Document:

exv10w1

 

Exhibit 10.1

MASTER SUBCONTRACT AGREEMENT

     This Subcontract Agreement (“Agreement”), made this 1st day of April, 2003, is by and between
Halifax Corporation, having a principal place of business at 5250 Cherokee Avenue, Alexandria, VA
22312 (“Subcontractor”), and Hewlett-Packard Company and its subsidiaries, having its principal
place of business at 3000 Hanover Street, Palo Alto, CA 94304-1185 (“HP”). The parties agree that
the terms and conditions of this Agreement and any applicable Purchase Order(s) that may be issued
hereunder will govern the purchase of Services by HP from Subcontractor for the purpose of
Subcontractor providing such Services on behalf of HP to a customer or customers of HP (hereinafter
referred to as “Customer”).

     This Agreement will become effective on the date specified above and will continue for a
period of one (1) year, unless otherwise terminated as provided herein or extended by the mutual
consent of the parties. Any expiration of termination of this Agreement will not alter the rights,
duties or obligations of the parties relating to any Purchase Orders issued by HP under this
Agreement prior to the date of expiration or termination of this Agreement.

     This Agreement does not obligate HP to purchase any Services from Subcontractor. Purchases,
if any, will be as specified on a Purchase Order(s) issued by HP pursuant to Section 2.

     1. DEFINITIONS

     (a) “Acceptance” means written notification from HP to Subcontractor that indicates that the
Services have been evaluated and satisfies the completion and acceptance criteria set forth or
referenced in the Statement of Work or Purchase Order. Acceptance may be partial or complete, as
specified in such notification.

     (b) “Invention(s)” means any designs, techniques, inventions, discoveries, or improvements,
whether patentable or not, that are conceived of or reduced to practice by Subcontractor in
providing the Services to HP or Customer under this Agreement.

     (c) “Services” means consulting, integration, implementation, installation, maintenance,
support, design, development, training, management, and any other work provided by Subcontractor in
connection with meeting Subcontractor’s responsibilities under this Agreement.

     (d) “Statement of Work” means a statement agreed upon by HP and Subcontractor that specifies
the Services to be provided by Subcontractor, the price, payment schedule, delivery schedule, and
acceptance criteria for such Services and, if applicable, detailed technical and administrative
requirements for the Services. The Statement of Work may also include additional terms or
modifications to this Agreement. A Statement of Work will be created and agreed upon for each
Purchase Order issued under this Agreement.

     2. PURCHASE ORDER, ORDER OF PRECEDENCE, SERVICES COORDINATORS

     (a) Subcontractor will furnish the Services to HP or Customer as specified in the Statement of
Work upon HP’s issuance of a Purchase Order to Subcontractor.

     (b) The following order of precedence will control in the event of any conflict in terms and
conditions:

     (1) Statement of Work,

     (2) Purchase Order, and

     (3) This Agreement.

 

 

     The pre-printed terms and conditions on the reverse side of the Purchase Order will not apply
to this Agreement or any Purchase Order issued under this Agreement.

     (c) Each party will appoint a coordinator for the Services to be performed under each Purchase
Order and Statement of Work. Subcontractor’s coordinator will have the authority to represent
Subcontractor. HP’s coordinator will represent HP and be responsible for determining the adequacy
and acceptability of the Services, provided by Subcontractor.

     3. PAYMENT

     Unless otherwise set forth in the Statement of Work or Purchase Order, payment for the
Services will be due forty-five (45) days from the later of the date of Acceptance or the date HP
receives a proper invoice from Subcontractor.

     4. RECORDS

     Subcontractor will maintain account records in accordance with generally accepted accounting
practices to substantiate all invoices. Such records will be made available to HP during normal
business hours and will include payroll records, expense accounts, attendance cards, and job
summaries. Subcontractor will maintain such records for three (3) years from the date of final
payment for the Services.

     5. OWNERSHIP AND LICENSE

     (a) All inventions will be the sole and exclusive property of HP. Subcontractor hereby
assigns to HP the ownership of copyright in the Inventions. HP will have the right to obtain and
hold in its own name copyrights, registrations, and similar protection which may be available in
the Inventions. Subcontractor agrees to assist HP as may be required to perfect such rights.

     (b) To the extent that any Subcontractor’s pre-existing technology is contained in the
Inventions, Subcontractor grants to HP an irrevocable, nonexclusive, worldwide royalty-free license
to:

     (1) use, execute, reproduce, display, perform, and distribute (internally or externally) such
pre-existing technology; and

     (2) authorize Customer to do any, some, or all of the foregoing.

     6. WARRANTY

     (a) Subcontractor warrants that all Services will (1) be performed in a good and workmanlike
manner and in accordance with generally accepted professional standards for such Services, and (2)
conform to the requirements specified in the Statement of Work or Purchase Order.

     (b) Subcontractor warrants that Services will not in any manner limit, impair, disrupt, or
jeopardize any existing Year 2000 Compliance of any equipment or software on which Services are
performed. “Year 2000 Compliance” for purposes of this provision means the capability to correctly
process, calculate, compare, and sequence date data within and between the 20th and 21st centuries,
including leap year calculations.

     (c) In the event of any breach of warranty, Subcontractor, without charge and without delay,
will re-perform nonconforming Services.

     7. CONFIDENTIAL INFORMATION

     Subcontractor will maintain all information or data, whether written or oral, relating to HP
or Customer which Subcontractor obtains or otherwise has access to in the performance of Services
in confidence and will not disclose any such information or data to any third party or to
employees, agents, Subcontractors, or suppliers of Subcontractor who do not have the need for
access to such information or data.

 

 

     8. PERSONNEL

     (a) Personnel provided by Subcontractor will not be considered employees of HP for any
purpose. Subcontractor personnel will make no commitments on behalf of HP for any purpose.
Subcontractor assumes full
responsibility for the actions of its personnel and will be responsible for their supervision,
daily direction, and control. Subcontractor will retain full responsibility for payment of salary
(including withholding of income taxes and Social Security), workers compensation, disability
benefits, and the like. Nothing in this Agreement grants Subcontractor or any Subcontractor
personnel any right under any HP employee benefit plan.

     (b) Subcontractor personnel specified or identified by name in the Statement of Work or
Purchase Order will be considered essential to the Services to be performed. No substitution or
diversion of such personnel will be made without the prior written consent o HP and Customer.

     (c) HP and Customer will retain the right to reject any of Subcontractor’s personnel whose
qualifications are insufficient in HP’s or Customer’s judgment.

     9. CHANGE IN SCOPE

     Each Purchase Order and Statement of Work under this Agreement is based upon HP’s present
understanding of HP’s obligations to Customer. In the event HP’s understanding changes or Customer
requests a change in HP’s obligations affecting Subcontractor’s performance, HP will notify
Subcontractor of such change request in writing. Within ten (10) days of receipt of such change
request, Subcontractor will notify HP in writing of any increase or decrease in Subcontractor’s
charges and/or alteration to delivery schedules occasioned by the change. Upon HP’s acceptance of
Subcontractor’s modified charges and delivery schedule, the parties will modify the terms of the
applicable Purchase Order and Statement of Work to effect the change. Subcontractor will not
implement the change without HP’s written authorization.

     10. TERMINATION

     (a) HP may terminate for convenience this Agreement, any Purchase Order, or any portions
thereof by written notice to Subcontractor. In any event, the applicable Purchase Order will
terminate immediately upon termination, for any reason, of HP’s agreement with Customer. Upon
receipt of such notice, Subcontractor will immediately stop all activities associated with the
terminated Purchase Order. Subcontractor will be paid for the Services provided and accepted prior
to the date of termination. Such payment will constitute HP’s entire liability.

     (b) In the event of a default by Subcontractor, HP will provide Subcontractor written notice
thereof. If the default is not remedied within thirty (30) days or within the time stated in the
notice, HP may terminate this Agreement, any Purchase Order, or any portions thereof.

     (c) The rights and obligations of Sections 4, 5, 6, 7, 10, 11, and 12 will continue after
expiration or termination of this Agreement and will bind the parties and their legal
representatives, successors, heirs, and assigns.

     11. INDEMNIFICATIONS

     (a) Subcontractor will indemnify, defend, and hold HP harmless from any and all claims or
demands (including all losses, damages, and liabilities resulting from such claims or demands, and
all related costs and expenses, including reasonable legal fees) arising from or in connection with
(1) Subcontractor’s performance of, or failure to perform, any of its obligations under this
Agreement or (2) an act or omission of Subcontractor in its relationships with its employees,
agents, subcontractor’s or suppliers.

     (b) Subcontractor will indemnify, defend and hold HP and Customer harmless from any and all
claims or demands (including all losses, damages, and liabilities resulting from such claims or
demands, and all related costs and expenses, including reasonable legal fees) which may result by
reason of any infringement or claim of infringement of any intellectual property rights associated
with the Services or Inventions provided in connection with this Agreement.

 

 

     12. LIMITATION OF LIABILITY

     EXCEPT FOR SUBCONTRACTOR’S OBLIGATION UNDER SECTION 11 (b) “INDEMNIFICATIONS”, OR EITHER
PARTY’S OBLIGATION UNDER SECTION 7 “CONFIDENTIAL INFORMATION”, NEITHER HP NOR SUBCONTRACTOR WILL BE
LIABLE TO EACH OTHER FOR ANY DAMAGES RESULTING FROM LOSS OF
DATA, PROFITS, OR USE OF PRODUCTS, OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES, EVEN IF
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

     13. COMPLIANCE WITH LAWS

     Subcontractor, at its own expense, will comply with all laws and regulations of federal,
state, and local government authorities relating to its obligations under this Agreement.

     14. GENERAL

     (a) Except as expressly provided in the Statement of Work or Purchase Order, Subcontractor
will be entitled to no further payment, cost reimbursement, or other compensation for the Services
provided hereunder.

     (b) Subcontractor shall carry during the term of this Agreement, and with companies with a
Best Rating of not less than A-:VII, insurance policies of the kinds and in the amounts listed
below:

     (1) Worker’s Compensation — statutory limits in each state in which Subcontractor is required
to provide Workers Compensation coverage including Other States Endorsement or policy equivalent
thereof. Policy shall include a waiver of subrogation in favor of HP Computer Corporation, its
officers, directors, employees and agents.

     (2) Employer’s Liability — not less than $1,000,000.

     (3) Comprehensive General Liability — Including Contractual Liability, Independent
Contractor’s Liability, Products and/or Completed Operations Liability, and Personal
Injury/Property Damage Coverages in a combined single limit of not less than $1,000,000 per
occurrence combined single limit and $2,000,000 General Aggregate. HP Computer Corporation, its
officers, directors, employees and agents shall be named as Additional Insureds.

     (4) Automobile Liability — for owned, non-owned, and hired vehicles in a combined single limit
of not less than $1,000,000.

     (5) Umbrella Liability — a combined single limit of not less than $2,000,000.

     Subcontractor shall furnish HP with Certificates of Insurance evidencing the specified
insurance policies and stating that such insurance policies may not be changed or terminated so as
to not comply with the foregoing insurance requirements without at least thirty (30) days prior
written notice to HP.

     (c) Nothing in this Agreement will be construed as prohibiting or restricting HP from
independently developing, acquiring, and/or marketing services which are similar to and/or
competitive with those provided hereunder.

     (d) Any assignment, transfer, or subcontracting of rights or obligations by Subcontractor
under this Agreement in whole or in part without the prior written consent of HP will be void and
may subject Subcontractor to termination.

     (e) During the performance by Subcontractor under a particular Purchase Order and Statement of
Work HP may require Subcontractor to temporarily cease performance of some or all of the Services
by issuing Subcontractor a Work Suspension Order (“Order”). The Order will include the effective
date of the Order, a specific description of the Services to be suspended, and the anticipated
duration of the suspension. Upon receipt of an Order, Subcontractor will take all reasonable
measures to protect the Services in progress. HP will notify Subcontractor in writing of the date
on which the suspended Services are to be resumed.

 

 

     (f) Subcontractor represents that it is not under any obligation or restriction, nor will it
assume any, which would interfere or present a conflict of interest with the Services that it
provides under this Agreement.

     (g) HP is free to determine the price charged to Customer for the Services that Subcontractor
provides to Customer on behalf HP.

     (h) Subcontractor agrees to comply with security procedures of HP and Customer.

     (i) Subcontractor agrees to be bound by applicable “flow down” provisions of HP’s agreement
with Customer of which it is notified by HP.

     (j) Neither party may bring an action, regardless of form, arising out of this Agreement more
than two (2) years after the cause of action arises. Subcontractor may not bring an action for
nonpayment more than two (2) years from the date final payment for the Services is due.

     (k) The laws of the State of California will govern this Agreement.

     (l) This Agreement and the documents referenced herein set forth the entire understanding of
the parties with respect to the subject matter described herein and supersede all prior
communications, whether oral or written, by either party. Any modification to these terms and
conditions must be in writing and signed by authorized representatives of both parties.

	 	 	 	 	 	 	 	 	 	 	 
	Accepted by:	 	 	 	Accepted by:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Halifax Corporation	 	 	 	Hewlett Packard Company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ James L. Sherwood
 

	 	 	 	By:
	 	/s/ Mark Pomerans
 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Print Name: James L. Sherwood	 	 	 	Print Name: James L. Sherwood	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title: Vice President	 	 	 	Title: Subcontract Manager	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date: 1 April 2003	 	 	 	Date: 1 April 2003exv4w1

 

Exhibit 4.1

FIRST SUPPLEMENTAL INDENTURE

     FIRST SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of March 31, 2006,
between PAR PHARMACEUTICAL COMPANIES, INC. (f/k/a Pharmaceutical Resources, Inc.), a Delaware
corporation (the “Company”), and AMERICAN STOCK TRANSFER & TRUST COMPANY, as trustee under the
Indenture referred to below (the “Trustee”). Capitalized terms used herein but not otherwise
herein defined shall have the meanings ascribed to them in the Indenture.

W I T N E S S E T H :

     WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the
“Indenture”), dated as of September 30, 2003, between the Company and the Trustee, pursuant to
which the Company issued its 2.875% Senior Subordinated Convertible Notes Due 2010 (the
“Securities”);

     WHEREAS, Section 11.1(h) of the Indenture provides that the Company and the Trustee may amend
the Indenture without the consent of the holders of Securities to make any provisions with respect
to matters or questions arising under the Indenture that the Company may deem necessary or
desirable and that are not inconsistent with any of the provisions of the Indenture and will not
adversely affect the interests of the Holders of Securities in any material respect;

     WHEREAS, the Board of Directors of the Company has determined that (i) it is in the best
interest of the Company to authorize and approve the amendments to the Indenture (the “Proposed
Amendments”) set forth in this Supplemental Indenture in order to establish the Company’s agreement
to satisfy 100% of the Conversion Obligation arising upon conversion of any of the Securities with
respect to the principal amount of any of the Securities converted solely in cash, with any
remaining amount of the Conversion Obligations to be satisfied, at the Company’s option, in cash,
shares of Common Stock or a combination of cash and Common Stock and (ii) such Proposed Amendments
do not adversely affect the interests of the Holders of the Securities in any material respect;

     WHEREAS, the Company has been authorized, through a Board Resolution, to execute and deliver
this Supplemental Indenture and a copy of such Board Resolution, certified by the Secretary of the
Company, has been delivered to the Trustee in connection with the execution of this Supplemental
Indenture; and

     WHEREAS, all other things necessary to make this Supplemental Indenture a valid agreement of
the Company, in accordance with its terms, have been done.

     NOW, THEREFORE, for and in consideration of the premises, covenants and obligations set forth
herein and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree, for the equal and proportionate benefit of
all Holders of the Securities, as follows:

     1. Amendments to the Indenture. (a) Section 1.1 of the Indenture is modified
by adding the following term and definition in the appropriate alphabetical location within such
Section:

          “‘Original Principal Amount’ has the meaning set forth in Section 12.13(a).”

     (b) Subsection (d) of Section 8.1 of the Indenture is modified by replacing it, in its
entirety, with the following language (modified text appears in blacklined form):

     “(d) the Company fails to convert any portion of the principal amount of any
Security following the exercise by the Holder of the right to convert such
Security into Applicable Stock (or cash or a combination of Applicable Stock
and cash, if the Company so elects) cash pursuant to and in accordance with
Article XII;”

     (c) Subsection (b) of Section 8.4 of the Indenture is modified by replacing it, in its
entirety, with the following language (modified text appears in blacklined form):

 

 

     “(b) in respect of a failure to convert any securitySecurity into Common Stock
(or cash, (or a combination of Common Stockcash and cashCommon Stock, if wethe
Company so electelects) as provided in Article XII or elsewhere in this
Indenture; or”

     (d) Subsections (a) – (c) of Section 12.2 of the Indenture are modified by replacing them,
in their entireties, with the following language (modified text appears in blacklined form):

     “(a) Subject to Section 12.13, each Security shall be convertible at the office
of the Conversion Agent into fully paid and nonassessable shares of Common
Stock (calculated to the nearest 1/10,000th of a share).

     The Conversion Agent shall notify the Company when it receives a Conversion
Notice. Pursuant to Section 12.13, the Company shall determine the amount of
cash and number of shares of Common Stock and/or the amount of cash, if any,
that the Holder that submitted the Conversion Notice is entitled toshall
receive upon surrender of the Securities covered by that Conversion Notice. If
the Company elects to settle in Common Stock onlyIn accordance with Section
12.13, the Company will settle the Original Principal Amount solely in cash.
If the Company elects, in its sole discretion, to settle the Excess Amount (as
defined in Section 12.13(a)), if any, in cash, Common Stock or a combination of
cash and Common Stock, the cash and/or a certificate for the number of full
shares of Common Stock into which the Securities relating to the applicable
portion of the Excess Amount are converted (and cash in lieu of fractional
shares) will be delivered to such Holder, assuming all of the other
requirements have been satisfied by such Holder, as soon as practicable after
the Company issues its notification of its chosen method of settlement, in
accordance with Section 12.13. If the Company elects to settle in cash or a
combination of cash and Common Stock, the cash and, if applicable, a
certificate for the number of full shares of Common Stock into which the
Securities are converted (and cash in lieu of fractional shares) will be
delivered to such Holder, assuming all of the other requirements have been
satisfied by such Holder, in accordance with Section 12.13. Notwithstanding
the foregoing, the Company shall not be required to deliver certificates for
Common Stock while the stock transfer books for such stock or the security
register are duly closed for any purpose, but certificates for Common Stock
shall be issued and delivered as soon as practicable after the opening of such
books or security register.

     No cash payment of accrued and unpaid interest or Additional Interest will be
paid by the Company on a converted Security, except as described in Section
12.9. Accrued and unpaid interest and Additional Interest, if any, will be
deemed to be paid in full with the cash paid (and shares of Common Stock issued
or cash paid, if applicable) upon conversion, rather than deemed cancelled,
extinguished or forfeited.

     If the Common Stock, cash or the combination of cash and Common Stock and cash
received upon conversion of a Security pursuant to this Article XII does not
include cash sufficient to comply with the U.S. federal withholding tax
obligations imposed by the Code with respect to accrued and unpaid interest on
the Securities payable to the beneficial owner of such Security, the Company
may, to the extent required by applicable law, recoup or set-off such liability
against either the Common Stock tothat may be issued upon conversion to such
beneficial owner or any actual cash dividends or distributions subsequently
made with respect to such Common Stock to such beneficial owner.

     In the event of a Fundamental Change, if a Holder has submitted any or all of
its Securities for repurchase, a Holder’s conversion rights on the Securities
so subject to repurchase will expire at 5:00 p.m., New York City time, on the
Business Day immediately preceding the Fundamental Change Repurchase Date.
Notwithstanding the foregoing, a Security in respect of which a Holder has
delivered a Fundamental Change Repurchase Notice exercising such Holder’s right
to require the Company to repurchase such Security may be converted only if
such Fundamental Change Repurchase Notice is withdrawn in accordance with
Section 4.2 prior to 5:00 p.m., New York City time, on the Business Day
immediately preceding the Fundamental Change Repurchase Date.

     (b) BeforeSubject to Section 12.13, before any Holder shall be entitled to
convert the same into Common Stock, such Holder shall, in the case of Global
Securities, comply with the Applicable Procedures of the Depositary in effect
at that time, and in the case of Certificated Securities, surrender such
Securities, duly

2

 

endorsed to the Company or in blank, at the office of the
Conversion Agent, and shall give written notice to the Company at said office
or place in the form of the Conversion Notice attached to the Security (the
“Conversion Notice”) that such Holder elects to convert the same and shall
state in writing therein the principal amount of Securities to be converted (in
whole or in part so long as the principal amount to be converted is in
multiples of $1,000 principal amount) and the name or names (with addresses) in
which such Holder wishes the certificate or certificates for Common Stock to be
issued.

     Before any such conversion, a Holder also shall pay all funds required, if any,
relating to interest or Additional Interest, if any, on the Securities, as
provided in Section 12.9, and all taxes or duties, if any, as provided in
Section 12.8.

     If more than one Security shall be surrendered for conversion at one time by
the same Holder, the number of full shares of Common Stock that shallmay be
delivered upon conversion, pursuant to Section 12.13, shall be computed on the
basis of the aggregate principal amount of the Securities (or specified
portions thereof to the extent permitted hereby) so surrendered.

     If Common Stock to be issued upon conversion of a Restricted Security are to be
issued in the name of a Person other than the Holder of such Restricted
Security, such Holder must deliver to the Conversion Agent a certification in
substantially the form set forth in a Transfer Certificate dated the date of
surrender of such Restricted Security and signed by such Holder, as to
compliance with the restrictions on transfer applicable to such Restricted
Security. TheSubject to Section 12.13, the Company shall not be required to
issue Common Stock upon conversion of any such Restricted Security to a Person
other than the Holder if such Restricted Security is not so accompanied by a
properly completed certification, and the Registrar shall not be required to
register Common Stock upon conversion of any such Restricted Security in the
name of a Person other than the Holder if such Restricted Security is not so
accompanied by a properly completed certification.

     (c) A Security shall be deemed to have been converted immediately prior to 5:00
p.m., New York City time, on the date on which all of the conversion
requirements set forth in this Section 12.2(c) have been satisfied, and the
person or persons entitled tothat receive theany shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
Holder or Holders of such Common Stock as of 5:00 p.m., New York City time, on
such date.”

     (e) Subsection (l) of Section 12.3 of the Indenture is modified by replacing it, in its
entirety, with the following language (modified text appears in blacklined form):

     “(l) To the extent that the Company has a Rights Plan in effect upon the
conversion of the Securities into Common Stock only or a combination of cash
and Common Stock, with respect to, and the Company elects to pay the Excess
Amount of the conversion consideration payable in Common Stock or a combination
of cash and Common Stock, a Holder will receive, in addition to the Common
Stock, the rights under the Rights Plan, whether or not the rights have
separated from the Common Stock. To the extent that the Company has a Rights
Plan in effect upon conversion of the Securities into cash, with respect to the
conversion consideration payable in cash, a Holder will not receive any rights
under the Rights Plan or other consideration in respect thereof.”

     (f) The heading and subsections (a) and (b) of Section 12.13 of the Indenture are modified
by replacing them, in their entireties, with the following language (modified text appears in
blacklined form):

     “Section 12.13. Option to SatisfySatisfaction of Conversion Obligation with
Cash, Common Stock or Combination Thereof .

     (a) If the Company receives any Holder’s Conversion Notice on or prior to the
day that is 31 Trading Days prior to the Stated Maturity (the “Final Notice
DateFINAL NOTICE DATE”), then the Company shall notify the Holder through the
Trustee, at any time on or before the date that is three Trading Days following
receipt of the Conversion Notice required pursuant to Section 12.2 (such
period, the “Settlement Notice

3

 

PeriodSETTLEMENT NOTICE PERIOD”) of the method
the Company chooses to settle its obligation upon conversion (the “Conversion
Obligation”)CONVERSION OBLIGATION”). Notwithstanding anything contained herein
to the contrary, the Company hereby agrees to settle all Conversion Obligations
arising after the date hereof (x) with an amount of cash equal to the lesser of
(A) the aggregate original principal amount (the “ORIGINAL PRINCIPAL AMOUNT”)
of the Securities to be converted and (B) the amount of cash settlement
determined pursuant to clause (i) of the second paragraph below that provides
for the computation of the settlement amount and (y) with respect to the excess
of any Conversion Obligation over the Original Principal Amount of the
Securities to be converted (the “EXCESS AMOUNT”), if any, with cash, Common
Stock or a combination of cash and Common Stock. If the Company elects to
settle its Conversion Obligationthe Excess Amount, if any, in a combination of
cash and Common Stock, the Company shall specify both the percentage of the
principal amount of Securities surrendered for conversion that it will pay in
cash and the percentage of the excess (the “Excess Amount”), if any, of the
Conversion Obligation relating to the Securities surrendered for conversion
over the principal amount of the Securities surrendered for conversionthe
percentage of the Excess Amount that it will pay in cash. The remainder of its
Conversion Obligation willthe Excess Amount shall be settled in shares of
Common Stock (except that cash will be paid in lieu of issuing any fractional
shares). The Company shall treat all Holders converting on the same Trading
Day in the same manner and; however, the Company shall not have any obligation
to settle Conversion Obligations arising on different Trading Days in the same
manner.

     If the Company timely elects to pay cash for any portion of the Conversion
Obligation, theThe Holder may retract the Conversion Notice at any time during
the two-Trading Day period beginning on the Trading Day after the Settlement
Notice Period (the “Conversion Retraction Period”); provided, that no such
retraction can be made (and a Conversion Notice shall be irrevocable) if the
Company does not elect to deliver cash in lieu of shares (other than cash in
lieu of fractional shares). Settlement of the Excess Amount, if any, in Common
Stock only will occurshall be effected in accordance with Section 12.2(a). If
the Conversion Notice has not been retracted, then settlement in cashof the
Original Principal Amount solely in cash and the Excess Amount, if any, in
cash, Common Stock or in a combination of cash and Common Stock will, subject
to Section 12.13(c), occur on the third Trading Day following the final Trading
Day of the 20 Trading Day period beginning on the third Trading Day following
the final Trading Day of the Conversion Retraction Period (the “Cash Settlement
Averaging Period”), assuming all of the other requirements contained herein
have been satisfied by such Holder.

     Settlement amounts will be computed as follows (subject to the provisions of
the second and third paragraph of Section 12.1(a) in connection with
conversions upon satisfaction of the Note Price Conditions prior to
satisfaction of the Common Stock Price Condition and conversions during a
Registration Default Period):

(i) if the Company elects to satisfy the entire Conversion Obligation in Common
Stock, the Company will deliver to such Holder a number of shares of Common
Stock equal to (1) the aggregate original principal amount of Securities to be
converted divided by 1,000, multiplied by (2) the Conversion Rate;

	 	i.	 	(ii) if the Company elects to satisfy the entire Conversion Obligation in
cash, the Company will deliver to such Holder cash in an amount equal to the
product of:

     (1) athe number equal to (x) the aggregate original principal amountOriginal
Principal Amount of Securities to be converted divided by 1,000, multiplied by
(y) the Conversion Rate, and

     (2) the arithmetic average of the Closing Prices of Common Stock during the
Cash Settlement Averaging Period; and

	 	ii.	 	(iii) if the Company elects to satisfy a portion of the Excess Amount of
the Conversion Obligation in cash, computed pursuant to clauses (1) and (2)
below (the “Cash Amount”) (excluding any cash paid for fractional shares), and
a

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	 	 	 	portion of the Conversion Obligation in Common Stock, computed pursuant to
clause (3) below, the Company will deliver to such Holder:

     (1) cash equal to the CashOriginal Principal Amount equal to the aggregate
principal amount of Securities to be converted multiplied by the percentage of
such principal amount to be satisfied in cash, and if greater than zero,of the
Securities surrendered for conversion; plus

     (2) cash equal to the product of (x) the difference between the amount of cash
that would otherwise be paid pursuant to clause (iii) above minus the aggregate
principal amountOriginal Principal Amount of the Securities surrendered for
conversion and (y) the percentage of the Excess Amount to be satisfied in cash;
plus

     (23) the number of shares of Common Stock equal to (x) the number of shares of
Common Stock that would be issued pursuant to clause (i) aboveOriginal
Principal Amount of the Securities to be converted divided by 1,000, multiplied
by the Conversion Rate, minus (y) the number of shares of Common Stock equal to
the quotient of the Cash Amount divided by the arithmetic average of the
Closing Prices of the Common Stock during the Cash Settlement Averaging Period.

Notwithstanding the foregoing, a Security in respect of which a Holder has
delivered a Fundamental Change Repurchase Notice exercising such Holder’s right
to require the Company to repurchase such Security may be converted as
described in this Section 12.13(a) only if such notice of exercise is withdrawn
in accordance with Section 4.2 prior to 5:00 p.m., New York City time, on the
Business Day immediately preceding the Fundamental Change Repurchase Date.

     (b) The Company shall settle all of its Conversion Obligations arising after
the Final Notice Date in the same manner. On or prior to the Final Notice
Date, the Company shall notify the Holders through the Trustee of the method it
chooses to settle the Excess Amount of any Conversion Obligations arising after
the Final Notice Date. If the Company elects to settle the Excess Amount of
any Conversion Obligations arising after the Final Notice Date in a combination
of cash and Common Stock, the Company shall specify both the percentage of the
principal amount of Securities surrendered for conversion that it will pay in
cash and the percentage of the Excess Amount that it will pay in cash. The
remainder of the Excess Amount of any Conversion Obligations arising after the
Final Notice Date shall be settled in shares of Common Stock (except that cash
will be paid in lieu of issuing any fractional shares). The Original
Principal Amount of any Conversion Obligations arising after the Final Notice
Date shall be settled in cash only. All Conversion Notices received after the
Final Notice Date shall be irrevocable.

Settlement of Conversion Obligations arising after the Final Notice Date in
Common Stock will occur in accordance with Section 12.2(a). Subject to
Sections 12.13((b) and (c), settlement of Conversion Obligations arising after
the Final Notice Date in cash or in a combination of cash and Common Stock will
occur at the Stated Maturity. The settlement amount of Common Stock, cash or
combination of cash and Common Stock in satisfaction of Conversion Obligations
arising after the Final Notice Date will be computed in the same manner as set
forth in Section 12.13(a), except that the “Cash Settlement Averaging Period”
will be the 20 Trading Day period beginning on the date that is the 23rd
Trading Day prior to the Stated Maturity.”

     (g) Section 7 of Exhibit A of the Indenure is modified by replacing it, in its entirety,
with the following language (modified text appears in blacklined form):

     Conversion.

     Subject to and in compliance with the provisions of the Indenture (including,
without limitation, the conditions to conversion set forth in Section 12.1
thereof), a Holder is entitled, at such Holder’s option, to convert the
Holder’s Security (or any portion of the principal amount thereof that is
$1,000 or an integral multiple $1,000), into, subject to Section 12.13 thereof
and except in connection with conversions following satisfaction of the Note
Price Conditions under the circumstances described below and except in
connection with conversions during a Registration Default Period following
satisfaction of any of the conditions to

5

 

conversion as described below, fully
paid and nonassessable shares of Common Stock at the Conversion Rate in effect
on the date of conversion. As provided in Section 12.13 of the Indenture, upon
conversion, the Company may choose, subject to Section 12.13(a) of the
Indenture, to deliver in lieu ofcash, Common Stock, cash or a combination of
cash and Common Stock in accordance with the Indenture.

     The initial Conversion Rate is 11.2660 shares of Common Stock per $1,000
principal amount of Securities and is subject to adjustment in certain events
as provided in the Indenture.

     With respect to any conversion of a Security following satisfaction of the Note
Price Conditions prior to the satisfaction of the Common Stock Price Condition,
a Holder shall be entitled to, subject to Section 12.13 of the Indenture, a
number of shares of Common Stock equal to the lesser of (a) the product of the
principal amount of such Security divided by 1,000 multiplied by the Conversion
Rate then in effect or (b) the quotient obtained by dividing the principal
amount of such Security by the Sale Price of the Common Stock on the Trading
Day immediately before the date of conversion.

     With respect to any conversion of a Security during a Registration Default
Period following satisfaction of any of the conditions to conversion described
in Section 12.1 of the Indenture (and during the prescribed time periods in
respect thereof), a Holder shall be entitled to, subject to Section 12.13, 103%
of the number of shares of Common Stock that the Holder would have otherwise be
entitled to upon conversion.

     The Company will notify Holders of any satisfaction of the conditions to
conversion triggering the right to convert the Securities as specified above in
accordance with the Indenture.

     To surrender a Security for conversion, a Holder must, in the case of Global
Securities, comply with the Applicable Procedures of the Depositary in effect
at that time, and in the case of Certificated Securities, (1) complete and
manually sign the conversion notice below (or complete and manually sign a
facsimile of such notice) and deliver such notice to the Conversion Agent, (2)
surrender the Security to the Conversion Agent, (3) furnish appropriate
endorsements and transfer documents and (4) pay all funds required, if any,
relating to interest or Additional Interest, if any, and any transfer or
similar tax or duties, if required.

     No fractional share of Common Stock shall be issued upon conversion of any
Security. Instead, the Company shall pay a cash adjustment as provided in the
Indenture.

     Except as provided in Section 1 hereof, upon conversion, no cash payment will
be made for accrued and unpaid interest or Additional Interest, if any.
Accrued and unpaid interest and Additional Interest, if any, will be deemed to
be paid in full with the shares of Common Stock issued or cash paid or
combination of cash paid and shares of Common Stock issued or cash paid upon
conversion, rather than deemed cancelled, extinguished or forfeited.

     Except as described in Section 12.3 of the Indenture, no payment or other
adjustment for distributions or dividends on any Common Stock issued upon
conversion of the Securities will be made.

     A Security in respect of which a Holder has delivered a Fundamental Change
Repurchase Notice exercising the right of such Holder to require the Company to
repurchase such Security may be converted only if such Fundamental Change
Repurchase Notice is withdrawn in accordance with the terms of the Indenture.

     If the Common Stock, cash or combination of cash and Common Stock and cash
received from the Company upon conversion of a Security does not include cash
sufficient to comply with the U.S. federal withholding tax obligations imposed
by the Code with respect to accrued and unpaid interest on the Securities
payable to the beneficial owner of such Security, the Company may, to the
extent required by applicable law, recoup or set-off such liability against
either the Common Stock tothat may be issued upon conversion to such beneficial
owner or any actual cash dividends or distributions subsequently made with
respect to such Common Stock to such beneficial owner.

If the Company (i) reclassifies the Common Stock, (ii) is a party to a
consolidation, merger or binding share

6

 

exchange or (iii) sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
the properties and assets of the Company and its Subsidiaries on a consolidated
basis to any Person or group of affiliated Persons, the right to convert a
Security into cash (or shares of Common Stock, subject to Section 12.13 of the
Indenture) may be changed into a right to convert it into cash or securities or
cash of the Company or such other Person, in each case in accordance with the
Indenture.”

     (h) The first two lines of the Conversion Notice of Exhibit A of the Indenture are
modified by replacing them, in their entirety, with the following language (modified text appears
in blacklined form):

     “To convert this Security into Common Stock (or cash or a combination of Common
Stockcash and cash,Common Stock if the Company so elects) of the Company, check
the box o”

     2. Trust Indenture Act Controls. If any provision of this Supplemental Indenture
limits, qualifies, or conflicts with the duties imposed by Section 318(c) of the TIA, such section
of the TIA shall control. If any provision of this Supplemental Indenture expressly modifies or
excludes any provision of the TIA that may be so modified or excluded, the Supplemental Indenture
provision so modifying or excluding such provision of the TIA shall, to the extent permitted by the
TIA, be deemed to apply.

     3. Separability. In case any provision in this Supplemental Indenture shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby.

     4. Effectiveness. This Supplemental Indenture will become operative and binding
upon each of the Company, the Trustee and the Holders of the Securities as of the day and year
first above written.

     5. References to and Effect on the Indenture. On and after the date hereof, each
reference in the Indenture to “this Indenture,” “hereunder,” “hereof”, “hereby” or “herein” shall
mean and be a reference to the Indenture as supplemented and amended by this Supplemental Indenture
unless the context otherwise clearly requires. Except as specifically supplemented and amended by
this Supplemental Indenture, the Indenture shall remain in full force and effect in accordance with
the provisions thereof and is in all respects hereby ratified and confirmed.

     6. Trustee Acceptance. The Trustee accepts the amendment of the Indenture effected
by this Supplemental Indenture, but only upon the terms and conditions set forth in the Indenture,
as hereby supplemented, including the terms and provisions defining and limiting the liabilities
and responsibilities of the Trustee in the performance of its duties and obligations under the
Indenture, as hereby supplemented. Without limiting the generality of the foregoing, the Trustee
has no responsibility for the correctness of the recitals of fact herein contained that shall be
taken as the statements of the Company, and makes no representations as to the validity,
sufficiency or enforceability of this Supplemental Indenture.

     5. Successors and Assignees. This Supplemental Indenture shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and permitted assigns.

     6. Headings. The headings of the sections of this Supplemental Indenture have been
inserted for convenience of reference only and are not to be considered part of this Supplemental
Indenture and shall in no way modify or restrict any of the terms or provisions hereof.

     7. Counterparts and Method of Execution. This Supplemental Indenture may be
executed in counterparts (including by facsimile), both of which together shall constitute one
agreement binding on the parties hereto, notwithstanding that both parties hereto have not signed
the same counterpart.

     8. Governing Law. This Supplemental Indenture shall be governed by and construed
in accordance with the laws of the State of New York.

7

 

     9. Notice. Following the effectiveness of this Supplemental Indenture, the
Company will mail to the Holders notice describing the amendments to the Indenture set forth
herein; provided, however, that the parties hereto acknowledge that, in accordance
with Section 11.1 of the Indenture, failure to give notice to all the Holders, or any defect in the
notice, will not impair or affect the validity of the amendments to the Indenture set forth herein.

     IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly
executed as of the day and year first above written.

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	PAR PHARMACEUTICAL COMPANIES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Scott Tarriff	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Scott Tarriff	 	 
	 

	 	Title:
	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	AMERICAN STOCK TRANSFER & TRUST COMPANY, as Trustee	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Herb Lemmer	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Herbert J. Lemmer	 	 
	 

	 	Title:
	 	Vice President	 	 

8

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