of
EMPLOYEE’s Separation Date.




               (c) Stock Options. EMPLOYEE agrees that as of the Separation Date, he has been
granted options to purchase 164,853 shares of THE COMPANY’s common stock. Of this amount, 18,863
options 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 exercise
price related to the respective option grants, provided that the relevant stock option plan remains
in effect and such options have not otherwise expired; and provided further that options that have
an exercise price that is less than the closing price of THE COMPANY’S share price on the New York
Stock 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 been
granted 37,869 shares of THE COMPANY’s restricted stock. Of this amount, 33,362 shares are
currently 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 his
unused 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 EMPLOYEE
ten thousand dollars ($10,000.00) to be utilized by EMPLOYEE for executive-level outplacement
services.




               (g) The payments and benefits contained in this Section 2 are contingent upon EMPLOYEE’s
continued 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 for
all work performed for THE COMPANY, and is entitled to no further payments or bonuses from THE
COMPANY whatsoever for services rendered or any other reason, except as set forth herein.




          4. Sufficiency of Consideration. No Admission of Liability. The parties agree that
the consideration paid to EMPLOYEE by the terms of this Agreement is good and sufficient
consideration for this Agreement. EMPLOYEE acknowledges that neither this Agreement, nor payment
of any consideration pursuant to this Agreement, shall be taken
or


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construed to be an admission or concession of any kind with respect to alleged liability or
alleged wrongdoing by THE COMPANY.




          5. No Disparagement. THE COMPANY agrees to refrain from any publication or any type
of 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, of
a defamatory or disparaging statement pertaining to THE COMPANY, its past, present and future
officers, agents, directors, supervisors, employees or representatives. Nothing in this Section
shall be construed as prohibiting THE COMPANY or EMPLOYEE from making any disclosures as required
by law or statute, including the release of such information as is required to be disclosed by THE
COMPANY or EMPLOYEE in connection with any legal proceeding, filing with the Securities and
Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, or as otherwise required by
law.




          6. Indemnification and Advancement of Legal Fees.




               (a) Mandatory Indemnification. In accordance with Section 5.1 of THE COMPANY’s
Bylaws, and as more definitively set forth therein, THE COMPANY agrees to indemnify and hold
harmless, to the fullest extent now or hereafter permitted by applicable law, EMPLOYEE if he is, or
is threatened to be made, a party to or otherwise involved in any Proceeding, (as defined in the
Bylaws), by reason of the fact that EMPLOYEE is or was an Authorized Representative, (as defined in
the Bylaws), against all expenses (including attorneys’ fees and disbursements), judgments, fines
(including excise taxes and penalties) and amounts paid in settlement actually and reasonably
incurred by EMPLOYEE in connection with such Proceeding, whether the basis of EMPLOYEE’s
involvement in the Proceeding is an alleged act or omission in EMPLOYEE’s capacity as an Authorized
Representative 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) actually
and reasonably incurred by EMPLOYEE in defending or appearing (otherwise than as a plaintiff) in
any Proceeding in advance of the final disposition of such Proceeding upon receipt of an
undertaking by or on behalf of EMPLOYEE to repay all amounts so advanced if it shall ultimately be
determined by a final, unappealable judicial decision that EMPLOYEE is not entitled to be
indemnified for such expenses under the Bylaws or otherwise.




               (c) Permissive Indemnification and Advancement of Expenses. In accordance with
Section 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 otherwise
involved in any Proceeding by reason of the fact that EMPLOYEE is or was an Authorized
Representative, against all expenses (including attorneys’ fees and disbursements), judgments,
fines (including excise taxes and penalties) and amounts paid in settlement actually and reasonably
incurred by EMPLOYEE in connection with such Proceeding, whether the basis of EMPLOYEE’s
involvement in the Proceeding is an alleged act or omission in EMPLOYEE’s capacity as an Authorized
Representative or in another capacity while serving in such capacity or both. THE COMPANY may, as
determined by the


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Board in its discretion from time to time, pay expenses actually and reasonably incurred by
EMPLOYEE by reason of EMPLOYEE’s involvement in such a Proceeding in advance of the final
disposition of the Proceeding.




          7. General Release and Waiver of Claims. Solely in connection with EMPLOYEE’s
employment relationship with THE COMPANY, and in consideration of the promises and covenants made
by THE COMPANY in this Agreement, EMPLOYEE hereby knowingly and voluntarily compromises, settles
and releases THE COMPANY from any and all past, present, or future claims, demands, obligations, or
causes of action, whether based on tort, contract, statutory or other theories of recovery for
anything 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 later
accrue to or be acquired by EMPLOYEE against THE COMPANY and its predecessors, successors in
interest, assigns, parent and subsidiary organizations, affiliates, and partners, and its past,
present, and future officers, directors, shareholders, agents, and employees, and their heirs and
assigns. EMPLOYEE specifically agrees to release and waive all claims for wrongful termination and
any claim for retaliation or discrimination in employment under federal or state law or regulation
including, 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 Age
Discrimination in Employment Act of 1967 as amended by the Older Workers’ Benefits Protection Act
of 1990 (ADEA and OWBPA), the Americans with Disabilities Act of 1990 (ADA), the New Jersey Law
Against Discrimination (LAD), the Consolidated Omnibus Budget Reconciliation Act (COBRA), the
Employee Retirement Income Security Act (ERISA), the Immigration Reform and Control Act (IRCA), the
Fair Labor Standards Act (FLSA), the Conscientious Employee Protection Act (CEPA), the Family
Medical Leave Act (FMLA), the New Jersey Family Leave Act (NJFLA) and the New Jersey wage and hour
laws. The release of claims agreed to herein specifically excludes any claims relating to a breach
of this Agreement.




          8. Covenant Not to Sue.




               (a) Each party represents and agrees that such party has not filed any lawsuits or
arbitrations against the other party, or filed or caused to be filed any charges or complaints
against the other party with any municipal, state or federal agency charged with the enforcement of
any law or any self-regulatory organization.




               (b) THE COMPANY represents that it is currently not aware of any basis for any cause of action
against EMPLOYEE relative to any matter that involved THE COMPANY and that occurred up to and
including the date of THE COMPANY’s execution of this Agreement.




               (c) EMPLOYEE agrees, not inconsistent with EEOC Enforcement Guidance or Non-Waivable Employee
Rights Under EEOC-Enforced Statutes dated April 11, 1997, and to the fullest extent permitted by
laws, not to sue or file a charge, complaint, grievance or demand for arbitration against THE
COMPANY in any claim, arbitration, suit, action, investigation or other proceeding of any kind
which relates to any matter that involved THE COMPANY, and that occurred up to and including the
date of EMPLOYEE’s execution of this Agreement, unless required to do so by court order, subpoena
or other directive by a court,


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administrative agency, arbitration panel or legislative body, or unless required to enforce
this Agreement. Nothing in this Agreement shall prevent EMPLOYEE from (i) commencing an action or
proceeding to enforce this Agreement, or (ii) exercising EMPLOYEE’s right under the OWBPA to
challenge the validity of EMPLOYEE’s waiver of ADEA claims set forth in this Agreement.




          9.
Consideration and Revocation Periods: Effective Date.
EMPLOYEE also understands
and 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 THE
COMPANY in writing of his revocation. This Agreement shall become effective on the day after the
seven-day Revocation Period has expired unless timely notice of EMPLOYEE’s revocation has been
delivered to THE COMPANY (the “Effective Date”).




          10. Return of Company Property. On his Separation Date, EMPLOYEE agrees forthwith to
deliver to THE COMPANY all of THE COMPANY’s property in his possession or under his custody and
control, including but not limited to all keys, and tangible items, notebooks, documents, records
and other data relating to research or experiments conducted by any person relating to the
products, formulas, formulations, processes or methods of manufacture of THE COMPANY, and to its
customers and pricing of products, except that EMPLOYEE shall be entitled to keep the cellular
telephone and Blackberry device provided to him by THE COMPANY, provided that EMPLOYEE agrees
forthwith to deliver the Blackberry device to THE COMPANY, wherein THE COMPANY will remove all
confidential and proprietary information from the Blackberry device and return it to EMPLOYEE.




          11. Confidential Information. “Confidential Information” means any and all
information (oral or written) relating to THE COMPANY or any of its subsidiaries or any person
controlling, controlled by, or under common control with THE COMPANY or any of its subsidiaries 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 hereof.




               EMPLOYEE acknowledges that during EMPLOYEE’s employment with THE COMPANY, EMPLOYEE has had
access 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 the
Confidential Information of THE COMPANY or its customers; (ii) not cause the transmission, removal
or 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 except
as otherwise permitted under applicable law.


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          12. Covenants Not to Solicit. EMPLOYEE acknowledges and agrees that for a period of
one (1) year following the Separation Date, EMPLOYEE shall be restrained from directly or
indirectly, hiring, offering to hire, enticing away or in any other manner persuading or attempting
to persuade any officer or employee of THE COMPANY or any of its subsidiaries to discontinue or
alter his or its relationship with THE COMPANY or any of its subsidiaries; provided that this
covenant shall not be applicable to hiring or offer to hire pursuant to a response to a general
advertisement by a subsequent employer with which EMPLOYEE is affiliated, so long as these methods
are not utilized to solicit or attract only employees of THE COMPANY or to target employees of THE
COMPANY.




          13. Confidentiality. EMPLOYEE agrees to keep both the existence and the terms of this
Agreement completely confidential, except that EMPLOYEE may discuss this Agreement with EMPLOYEE’s
family, and his attorney, accountant, or other professional person who may assist EMPLOYEE in
evaluating, reviewing, or negotiating this Agreement, and as otherwise permitted or required under
applicable law. EMPLOYEE understands and agrees that his disclosure of the terms of this Agreement
contrary to the terms set forth herein will constitute a breach of this Agreement; provided that
EMPLOYEE may disclose his covenant not to solicit set forth in Paragraph 12 to a successor employer
or potential successor employer.




          14. No Public Statements. EMPLOYEE and THE COMPANY represent and warrant that they
will refrain from making any public statement regarding EMPLOYEE’s separation from THE COMPANY for
ninety (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 as
required by law or regulations, including release of such information or that is required to be
disclosed by THE COMPANY in its filings under the Securities Exchange Act of 1934 with the
Securities and Exchange Commission (“SEC”).




          15. Disclosure of Information. EMPLOYEE represents and warrants that he is not aware
of any material non-public information concerning THE COMPANY, its business or its affiliates that
he has not disclosed to the Board of Directors of THE COMPANY prior to the date of this Agreement
or that is required to be disclosed by THE COMPANY in its filings under the Securities Exchange Act
of 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 COMPANY
believes necessary, in person upon reasonable notice, to assist THE COMPANY in connection with any
matter 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 any
investigation or hearing with the SEC or any other governmental agency, as well as in the defense
or prosecution of any claims or actions now in existence, including but not limited to ongoing
commercial litigation matters, shareholder derivative actions, and class action law suits, or which
may 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 Paragraph
16(b) above including, without limitation, his being available to meet with THE COMPANY to prepare
for any proceeding (including depositions, fact-findings, arbitrations or trials), to provide
affidavits, to assist with any audit, inspection, proceeding or other inquiry, and to act as a
witness in connection with any litigation or other legal proceeding affecting THE COMPANY. THE
COMPANY shall reimburse EMPLOYEE for any reasonable travel expenses incurred by EMPLOYEE in
connection therewith and shall also, in the event that EMPLOYEE’s participation as set forth herein
exceeds one business day, pay employee a per diem rate of fourteen hundred dollars ($1,400) for
each subsequent day.




               (d) EMPLOYEE further agrees that should he be contacted (directly or indirectly) by any
individual or any person representing an individual or entity that is or may be legally or
competitively adverse to THE COMPANY in connection with any claims or legal proceedings, he will
promptly notify THE COMPANY of that fact in writing, but in no event later than the next business
day, or immediately if he already has been so contacted. Such notification shall include a
reasonable description of the content of the communication with the legally or competitively
adverse individual or entity.




               (e) Notwithstanding the provisions herein, EMPLOYEE acknowledges that his cooperation
obligation requires him to participate truthfully and accurately in all matters contemplated under
this Section 16.




               (f) THE COMPANY shall assist the EMPLOYEE in the preparation and filing of his final reports
for the year 2006 as an officer of THE COMPANY under Section 16 of the Securities Exchange Act of
1934, 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 COMPANY
and will entitle THE COMPANY to injunctive relief from a court having appropriate jurisdiction.




          18. Representation by Attorney. EMPLOYEE acknowledges that he has been given the
opportunity to be represented by independent counsel in reviewing this Agreement, and that EMPLOYEE
understands the provisions of this Agreement and knowingly and voluntarily agrees to be bound by
them.




          19. No Reliance Upon Representations. EMPLOYEE hereby represents and acknowledges
that in executing this Agreement, EMPLOYEE does not rely and has not relied upon any representation
or 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 this
Agreement other than as set forth in this Agreement.




          20. Tax Advice.




               (a) THE COMPANY makes no representations regarding the federal or state tax consequences of
the payments or benefits referred to above and provided for herein, and shall not be responsible
for any tax liability, interest or penalty including but not limited to those which may arise under
Internal 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 the
exception 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 and
owing as federal or state taxes, interest and penalties, including but not limited to those which
may arise under Internal Revenue Service Code Section 409A, arising out of the payments or benefits
provided for herein.




               (b) EMPLOYEE agrees and understands that he is not relying upon THE COMPANY or its counsel for
any tax advice regarding the tax treatment of the payments made or benefits received pursuant to
this Agreement, and EMPLOYEE agrees that he is responsible for determining the tax consequences of
all such payments and benefits hereunder, including but not limited to those which may arise under
Internal Revenue Service Code Section 409A, and for paying taxes, if any, that he may owe with
respect to such payments or benefits.




               (c) EMPLOYEE further agrees to (i) hold harmless THE COMPANY and its attorneys against, and
indemnify THE COMPANY and its attorneys for, any and all losses and/or damages arising from claims
by 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 arising
out of or relating to the payments or benefits hereunder and (ii) reimburse THE COMPANY and its
attorneys for any resulting payment, including without limitation, all penalties and interest
payable 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 mutual
notice 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 COMPANY
and its attorneys shall be entitled to recover their attorneys’ fees, costs, disbursements, and the
like incurred in prosecuting the action.




          21. Entire Agreement. This Agreement constitutes the entire Agreement between the
parties relating to EMPLOYEE’s separation from and release of employment-related claims against THE
COMPANY, 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 or
unenforceable as applied to any circumstance, the remainder of this Agreement and the application
of such provision shall be interpreted so as best to effect the intent of the parties hereto. The
parties further agree to replace any such void or unenforceable provision of this Agreement with a
valid 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 hereunder
shall 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 this
Agreement, including the confidentiality and non-solicitation provisions, shall survive the signing
of this Agreement and the receipt of benefits thereunder.




          25. Construction. The terms and language of this Agreement are the result of arm’s
length negotiations between both parties hereto and their attorneys. Consequently, there shall be
no presumption that any ambiguity in this Agreement should be resolved in favor of one party and
against another. Any controversy concerning the construction of this Agreement shall be decided
neutrally 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 TIME
NECESSARY TO REVIEW COMPLETELY AND FULLY UNDERSTAND THIS AGREEMENT; AND (3) HE FULLY UNDERSTANDS
THIS AGREEMENT, ACCEPTS IT, AGREES TO IT, AND AGREES THAT IT IS FULLY BINDING UPON HIM FOR ALL
PURPOSES.



	 	 	 	 	 
	 	EMPLOYEE

 	 
	 	/s/ Michael Graves
 	 
	 	MICHAEL GRAVES 	 
	 	 	 
	 
	 	PAR PHARMACEUTICAL COMPANIES, INC.

 	 
	 	/s/ Patrick G. LePore
 	 
	 	By:  	Patrick G. LePore 
	 	  	President and C.E.O. 
	 
	 	PAR PHARMACEUTICAL, INC.

 	 
	 	/s/ Gerard A. Martino
 	 
	 	By:  	Gerard A. Martino 
	 	  	Executive Vice President and Chief Financial Officer 	 
	 




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