Document:

exv10w2

 

EXHIBIT 10.2

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 MARK
AUERBACH (“EMPLOYEE”), a specified employee of THE COMPANY. The Effective Date of this Agreement
shall be as set forth in Section 8 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 and divisions.

     B. EMPLOYEE has been employed by THE COMPANY as the Executive Chairman of the Board of
Directors of THE COMPANY (“the Board”).

     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, and to reiterate certain
terms contained in EMPLOYEE’s Employment Agreement dated September 16, 2003, THE COMPANY and
EMPLOYEE have decided to enter into this Agreement.

     For and in consideration of the mutual promises and covenants in this Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, 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 October 31, 2006 (“Separation Date”),
such separation of employment with THE COMPANY occurring pursuant to Section 3.2.5 of that certain
Employment Agreement dated as of September 16, 2003 by and between the parties (“Employment
Agreement”).

          2. Pay, Benefits and Stock Options Upon Separation.

               (a) Separation Pay. In accordance with the Employment Agreement EMPLOYEE is, on
account of his separation from THE COMPANY, entitled to severance in the amount of six hundred
forty two thousand one hundred fourteen dollars ($642,114.00), which severance shall be payable in
six (6) equal installments beginning in the seventh (7th) month after the Separation
Date and continuing for five (5) months thereafter. The aforementioned payments 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 or during the aforementioned period.

               (b) Benefits/Termination. In accordance with Section 3.3.5 the Employment Agreement,
on account of EMPLOYEE’s separation from THE COMPANY, THE COMPANY shall, for a twenty-four (24)
month period from the Separation Date, maintain in effect for EMPLOYEE coverage under THE COMPANY’S
medical, health and accident, and disability plans and programs in which EMPLOYEE was entitled to
participate immediately prior to the Separation; provided, that such benefits shall immediately
terminate in the event EMPLOYEE becomes eligible for equal or comparable coverage by a subsequent
employer prior to the expiration of the twenty-four (24) month period. Following the termination
of the twenty-four (24) month period, if EMPLOYEE is not eligible for equal or comparable coverage
under another employer’s benefit program, EMPLOYEE will have the opportunity to elect continuation
coverage pursuant to COBRA and will thus be responsible for the execution of the COBRA continuation
of coverage forms. All other benefits and allowances, except those in which EMPLOYEE has vested
rights under the terms of an employee benefit plan, terminate as of the Separation Date.
Notwithstanding the foregoing, THE COMPANY shall pay EMPLOYEE a one-time Executive Health Care
Allowance in the amount of five thousand dollars ($5,000.00). THE COMPANY shall use its
commercially reasonable efforts to provide such benefits to EMPLOYEE in accordance with Section
3.3.5 of the Employment Agreement.

               (c) Stock Options. The parties agree that as of October 30, 2006 EMPLOYEE has been
granted options for 328,816 shares of THE COMPANY’s common stock. Of these, 95,855 options are
unvested. In accordance with the Employment Agreement, 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. EMPLOYEE’S
exercise of such options is governed by Section 3.3.6(b) of the Employment Agreement as well as the
terms of the applicable plan, referenced in the Employment Agreement.

               (d) Restricted Stock. The parties agree that as of October 30, 2006, EMPLOYEE has
been granted 23,730 shares of THE COMPANY’s restricted stock. Of these, 21,098 shares are
unvested. These unvested shares shall vest as of the date of EMPLOYEE’s execution of this
Agreement.

               (e) In accordance with the Employment Agreement, the payments and benefits contained in this
Section 2 are contingent upon EMPLOYEE’s continued compliance with Section 4 of the Employment
Agreement (as modified by this Agreement), as referenced in Sections 9 through 12 herein. THE
COMPANY shall use its commercially reasonable efforts to provide such benefits to EMPLOYEE in
accordance with Section 3.3.5 of the Employment Agreement.

          3. Earned Salary and Expenses. EMPLOYEE acknowledges and agrees that he has been paid
in full for all work performed, and has received reimbursement for
all business

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expenses, 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. Consideration.

               (a) No Disparagement. THE COMPANY agrees to refrain from any publication or any type
of communication, oral or written, of a defamatory or disparaging nature pertaining to EMPLOYEE,
except as otherwise permitted by law.

               (b) Sufficiency of Consideration. No Admission of Liability. The parties agree that
the consideration tendered to EMPLOYEE is good and sufficient consideration for this Agreement, to
the extent it imposes upon EMPLOYEE obligations in addition to those contained in the Employment
Agreement. EMPLOYEE acknowledges that neither this Agreement, nor any consideration pursuant to
this Agreement, shall be taken or construed to be an admission or concession of any kind with
respect to alleged liability or alleged wrongdoing by THE COMPANY.

          5. Indemnification and Advancement of Expenses. THE COMPANY acknowledges that it will
comply with the indemnification and advancement of expenses covenants contained in Sections 5.1,
5.2, 5.3 and 5.4 of THE COMPANY’s Bylaws.

          6. General Release and Waiver of Claims. Solely in connection with EMPLOYEE’s
employment relationship with THE COMPANY and in accordance with Section 3.3 of the Employment
Agreement, and in consideration of the additional 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 (ADEA), 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 law. The release of claims agreed to herein
specifically excludes any claims relating to a breach of this Agreement and any
non-employment-related counterclaims

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that EMPLOYEE might assert against THE COMPANY if THE COMPANY were to sue EMPLOYEE.

          7. 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, except, however, for the sake of
clarity, the parties acknowledge that there is currently pending shareholder litigation in which
claims have been asserted against EMPLOYEE.

               (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, other than those non-employment-related
counterclaims that EMPLOYEE might assert against THE COMPANY if THE COMPANY were to sue EMPLOYEE,
unless required to do so by court order, subpoena or other directive by a court, 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 Older Workers Benefit
Protection Act of 1990 to challenge the validity of EMPLOYEE’s waiver of ADEA claims set forth in
this Agreement.

          8.
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”).

          9. 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

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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 Blackberry device provided to him by THE COMPANY. EMPLOYEE
represents to THE COMPANY that all confidential and proprietary information of THE COMPANY stored
on the Blackberry device has been returned to THE COMPANY.

          10. Confidential Information. EMPLOYEE acknowledges that during EMPLOYEE’s employment
with THE COMPANY, EMPLOYEE has had access to Confidential Information (as defined in Section 4.1 of
the Employment Agreement). In accordance with and subject to the covenants contained in Section
4.2 of the Employment Agreement, EMPLOYEE shall not at any time (other than as may be required in
connection with the performance by him of any remaining duties or obligations under the Employment
Agreement), directly or indirectly, use, communicate, disclose or disseminate any Confidential
Information in any manner whatsoever (except as may be required under legal process by subpoena or
other court order).

          11. Covenants Not to Solicit. As EMPLOYEE acknowledged in the Employment Agreement,
and in accordance with Section 4.3 thereof, for a period of two (2) years 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, employee, agent,
lessor, lessee, licensor, licensee, customer, prospective customer or supplier of THE COMPANY to
discontinue or alter his or its relationship with THE COMPANY. This covenant shall not be
applicable to the hiring or offer to hire of employees who have previously been terminated by or
who have separated from THE COMPANY, so long as any such separation was not due to conduct of
EMPLOYEE as prohibited herein.

          12. Covenants Not to Compete. As EMPLOYEE acknowledged in the Employment Agreement,
EMPLOYEE shall be restricted in regard to his post-employment business undertakings. Specifically,
in accordance with Section 4.4 of the Employment Agreement, for a period of one (1) year following
the Separation Date, EMPLOYEE shall be restrained from, directly or indirectly, on his own behalf
or for his own benefit, or on behalf of or for the benefit of another (other than THE COMPANY),
own, operate, manage, engage in, participate in, be employed by, affiliate with, or provide
material assistance to, contract for services for or with, render advice or services to or
otherwise assist in any capacity, directly or indirectly (whether as an officer, director, partner,
agent, investor, consultant, contractor, employee, equityholder, lender, counselor, or otherwise)
any Competitive Enterprise, as defined in Section 4.5 of the Employment Agreement. Nothing herein
shall prevent EMPLOYEE from owning up to five percent (5%) of a Competitive Enterprise.
Notwithstanding any provision to the contrary contained in the Employment Agreement or in this
Agreement, including without limitation, Sections 4.4 and 4.5 of the Employment Agreement or in
this Section 12, from and after the date of this Agreement, there shall be no prohibition,
restriction or any other conditions whatsoever against or relating to EMPLOYEE’s serving as a
director, financial consultant or advisor to any third party’s business, whether a corporation,
limited liability company,

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partnership, individual or otherwise, and whether or not such business constitutes a
“Competitive Enterprise”, “Third Party Relationship” or “Employer Source” (as such terms are
defined in the Employment Agreement), so long as EMPLOYEE will not knowingly and intentionally
provide such activity that would have the effect of diverting THE COMPANY’s business or diverting
THE COMPANY’s business opportunities with current business partners. The parties hereto
acknowledge that all relevant provisions of the Employment Agreement, including Article 4 thereof,
are hereby amended to reflect the foregoing agreement of the parties.

          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
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 and 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 covenants not to solicit or compete, set forth in Paragraph 11 and 12 of this
Agreement, or in the relevant provisions of the Employment Agreement, to a successor employer or
potential successor employer.

          14. No Disparagement. EMPLOYEE agrees to refrain from any publication or any type of
communication, oral or written, of a defamatory or disparaging nature pertaining to THE COMPANY,
its past, present and future officers, directors or employees, except as otherwise permitted by
law.

          15. Technology, Products and Inventions. EMPLOYEE shall comply with Section 4.6 of
the Employment Agreement with regard to Intellectual Property, research and development, and the
like, as well as copyright and property rights thereto.

          16. 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 Securities and Exchange Commission (“SEC”) and that has not been so disclosed.

          17. Cooperation. EMPLOYEE hereby agrees that:

               (a) EMPLOYEE will make himself reasonably available to THE COMPANY either by telephone or, if
reasonably necessary, in person upon reasonable advance 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 take reasonable actions to 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

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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.

               (c) EMPLOYEE will take reasonable actions to cooperate in connection with such claims or
actions referred to in Section 17(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.

               (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 against THE
COMPANY, he will promptly notify THE COMPANY of that fact in writing. 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
Section 17. THE COMPANY shall reimburse EMPLOYEE for all out-of-pocket expenses incurred by
EMPLOYEE as a result of or arising out of any actions taken by EMPLOYEE pursuant to this Section
17, including without limitation, all travel, meal and lodging expenses. THE COMPANY shall not be
required to reimburse EMPLOYEE for any attorneys fees incurred as a result of or arising out of any
actions taken by EMPLOYEE pursuant to this Section 17.

          18. Injunctive Relief. EMPLOYEE acknowledges that his failure to abide by Sections 10
through 13 and Section 15 of this Agreement, and their counterparts in the Employment Agreement (as
amended herein), will result in immediate and irreparable damage to THE COMPANY and will entitle
THE COMPANY to injunctive relief from a court having appropriate jurisdiction.

          19. 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.

          20. 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.

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          21. 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 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 and THE COMPANY further agree that they and their attorneys will give mutual
notice of any 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 EMPLOYEE or
THE COMPANY and its attorneys arising out of or relating to the payments or benefits hereunder.

          22. Employment Agreement. The parties acknowledge and agree that all pertinent terms
of the Employment Agreement (as amended herein) shall remain in full force and effect and are
enforceable, to the extent any such terms therein survive or govern the period after the Term of
that Employment Agreement. The event of revocation of this Separation and Release Agreement in
accordance with Section 8 herein in no way affects the validity or enforceability of the Employment
Agreement (except as and to the extent amended herein); and in the event of revocation, to the
extent any pertinent terms of this Agreement reiterate or confirm the terms of the Employment
Agreement, the Employment Agreement shall govern.

          23. Entire Agreement. When read in conjunction with the Employment 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.

          24. 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

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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.

          25. Governing Law and Jurisdiction. Notwithstanding any provision of the Employment
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.

          26. Survival of Terms. EMPLOYEE understands and agrees that the terms set out in this
Agreement, including the confidentiality, non-compete and non-solicitation provisions, shall
survive (for any applicable periods specified herein) the signing of this Agreement and the receipt
of benefits thereunder.

          27. 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.

          28. Copies. This Agreement may be executed in counterparts, and each counterpart,
when executed, shall have the efficacy of a signed original.

          29. Attorney Fees. The Company shall reimburse EMPLOYEE for documented attorney’s fee
and expenses incurred by EMPLOYEE in connection with the drafting and negotiation of this
Agreement, up to and including a maximum reimbursement amount of ten thousand dollars ($10,000.00).

[SIGNATURE LINES CONTAINED ON NEXT PAGE]

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     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/ Mark Auerbach
 	 
	 	MARK AUERBACH 	 
	 	 	 
	 

Sworn and
subscribed before me this

1st day of December, 2006

/s/
Laurie J. Magargal

Notary Public

Laurie J. Magargal

Notary Public of New Jersey

My Commission Expires 6/30/2010

	 	 	 	 	 	 	 
	PAR PHARMACEUTICAL, INC.	 	PAR PHARMACEUTICAL COMPANIES,
INC.
	 
	/s/ Gerard A. Martino
 	 	/s/ Peter S. Knight
 
	By: 	Gerard A. Martino	 	By: 	Peter S. Knight

10exv10w3

 

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,

4

 

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.

6

 

               (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

7

 

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.

8

 

           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 	 
	 

9

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