Document:

FIRST AMENDMENT TO AMENDED AND
                            RESTATED CREDIT AGREEMENT

     THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT, dated as of
February 28, 2000, amends and supplements that certain Amended and Restated
Credit Agreement dated as of April 30, 1999 (the "Credit Agreement"), among
BANDO MCGLOCKLIN SMALL BUSINESS LENDING CORPORATION, a Wisconsin corporation
(the "Company"), the financial institutions from time to time party thereto
(individually a "Lender" and collectively the "Lenders"), and FIRSTAR BANK,
NATIONAL ASSOCIATION (formerly known as Firstar Bank Milwaukee, N.A.), as agent
for the Lenders (in such capacity, the "Agent").

                                     RECITAL

     The Company, the Lenders and the Agent desire to amend the Credit Agreement
as provided below.

                                   AGREEMENTS

     In consideration of the promises and agreements set forth in the Credit
Agreement, as amended hereby, the Lenders, the Agent and the Company agree as
follows:

     1.  Definitions and References. Capitalized terms not otherwise defined
herein have the meanings assigned to them in the Credit Agreement. All
references to the Credit Agreement contained in the Loan Documents shall, upon
fulfillment of the conditions set forth in section 3 below, mean the Credit
Agreement as amended by this First Amendment.

     2.  Amendments to Credit Agreement. The Credit Agreement is amended as
follows:

         (a) The following definitions are added to section 1 to appear in the
appropriate alphabetical sequence:

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             "Certificate Trustee" means Firstar Bank, National Association, in
     its capacity as trustee under the Indenture, and any successor trustee
     under the Indenture.

             "Indenture" means that certain Trust Indenture dated as of March 1,
     2000 between the Company and the Certificate Trustee, as the same may be
     amended, modified, supplemented or restated from time to time.

             "Transferred Loan Value" means, with respect to any Transferred
     Loan, (a) prior to any draw under the Letter of Credit by the Certificate
     Trustee for the purpose of redeeming the Certificates of Participation
     issued with respect to such Transferred Loan as a result of a default
     thereunder, the lesser of (i) the outstanding principal balance of such
     Transferred Loan and (ii) an amount equal to 64% of the fair market value
     of the real property and equipment securing such Transferred Loan as
     determined by an MAI appraiser acceptable to the Agent in a written
     appraisal which satisfies all regulatory requirements applicable to the
     Lenders, and (b) upon any drawing under the Letter of Credit by the
     Certificate Trustee for the purpose of redeeming the Certificates of
     Participation issued with respect to such Transferred Loan as a result of a
     default thereunder, the lesser of (i) the outstanding principal balance of
     such Transferred Loan and (ii) an amount equal to 50% of the fair market
     value of the real property and equipment securing such Transferred Loan as
     determined by an MAI appraiser acceptable to the Agent in a written
     appraisal which satisfies all regulatory requirements applicable to the
     Lenders; provided, however, that in each circumstance in which such fair
     market value exceeds $1,000,000, such appraisal shall be reviewed by the
     Agent and if the Agent, in its reasonable judgment, determines that the
     value of such real property and equipment is less than the amount shown in
     the applicable appraisal, then the value for purposes of subsections
     (a)(ii) or (b)(ii) hereof, as the case may be, shall be such lesser amount
     determined by the Agent; provided, further, that in the case of a
     Transferred Loan that is reacquired by the Company from the Certificate
     Trustee (by purchase or otherwise), the Transferred Loan Value of such
     Transferred Loan shall be $0 until the date the Agent receives a new
     appraisal of the relevant real property and equipment, or the Company and
     the Majority Lenders otherwise agree.

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<PAGE>

         (b) The definition of Letter of Credit contained in section 1 is
amended to read as follows:

             "Letter of Credit" means the Irrevocable Letter of Credit issued by
     the Agent in favor of the Certificate Trustee.

         (c) The definition of "LOC Commitment" contained in section 1 is
amended to read as follows:

             "LOC Commitment" means the commitment of the Agent to issue, and
     the Commitment of the Lenders to severally participate in, the Letter of
     Credit. The LOC Commitment is initially $10,500,000. The LOC Commitment is
     a subfacility of the Revolving Loan Commitment rather than a separate,
     independent commitment.

         (d) The definition of "Transferred Loan" contained in section 1 is
amended to read as follows:

             "Transferred Loan" means an industrial development revenue bond
     issued by a Wisconsin municipality which the Company has sold to the trust
     created under the Indenture.

         (e) The definition of "Transferred Loan Borrowing Base Amount"
contained in section 1 is amended to read as follows:

             "Transferred Loan Borrowing Base Amount" means the sum of the
     Transferred Loan Values for all outstanding Transferred Loans.

         (f) Section 2.1(c)(i) is amended to read as follows:

             (i) Issuance. The Agent will issue the Letter of Credit, subject to
     the terms and conditions hereof, at any time during the period from the
     Closing Date to the Maturity Date; provided that:

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<PAGE>

                 [1] The amount available for drawing under the Letter of Credit
          shall not exceed the LOC Commitment;

                 [2] The amount available for drawing plus the aggregate
          outstanding principal balance of all Revolving Loans shall not exceed
          the lesser of [a] the Revolving Loan Commitment then in effect and [b]
          the Borrowing Base Amount as shown on the Borrowing Base Certificate
          most recently furnished to the Agent by the Company;

                 [3] The Letter of Credit and all proceedings related thereto
          shall be satisfactory in form and content to the Agent;

                 [4] At or prior to the issuance date of the Letter of Credit
          the Agent shall have received [a] a copy of the Indenture, duly
          executed by the Company and the Certificate Trustee, [b] an
          application from the Company requesting the issuance of the Letter of
          Credit and [c] a certificate, signed by the President of the Company,
          to the effect that on the issuance date the representations and
          warranties of the Company set forth in this Agreement are true and
          correct in all material respects and that no Default or Event of
          Default exists; and

                 [5] The conditions set forth in section 4.2 of this Agreement
          have been satisfied.

         (g) Sections 2.13 and 2.14 are amended to read as follows:

             2.13 Capital Adequacy. As used in this section, the term
     "Regulatory Change" means any change enacted or issued after the date of
     this Agreement of any (or the adoption after the date of this Agreement of
     any new) federal or state law, regulation, interpretation, direction,
     policy or guideline, or any court decision, which affects (or, in the case
     of a court decision would, if the decision were applicable to any Lender,
     affect) the treatment of any Revolving Loan, the Letter of Credit or any
     commitment of any Lender hereunder as an asset or other item included for
     the purpose of calculating the appropriate amount of capital to be
     maintained by such

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<PAGE>

     Lender or any corporation controlling such Lender. If such Regulatory
     Change has the effect of reducing the rate of return on such Lender's or
     such corporation's capital as a consequence of the Revolving Loans, the
     Letter of Credit or commitments of such Lender hereunder to a level below
     that which such Lender or such corporation could have achieved but for such
     Regulatory Change (taking into account such Lender's or such corporation's
     policies with respect to capital adequacy) by an amount deemed in good
     faith by such Lender to be material, then from time to time following
     notice by such Lender to the Company of such Regulatory Change, within ten
     days after demand from such Lender, the Company shall pay to such Lender
     such additional amount or amounts as will compensate such Lender or such
     corporation, as the case may be, for such reduction. Such notice (which
     shall include calculations in reasonable detail) shall, in the absence of
     manifest error, be conclusive and binding on the Company.

             2.14 Yield Protection. If any law or any governmental rule,
     regulation, policy, guideline or directive (whether or not having the force
     of law), or any interpretation thereof, or the compliance of any Lender
     therewith,

         (a) subjects any Lender to any tax, duty, charge or withholding on or
from payments due from the Company (excluding federal taxation of the overall
net income of any Lender and any such tax, duty, charge or withholding in effect
as of the date of this Agreement), or changes the basis of taxation of payments
to any Lender in respect of its Revolving Loans, the Letter of Credit or other
amounts due it hereunder (excluding federal taxation of the overall net income
of any Lender);

         (b) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Lender (other
than reserves and assessments taken into account in determining the interest
rate applicable to LIBOR Rate Loans) with respect to its Revolving Loans or the
Letter of Credit; or

         (c) imposes any other condition the result of which is to increase the
cost to any Lender of making, funding or maintaining the Revolving Loans or the
Letter of Credit or reduces any amount received by any Lender in connection with
the Revolving Loans or the Letter of Credit

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<PAGE>

or requires any Lender to make any payment calculated by reference to the amount
of Revolving Loans held or interest received by it or by reference to the amount
of such Lender's participation in the Letter of Credit, by an amount deemed
material by such Lender;

then, within 15 days of demand by such Lender, the Company shall pay such Lender
that portion of such increased expense incurred or reduction in an amount
received which such Lender determines is attributable thereto. Such notice
(which shall include calculations in reasonable detail) shall, in the absence of
manifest error, be conclusive and binding on the Company.

         (h) Section 5.13 of the Credit Agreement is created and reads as
follows:

             5.13 Compliance with Indenture. Timely (subject to any applicable
     grace periods provided for therein) comply with all of the Company's
     obligations under the Indenture.

         (i) Section 6.6 is amended by deleting the "and" at the end of
subsection (f) thereof, deleting the "." at the end of subsection (g) thereof,
inserting a ";" in its place, and creating a new subsection (h) to read as
follows:

             and (h) acquisition of any Junior Certificate (as defined in the
     Indenture) of any Series (as defined in the Indenture) in connection with
     the transfer by the Company of any Transferred Loan to the trust created
     under the Indenture.

         (j) Section 6.17 of the Credit Agreement is created to read as follows:

             6.17 No Amendment to Indenture or Transferred Loans. Amend, modify,
     supplement or revise the Indenture or the terms of any Transferred Loan,
     (a) at any time that a Default or Event of Default exists hereunder, or (b)
     if no Default or Event of Default then exists, if such amendment,
     modification, supplementation or revision would (i) alter any of the "money
     terms" under the Indenture, including, the rate of interest payable
     thereunder, the amount of, or schedule for the repayment of the principal
     thereof, or the amount of any fees payable thereunder, (ii) require any
     amendment or modification to any of the terms of the Letter of Credit or

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<PAGE>

     (iii) otherwise adversely affect the rights or remedies of the Agent or the
     Lenders with respect to any Transferred Loan.

         (k) Section 9.2 of the Credit Agreement is revised to read as follows:

             9.2 Indemnification. The Company agrees to defend, indemnify and
     hold harmless the Agent, the Collateral Custodian, the Lenders and their
     respective directors, officers, employees and agents from and against any
     and all loss, cost, expense or liability (including reasonable attorneys'
     fees) incurred in connection with any and all claims or proceedings
     (whether brought by a private party or governmental agency) as a result of,
     or arising out of or relating to:

                 (a) bodily injury, property damage, abatement or remediation,
          environmental damage or impairment or any other injury or damage
          resulting from or relating to any hazardous or toxic substance or
          contaminated material (as determined under Environmental Laws) located
          on or migrating into, from or through property previously, now or
          hereafter owned or occupied by the Company, which the Agent or any
          Lender may incur due to the making of the Revolving Loans, the
          exercise of any of its rights under the Security Documents, or
          otherwise;

                 (b) any transaction financed or to be financed, in whole or in
          part, directly or indirectly, with the proceeds of any Revolving Loan;

                 (c) any claim that the offering, issuance, placement or sale of
          Commercial Paper, or any document used in connection therewith,
          resulted in a violation of law, including any federal or state
          securities law;

                 (d) the entering into, performance of and exercise of their
          rights under this Agreement or any other Loan Document by the Agent,
          the Collateral Custodian and the Lenders;

                 (e) the execution and delivery or transfer of, or payment or
          failure to pay under, the Letter of Credit; provided, however, that
          the Company shall not be required to indemnify the Agent or the
          Lenders for any claims, damages, losses, liabilities, costs or
          expenses to the

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<PAGE>

          extent, but only to the extent, caused by (i) the willful misconduct
          or gross negligence of the Agent in determining whether a draw or
          certificate presented under the Letter of Credit complied with the
          terms of the Letter of Credit or (ii) the Agent's willful failure to
          pay under the Letter of Credit after the presentation to it by the
          Certificate Trustee of a draw and certificate strictly complying with
          the terms and conditions of the Letter of Credit; and

                 (f) the issuance and sale of the Certificates of Participation
          in the trust created under the Indenture, the issuance of the Letter
          of Credit or the consummation of the transactions contemplated by the
          Indenture; provided, however, that the Company shall not be required
          to indemnify the Agent or the Lenders for any claims, damages, losses,
          liabilities, costs or expenses to the extent, but only to the extent,
          caused by (i) any misstatement of a material fact concerning the Agent
          which was made or furnished by the Agent or (ii) any failure by the
          Agent to state a material fact concerning the Agent, in connection
          with the sale of such Certificates of Participation.

                     This indemnity will survive foreclosure of any security
          interest or mortgage or conveyance in lieu of foreclosure and the
          repayment of the Revolving Loans and the discharge and release of the
          Security Documents.

         (l) References in the Loan Documents to "a Letter of Credit," "each
Letter of Credit" and "the Letters of Credit" shall refer to the Letter of
Credit.

         (m) Exhibit D attached hereto shall be deemed to be an Exhibit to the
Credit Agreement and shall replace its predecessor attached thereto.

     3.  Effectiveness of First Amendment. This First Amendment shall become
effective upon its execution and delivery by the Company, the Lenders and the
Agent and satisfaction of the following conditions:

         (a) Closing Certificate of the Company. The Agent shall have received
copies for each of the Lenders, certified by the Secretary of the Company to be
true and correct and in full force and effect, of (i) a statement to the effect
that the Articles of Incorporation and By-Laws of the Company delivered to the
Lenders on April 30, 1999 have not been amended since that date and remain in
full force and effect as of the date hereof; (ii) resolutions of the Board of
Directors

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<PAGE>

of the Company authorizing the issuance, execution and delivery of this First
Amendment; and (iii) a statement containing the names and titles of the officer
or officers of the Company authorized to sign such documents, together with true
signatures of such officers.

         (b) Ancillary Documents. The Agent shall have received such additional
documents, agreements, instruments, certifications and opinions of counsel as
the Agent may reasonably request in connection with the transaction contemplated
by the Indenture and the issuance of the Letter of Credit.

         (c) Proceedings Satisfactory. All other proceedings contemplated by
this First Amendment shall be satisfactory to the Lenders and the Agent, and the
Lenders and the Agent shall have received such other information relating hereto
as the Lenders or the Agent may reasonably request.

     4.  Representations and Warranties. The Company represents and warrants to
the Lenders and the Agent that:

         (a) The execution and delivery of this First Amendment and related
documents, and the performance by the Company of its obligations thereunder, are
within its corporate power, have been duly authorized by proper corporate action
on the part of the Company, are not in violation of any existing law, rule or
regulation of any governmental agency or authority, any order or decision of any
court, the Articles of Incorporation or By-Laws of the Company or the terms of
any agreement, restriction or undertaking to which the Company is a party or by
which it is bound, and do not require the approval or consent of the
shareholders of the Company, any governmental body, agency or authority or any
other person or entity; and

         (b) The representations and warranties contained in the Loan Documents
are true and correct in all material respects as of the date of this First
Amendment except (i) the representations and warranties contained in section 3.3
of the Credit Agreement shall apply to the most recent financial statements
delivered by the Company to the Lenders pursuant to sections 5.1 and 5.2 of the
Credit Agreement and (ii) for changes contemplated or permitted by the Loan
Documents and, to the Company's knowledge, no condition exists or event or act
has occurred that, with or without the giving of notice or the passage of time,
would constitute an Event of Default under the Credit Agreement.

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<PAGE>

     5.  Costs and Expenses. The Company agrees to pay to the Agent, on demand,
all costs and expenses (including reasonable attorneys' fees) paid or incurred
by the Agent in connection with the negotiation, execution and delivery of this
First Amendment.

     6.  Full Force and Effect. The Credit Agreement, as amended hereby, remains
in full force and effect.

     7.  Counterparts. This First Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of parties hereto may execute this First Amendment by signing any such
counterpart.

           [Intentionally Left Blank, Signatures Appear on Next Page]

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<PAGE>

                                        BANDO MCGLOCKLIN SMALL BUSINESS LENDING
                                        CORPORATION

                                        BY
                                          --------------------------------------
                                          Its
                                             -----------------------------------

                                        FIRSTAR BANK, N.A., (formerly known
                                        as Firstar Bank Milwaukee, N.A.), as the
                                        Agent and a Lender

                                        BY
                                          --------------------------------------
                                          Its
                                             -----------------------------------

                                        U.S. BANK NATIONAL ASSOCIATION
                                        (formerly known as First Bank National
                                        Association)

                                        BY
                                          --------------------------------------
                                          Its
                                             -----------------------------------

                                        LASALLE BANK NATIONAL
                                        ASSOCIATION (formerly known
                                        as LaSalle National Bank)

                                        BY
                                          --------------------------------------
                                          Its
                                             -----------------------------------

                                        THE HUNTINGTON NATIONAL BANK

                                        BY
                                          --------------------------------------
                                          Its
                                             -----------------------------------

                                        M&I MARSHALL & ILSLEY BANK

                                        BY
                                          --------------------------------------
                                          Its
                                             -----------------------------------

                                        BY
                                          --------------------------------------
                                          Its
                                             -----------------------------------

                                       S-1AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

     AMENDED AND RESTATED EMPLOYMENT  AGREEMENT (this "Agreement"),  dated as of
January 12, 2001, by and between  Pharmaceutical  Resources,  Inc., a New Jersey
corporation ("Resources"), and Kenneth I. Sawyer ("Executive").

                                R E C I T A L S :

     A. WHEREAS,  Par  Pharmaceutical,  Inc. ("Par" and together with Resources,
the "Employer") and Executive entered into an Employment Agreement,  dated as of
October 14, 1992 (the "October  1992  Agreement"),  pursuant to which  Executive
provided  services  to  Employer  and its  existing  subsidiaries,  entities  or
organizations  hereafter formed,  organized or acquired by Resources directly or
indirectly  (all  such  existing  subsidiaries  and all such  hereafter  formed,
organized or acquired corporations,  entities or organizations being hereinafter
individually  referred to as a "Subsidiary" and collectively  referred to as the
"Subsidiaries");

     B.  WHEREAS,  on April 30,  1998.  Employer and  Executive  entered into an
amendment to the October 1992 Agreement (the "April Amendment"); and

     C. WHEREAS,  Resources  and Executive  desire to supersede the October 1992
Agreement,  as  previously  amended  by the  April  Amendment  on the  terms and
conditions set forth herein.

     In  consideration  of the mutual  promises  herein  contained,  the parties
hereto hereby agree as follows:

     1. Employment.

          1.1.  General.  Until the  earlier to occur of a Change of Control (as
defined  below),  the  election  by the Board of  Directors  of  Resources  (the
"Board") of a new Chief  Executive  Officer or September  30, 2001 (the "Initial
Period"),  Resources  hereby employs  Executive in the capacities of Chairman of
the Board and Chief  Executive  Officer  of  Resources.  Following  the  Initial
Period, unless otherwise terminated pursuant to this Agreement, Resources hereby
employs  Executive  in the  capacity  of  Chairman  of  the  Board  at the  same
compensation  rate and benefits which Executive earned during the Initial Period
as Chairman of the Board and Chief  Executive  Officer of  Resources.  Executive
hereby  accepts  such  employment  subject  to the terms and  conditions  herein
contained.  In all such  capacities,  Executive  will perform and carry out such
duties and  responsibilities  as may be assigned to him from time to time by the
Board reasonably  consistent with Executive's title and this Agreement and shall
report only to the Board.

          1.2. Board and Board  Committees.  Resources will use its best efforts
to cause  Executive to be elected and  re-elected to the Board during his period
of employment with Resources.

          1.3. Time Devoted to Position.  Executive,  during the Initial Period,
will devote  substantially all of his business time, attention and skills to the
business and affairs of Resources.  Following the Initial Period, Executive will
devote  only such  time as  Executive,  in his sole  discretion,  determines  is
reasonably  necessary to perform the duties of Chairman of the Board,  including
those duties  assigned to him by the Board in such capacity for which  Executive
has received  reasonable notice,  which shall be limited to regulatory and legal
matters and  strategic  planning.  In addition,  following  the Initial  Period,
Executive will be permitted to engage in other  employment  activities  provided
such  activities do not directly  compete with the business of Resources and its
Subsidiaries as such business is conducted on the date of this Agreement.

     2.   Compensation and Benefits.

          2.1. Salary. At all times Executive is employed hereunder (both during
and following the Initial Period and regardless of the title Executive then has)
Employer will pay to Executive,  and Executive will accept, as full compensation
for any and all  services  rendered and to be rendered by him during such period

<PAGE>

to  Resources  in all  capacities,  including,  but not limited to, all services
which may be rendered by him to any  Subsidiary  and all  services  which may be
rendered  by him as an  officer  of  Resources  or  member  of the  Board or any
committee thereof, (i) a base salary at the annual rate of $395,163,  or at such
increased  rate as the Board of Resources  (through its  Compensation  and Stock
Option Committee), in its sole discretion, may hereafter from time to time grant
to Executive,  subject to adjustment in accordance with Section 2.1.1 hereof (as
so adjusted,  the "Base  Salary");  and (ii) the  additional  bonus and benefits
hereinafter  set forth in this  Section 2. The Base  Salary  shall be payable in
accordance with the regular payroll practices of Resources  applicable to senior
executives,  less  such  deductions  as  shall be  required  to be  withheld  by
applicable law and regulations or otherwise.

          2.1.1  Adjustments in Base Salary.  Commencing on October 1, 2001, and
on each October 1 thereafter  during the Employment Period (as defined below) or
any extension thereof, the Base Salary shall be increased by that percentage, if
any, by which the Consumer Price Index, Urban Wage Earners and Clerical Workers,
for  the New  York  City  metropolitan  area,  published  by the  United  States
Government  for the month of  September  of such year exceeds such Index for the
immediately preceding September.

          2.2 Bonus. Subject to Section 3.3 hereof,  Executive shall be entitled
to an annual  bonus  during  the  Employment  Period in such  amount (if any) as
determined by the Board of Resources  based on such  performance  criteria as it
deems appropriate,  including Employer's earnings,  financial condition, rate of
return on equity and compliance with regulatory requirements.

          2.3. Executive Benefits.

               2.3.1. Expenses.  Resources will promptly reimburse Executive for
expenses he reasonably  incurs in connection  with the performance of his duties
(including  business  travel  and  entertainment  expenses)  hereunder,  all  in
accordance with Resources' policy with respect thereto as in effect from time to
time.

               2.3.2. Employer Plans.  Executive will be entitled to participate
in such  employee  benefit and welfare  plans and programs as Resources may from
time to time  offer  or  provide  to  executive  officers  of  Resources  or its
Subsidiaries,  including,  but not limited to,  participation in life insurance,
health  and  accident,  medical  plans  and  programs  and  profit  sharing  and
retirement plans.

               2.3.3.  Vacation.  During the Initial  Period,  Executive will be
entitled to such vacation time as may be determined to be in the best  interests
of  Executive  and  Resources,  but in no case less  than a pro rated  amount of
vacation equal to four weeks vacation for a 12-month period.

               2.3.4.  Automobile.   Resources  will  either  buy  or  lease  an
automobile for Executive's use and reimburse  Executive for all expenses related
thereto,  all in accordance with Employer's policy for its executive officers as
in effect from time to time.

               2.3.5.  Note  Forgiveness.  Resources  shall  forgive  the  final
one-third  principal amount of that certain Amended and Restated Promissory Note
dated  January 1, 1999,  made by Executive in favor of Resources  (plus  accrued
interest  on the  forgiven  portion  thereof)  in equal  monthly  amounts  until
September  30,  2001 at which  time said Note  shall be  deemed  fully  paid and
cancelled;  provided,  that, if Executive is  terminated  prior to such date the
entire remaining unpaid balance,  including accrued interest  thereon,  shall be
forgiven and cancelled  unless such termination was for Cause (as defined below)
prior to the end of the Initial Period.

     3.   Employment Period; Termination.

          3.1.  Employment  Period.   Executive's   employment  hereunder  shall
commence  on the date hereof and shall  continue  until  terminated  pursuant to
Section 3.2 hereof (the Initial Period,  together with any subsequent employment
period, being referred to herein as the "Employment  Period"). If the Employment
Period is  extended  beyond the  Initial  Period,  such  employment  shall be as
Chairman  of the  Board of  Resources  only but at the  compensation  rates  and
benefits  set forth in  Section 2 of this  Agreement.  Upon  termination  of the
Employment  Period  pursuant to Sections 3.2.1 through 3.2.6 hereof,  inclusive,
Executive  will be released  from any duties  hereunder  (except as set forth in
Section 4 hereof) and the  obligations  of Resources to Executive will be as set
forth in Section 3.3 hereof.

                                       2
<PAGE>

          3.2. Events of Termination.  The Employment Period will terminate upon
the occurrence of any one or more of the following events:

               3.2.1.  Death. In the event of Executive's  death, the Employment
Period will terminate on the date of his death.

               3.2.2.  Without Cause By  Executive.  Executive may terminate the
Employment  Period at any time during such Period for any reason  whatsoever  by
giving a Notice of  Termination  to Resources.  The date of  termination  of the
Employment Period pursuant to this Section 3.2.2 shall be 30 days after the date
of receipt by Resources of the Notice of Termination.

               3.2.3.  Disability.  In the event of  Executive's  Disability (as
hereinafter defined), Resources will have the option to terminate the Employment
Period by giving a Notice of Termination (as defined in Section 3.4.2 hereof) to
Executive.  The Notice of  Termination  shall  specify the date of  termination,
which  date  shall not be  earlier  than  thirty  (30) days  after the Notice of
Termination is given.  For purposes of this  Agreement,  "Disability"  means the
inability of Executive for 180  consecutive  days to  substantially  perform his
duties hereunder as a result of a physical or mental illness,  all as determined
in good faith by the Board of Resources.

               3.2.4.  Cause.  Resources  may,  at  its  option,  terminate  the
Employment  Period for "Cause"  based on objective  factors  determined  in good
faith by a  majority  of the  Board of  Resources  as set  forth in a Notice  of
Termination to Executive  specifying the reasons for termination and the failure
of the  Executive  to cure the same  within ten (10) days of his  receiving  the
Notice of  Termination;  provided,  that in the event the Board of  Resources in
good  faith  determines  that  the  underlying   reasons  giving  rise  to  such
determination  cannot be cured,  then said cure  period  shall not apply and the
Employment  Period  shall  terminate on the date of  Executive's  receipt of the
Notice of Termination.  For purposes of this Agreement, "Cause" shall be limited
to willful  misconduct by Executive  which results in material harm to Resources
and/or a material violation by Executive of the provisions of Section 4 hereof.

               3.2.5. Without Cause By Resources.  Resources may, at its option,
terminate the Employment  Period for any reason or no reason  whatsoever  (other
than for the reasons set forth elsewhere in this Section 3.2) by giving a Notice
of Termination to Executive. The Notice of Termination shall specify the date of
termination,  which date shall not be earlier  than  thirty  (30) days after the
Notice of Termination is given.

               3.2.6. Resources' Material Breach.  Executive may, at his option,
terminate  the  Employment  Period  upon  Resources'  material  breach  of  this
Agreement and the  continuation of such breach for more than ten (10) days after
written demand for cure of said breach is given to Resources by Executive (which
demand will identify the manner in which Employer has  materially  breached this
Agreement);  provided,  that  no  such  demand  will be  required  if  Executive
determines in good faith that such material breach is not capable of being cured
by Employer within said ten (10) day period.  Employer's material breach of this
Agreement  shall include,  but not be limited to, (i) the failure of Employer to
make any payment which it is required to make  hereunder to Executive  when such
payment is due or within two business days  thereafter;  (ii) the  assignment to
Executive without Executive's express written consent of any duties inconsistent
with his positions,  duties,  responsibilities  and status with  Employer,  or a
change in Executive's reporting responsibilities, titles or offices or any plan,
act, scheme or design to constructively  terminate the Executive, or any removal
of Executive  from or any failure to use its best efforts to re-elect  Executive
to any of such  positions,  except in  connection  with the  termination  of the
Employment  Period  by  Employer  for  Cause or  Disability  or as a  result  of
Executive's  death or voluntary  resignation or by Executive other than pursuant
to this Section 3.2.6; and (iii) a reduction by the Employer in Executive's Base
Salary.

                                       3
<PAGE>

               3.3. Certain Obligations of Employer Following Termination of the
Employment  Period.  Following  termination of the  Employment  Period under the
circumstances  described  below,  Employer  will pay to Executive  the following
compensation and provide the following  benefits in full  satisfaction and final
settlement of any and all claims and demands that Executive now has or hereafter
may have hereunder against Resources.

               3.3.1.  For  Cause.  In the event that the  Employment  Period is
terminated (i) For Cause prior to the end of the Initial Period,  then Resources
will pay to Executive or his estate, as the case may be, Base Salary through the
date of  termination  or (ii) For Cause  subsequent  to the Initial  Period then
Resources will pay to Executive in a single lump sum (x) Base Salary through the
date of termination and (y) $1,000,000.

               3.3.2.  Without Cause by Resources;  Material Breach by Employer;
Death,  Disability.  In the event that the  Employment  Period is  terminated by
Resources  pursuant to Section  3.2.5 hereof,  by Executive  pursuant to Section
3.2.6 hereof, by reason of Executive's death pursuant to Section 3.2.1 hereof or
by reason of Executive's Disability pursuant to Section 3.2.3. hereof,  Employer
will pay to  Executive,  following  the Date of  Termination,  a lump sum amount
equal to (x) the aggregate Base Salary through such Date of Termination  and (y)
$1,000,000.  In  addition,  Resources  shall pay, on behalf of  Executive  for a
period  equal to 12 months  from the Date of  Termination,  all life  insurance,
medical,  health  and  accident,  and  disability  plans and  programs  in which
Executive  was  entitled  to  participate  immediately  prior  to  the  Date  of
Termination;  provided,  that  Executive's  continued  participation is possible
under the general terms and provisions of such plans and programs.  In the event
that Executive's participation in any such plan or program is barred, Resources,
at its sole  cost  and  expense,  will use its  reasonable  efforts  to  provide
Executive  with  benefits  substantially  similar to those which  Executive  was
entitled  to  receive  under  such  plans and  programs.  In the event  that the
Employment Period is terminated  pursuant to Section 3.2.3 hereof  (Disability),
the Executive  will also be entitled to receive any unpaid  disability  benefits
under any insurance program in effect on the date of termination.

               3.3.3.  Without  Cause  By  Executive.  In  the  event  that  the
Employment  Period is terminated by Executive  pursuant to Section 3.2.2 hereof,
(i) prior to the end of the Initial Period, then Resources will pay to Executive
the Base Salary and the  benefits  set forth in Sections  2.3.1 and 2.3.2 hereof
through the Date of Termination or (ii) subsequent to the Initial  Period,  then
Resources  will pay to Executive in a single lump sum an amount equal to (x) the
Base Salary and the benefits set forth in Section  2.3.1 and 2.3.2  through such
Date of Termination and (y) $1,000,000.

     3.4    Definitions.

               3.4.1.  "Change of  Control"  Defined.  A "Change in  Control" of
Resources means (A) the approval by the stockholder(s) of Resources of the sale,
lease,   exchange  or  other   transfer   (other   than   pursuant  to  internal
reorganization) by Resources or Par of all or substantially all of its assets to
a  single  purchaser  or to a group  of  associated  purchasers;  (B) the  first
purchase of shares of equity securities of Par or Resources pursuant to a tender
offer or exchange  offer (other than an offer by Par or Resources)  for at least
fifteen (15%) of the equity securities of Par or Resources;  (C) the approval by
the stockholder(s) of Resources of an agreement for a merger or consolidation in
which neither Par nor Resources will survive as an  independent,  publicly-owned
corporation;  (D) the  acquisition  (including by means of a merger) by a single
purchaser or a group of associated  purchasers of securities of Par or Resources
from either Par or Resources or any third party  representing  thirty-five (35%)
percent  or more of the  combined  voting  power of Par's (or  Resources')  then
outstanding equity securities in one or a related series of transactions  (other
than  pursuant  to an  internal  reorganization);  or  (E)  the  change  of  the
membership  of a majority of the Board of Par or Resources  during any period of
two consecutive  years,  unless the election,  or the nomination for election by
Par's or Resources' stockholders, of each new director was approved by a vote of
at least  two-thirds of the  directors of  Resources'  Board still in office who
were directors of Resources at the beginning of the period.

               3.4.2. "Notice of Termination"  Defined.  "Notice of Termination"
means a written notice which indicates the specific termination provision relied
upon by Resources or Executive and,  except in the case of termination  pursuant
to Sections 3.2.1, 3.2.2 or 3.2.5 hereof,  which sets forth in reasonable detail
the facts and  circumstances  claimed to provide a basis for  termination of the
Employment Period under the termination provision so indicated.

               3.4.3. "Date of Termination" Defined. "Date of Termination" means
such date as the Employment  Period is terminated in accordance with Section 3.2
hereof; provided,  however, that in the event that within thirty (30) days after
any  Notice  of  Termination  is  given,  the  party  receiving  such  Notice of
Termination  notifies  the other  party  that a dispute  exists  concerning  the
termination,  the Date of  Termination  will be the date on which the dispute is
finally  determined,  either by mutual written  agreement of the parties or by a
final  judgment,  order or decree of a court of competent  jurisdiction  entered
upon an  arbitration  award rendered in an  arbitration  proceeding  pursuant to
Section 5.13 hereof.
                                       4

<PAGE>

    4.   Confidentiality and Nonsolicitation.

               4.1.    "Confidential    Information"   Defined.    "Confidential
Information"  means  any and all  information  (oral  or  written)  relating  to
Resources or any Subsidiary or any person  controlling,  controlled by, or under
common  control with  Resources  or any  Subsidiary  or any of their  respective
activities,  including, but not limited to, information relating to: technology,
research,  test procedures and results,  machinery and equipment;  manufacturing
processes;   financial  information;   products;  identity  and  description  of
materials  and  services  used;  purchasing;   costs;  pricing;   customers  and
prospects;  advertising,  promotion and  marketing;  and selling,  servicing and
information   pertaining  to  any   governmental   investigation,   except  such
information generally in the public domain (such information not being deemed to
be  in  the  public  domain  merely  because  it is  embraced  by  more  general
information  which is in the public domain),  other than as a result of a breach
of the provisions of Section 4.2 hereof.

               4.2. Non-disclosure of Confidential  Information.  Executive will
not at any time (other than as may be required or appropriate in connection with
the performance by him of his duties  hereunder),  directly or indirectly,  use,
communicate,  disclose or disseminate any Confidential Information in any manner
whatsoever  (except as may be required  under legal process by subpoena or other
court order).

               4.3.  Certain  Activities.  Executive will not, while employed by
Resources and for the period,  if any, during which he is paid on a timely basis
(subject to any legal offsets by  Resources)  pursuant to Section 3.3 (unless he
shall be terminated  for cause  pursuant to Section 3.2.4 hereof,  in which case
for a period of one (1) year  following  the Date of  Termination),  directly or
indirectly,  hire, offer to hire, entice away or in any other manner persuade or
attempt to persuade any officer,  employee,  agent,  lessor,  lessee,  licensor,
licensee, customer,  prospective customer or supplier of Resources or any of its
Subsidiaries to discontinue or alter his or its  relationship  with Resources or
any of its Subsidiaries.

               4.4  Non-Competition.  Executive  will  not,  while  employed  by
Resources and for the period,  if any, during which he is paid on a timely basis
(subject to any legal offsets by the Resources)  pursuant to Section 3.3 (unless
he shall be terminated for cause pursuant to Section 3.2.4 hereof, in which case
for a period  of one (1) year  following  the Date of  Termination),  engage  or
participate  in,  directly  or  indirectly  (whether  as an  officer,  director,
employee, partner, consultant,  equityholder, lender or otherwise), any business
in the generic drug industry within the States of New York or New Jersey.

               4.5.  Injunctive Relief. The parties hereby acknowledge and agree
that (a)  Resources  will be  irreparably  injured  in the  event of a breach by
Executive of any of his obligations  under this Section 4; (b) monetary  damages
will not be an  adequate  remedy  for any such  breach;  (c)  Resources  will be
entitled to  injunctive  relief,  in addition to any other  remedy  which it may
have, in the event of any such breach, and (d) the existence of any claims which
Executive  may have against  Resources or the  Subsidiaries,  whether under this
Agreement or otherwise, will not be a defense to the enforcement by Resources of
any of its rights under this Section 4.

               4.6.  Non-exclusivity  and  Survival.  The covenants of Executive
contained  in this  Section  4 are in  addition  to,  and not in  lieu  of,  any
obligations  which Executive may have with respect to the subject matter hereof,
whether by contract,  as a matter of law or  otherwise,  and such  covenants and
their  enforceability  will survive any termination of the Employment  Period by
either party and any  investigation  made with respect to the breach  thereof by
Resources at any time.

                                       5
<PAGE>

      5.  Miscellaneous Provisions.

               5.1. Severability. If, in any jurisdiction, any term or provision
hereof is determined to be invalid or unenforceable, (a) the remaining terms and
provisions   hereof   shall  be   unimpaired,   (b)  any  such   invalidity   or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other  jurisdiction,  and (c) the invalid or
unenforceable  term or provision  shall, for purposes of such  jurisdiction,  be
deemed  replaced by a term or provision that is valid and  enforceable  and that
comes closest to expressing the intention of the invalid or  unenforceable  term
or provision.

               5.2. Execution in Counterparts. This Agreement may be executed in
one or more  counterparts,  and by the  different  parties  hereto  in  separate
counterparts,  each of which shall be deemed to be an original  but all of which
taken together  shall  constitute one and the same agreement (and all signatures
need not  appear  on any one  counterpart),  and  this  Agreement  shall  become
effective when one or more  counterparts  has been signed by each of the parties
hereto and delivered to each of the other parties hereto.

               5.3.   Notices.   All  notices,   requests,   demands  and  other
communications hereunder shall be in writing and shall be deemed duly given when
delivered by hand, or when  delivered if mailed by registered or certified  mail
or private courier  service,  postage  prepaid,  return receipt  requested,  via
facsimile (with confirmed answerback) as follows:

         If to Resources, to:

                  Pharmaceutical Resources, Inc.
                  One Ram Ridge Road
                  Spring Valley, New York  10977
                  Attention:   Vice President - Finance and Administration

                  Telecopy No.:  (845) 425-7922

         Copy to:

                  Stephen A. Ollendorff, Esq.
                  c/o Kirkpatrick & Lockhart LLP
                  1251 Avenue of the Americas
                  New York, NY  10022
                  Telecopy No.:  (212) 536-3901

         If to Executive, to:

                  Kenneth I. Sawyer
                  c/o Pharmaceutical Resources, Inc.
                  One Ram Ridge Road
                  Spring Valley, New York  10977

or to such other  address(es)  as a party hereto shall have  designated  by like
notice to the other parties hereto.

                                       6
<PAGE>

               5.4.  Amendment.  No provision of this Agreement may be modified,
amended,  waived or  discharged  in any  manner  except by a written  instrument
executed by both Resources and Executive.

               5.5.  Entire  Agreement.  This Agreement  constitutes  the entire
agreement of the parties hereto with respect to the subject  matter hereof,  and
supersedes all prior agreements and  understandings of the parties hereto,  oral
or written,  including but not limited to the October,  July,  January,  May and
October 1992  Agreements,  with respect to the subject matter hereof.  Executive
and Employee  hereby agree that the October 1992 Agreement is hereby  superseded
and of no further force and effect,  and that this Agreement  shall be effective
as of the date hereof.

               5.6.  Applicable  Law.  This  Agreement  shall be governed by and
construed in  accordance  with the laws of the State of New York  applicable  to
contracts  made  and to be  wholly  performed  therein,  without  regard  to its
conflicts or choice of law provisions.

               5.7.  Headings.  The headings  contained  herein are for the sole
purpose of  convenience  of reference,  and shall not in any way limit or affect
the  meaning  or  interpretation  of any of the  terms  or  provisions  of  this
Agreement.

               5.8.  Binding Effect;  Successors and Assigns.  Executive may not
delegate his duties or assign his rights hereunder. This Agreement will inure to
the benefit of, and be binding  upon,  the parties  hereto and their  respective
heirs, legal representatives,  successors and permitted assigns. Resources shall
require  any  successor  (whether  direct or indirect  and whether by  purchase,
merger,  consolidation or otherwise) to all or substantially all of the business
and/or  assets of Resources,  by an agreement in form and  substance  reasonably
satisfactory  to  Executive,  to  expressly  assume  and agree to  perform  this
Agreement  in the same  manner and to the same extent  that  Resources  would be
required to perform if no such succession had taken place.

               5.9. Waiver,  etc. The failure of either of the parties hereto to
at any time enforce any of the provisions of this Agreement  shall not be deemed
or construed to be a waiver of any such provision,  nor to in any way affect the
validity of this Agreement or any provision hereof or the right of either of the
parties hereto thereafter to enforce each and every provision of this Agreement.
No waiver of any  breach of any of the  provisions  of this  Agreement  shall be
effective unless set forth in a written instrument executed by the party against
whom or which  enforcement  of such waiver is sought,  and no waiver of any such
breach shall be  construed  or deemed to be a waiver of any other or  subsequent
breach.

               5.10. Capacity, etc. Executive and Resources hereby represent and
warrant  to the other  that,  as the case may be:  (a) he or it has full  power,
authority and capacity to execute and deliver this Agreement, and to perform his
or its obligations hereunder; (b) such execution,  delivery and performance will
not (and with the giving of notice or lapse of time or both would not) result in
the breach of any  agreements or other  obligations to which he or it is a party
or he or it is otherwise  bound;  and (c) this Agreement is his or its valid and
binding obligation in accordance with its terms.

               5.12.  Enforcement.  If any  party  institutes  legal  action  to
enforce or interpret the terms and conditions of this Agreement,  the prevailing
party shall be awarded  reasonable  attorneys'  fees at all trial and  appellate
levels,  and the  expenses  and  costs  incurred  by such  prevailing  party  in
connection  therewith.  Venue for any such action shall  exclusively be New York
City, New York.

                                       7
<PAGE>

               5.13. Arbitration.

                    (a) Any dispute under Section 3 of this Agreement, including
but not limited to the  determination by the Board of Resources of a termination
for Cause pursuant to Section 3.2.4 hereof,  or in respect of the breach thereof
will be settled by  arbitration  in the Borough of Manhattan,  City of New York.
The arbitration will be accomplished in the following  manner.  Either party may
serve upon the other party  written  demand  that the  dispute,  specifying  the
nature  thereof,  shall be  submitted to  arbitration.  Within 10 days after the
service of such demand,  each of the parties will  designate an  arbitrator  and
serve written notice of such  appointment  upon the other party. If either party
fails within the specified time to appoint such arbitrator, the other party will
be entitled to appoint both  arbitrators.  The two arbitrators so appointed will
appoint a third arbitrator.  If the two arbitrators appointed fail to agree upon
a third arbitrator within 10 days after their  appointment,  then an application
may be made by either  party  hereto,  upon  notice to the other  party,  to the
American  Arbitration  Association (the "AAA"), or any successor thereto,  or if
the AAA or its successor fail to appoint a third arbitrator within ten (10) days
after such request,  then either party may apply,  with notice to the other,  to
the Supreme Court of the State of New York, New York County (the  "Court"),  for
the appointment of a third arbitrator,  and any such appointment so made will be
binding upon both parties hereto.

                    (b)  The  decision  of the  arbitrators  will be  final  and
binding upon the  parties.  The party  against  whom the award is rendered  (the
"non-prevailing  party")  will  pay  all  fees  and  expenses  incurred  by  the
prevailing  party  in  connection  with  the  arbitration  (including  fees  and
disbursements of the prevailing party's counsel), as well as the expenses of the
arbitration  proceeding.  The  arbitrators  will determine in their decision and
award which of the parties is the prevailing party,  which is the non-prevailing
party,  the  amount of the fees and  expenses  of the  prevailing  party and the
amount of the arbitration  expenses.  The arbitration will be conducted,  to the
extent consistent with this Section 5.13, in accordance with the then prevailing
rules of commercial  arbitration  of the AAA or its successor.  The  arbitrators
will have the right to retain and  consult  experts  and  competent  authorities
skilled in the matters under arbitration,  but all consultations will be made in
the  presence of both  parties,  who will have full right to  cross-examine  the
experts and  authorities.  The  arbitrators  will render their  award,  upon the
concurrence  of at least two of their  number,  not later than  thirty (30) days
after the appointment of the third  arbitrator.  The decision and award shall be
in writing, and counterpart copies shall be delivered to each of the parties. In
rendering  an award,  the  arbitrators  will have no power to modify  any of the
provisions  of  this  Agreement,  and the  jurisdiction  of the  arbitrators  is
expressly  limited  accordingly.  Judgment  may be  entered  on the award of the
arbitrators and may be enforced in any court having jurisdiction.

                                       8
<PAGE>

          IN WITNESS WHEREOF,  this Agreement has been executed and delivered by
the parties hereto as of the date first above written.

                          PHARMACEUTICAL RESOURCES, INC.

                          By: /s/ Mark Auerbach
                             --------------------------------
                              Name:  Mark Auerbach
                                     Authorized Signatory

                          /s/ Kenneth I. Sawyer
                          -------------------------------------
                              KENNETH I. SAWYER

                                       8

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