8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

______________________

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported):  November 18, 2008

PAR PHARMACEUTICAL COMPANIES, INC.

(Exact name of registrant as specified in its charter)

Delaware	File Number 1-10827	22-3122182
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

300 Tice Boulevard, Woodcliff Lake, NJ

07677

   (Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (201) 802-4000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02   Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

On November 18, 2008, the Board of Directors of Par Pharmaceutical Companies, Inc. (the "Company"), upon the recommendation of the Company’s Compensation and Management Development Committee, approved special executive retention awards under the Company's 2004 Performance Equity Plan (as amended and restated as of May 24, 2005) for Paul V. Campanelli, Thomas J. Haughey and John A. MacPhee, each of whom was a named executive officer as identified in the Company’s Proxy Statement filed on April 7, 2008.  In light of the Company’s recent reorganization (as previously reported in the Company’s Form 8-K as filed with the Securities and Exchange Commission on October 14, 2008), these awards were made (i) for the purpose of continuity, to ensure the retention of these officers, and (ii) to recognize expanded responsibilities assumed by these officers.  The Company believes these awards are an important component of its compensation package at a time when the Company is seeking to successfully execute its business strategy.

Executive Officer	Position with the Company	No. of Shares of Restricted Stock	No. of Options Awarded
Paul V. Campanelli	Executive Vice President; President, Generics Division	45,496	102,881
Thomas J. Haughey	Executive Vice President, Chief Administration Officer, General Counsel and Secretary	45,496	102,881
John A. MacPhee	Executive Vice President; President, Strativa Pharmaceuticals	45,496	102,881

Both awards are effective as of the grant date, November 18, 2008, and vest, contingent upon the officer’s continuous employment with the Company, through the third anniversary of the grant date.  However 66-2/3% of the awards will vest if the following conditions are satisfied:  (a)  the officer is continuously employed with the Company through the second anniversary of the grant date and (b) the closing price of the Company’s common stock, as reported on the New York Stock Exchange or such other established stock exchange, exceeds 120% of the closing price of the Company’s common stock on the grant date ($10.99) for at least 20 days during the fiscal quarter ending December 31, 2010.

Additional vesting provisions may apply upon early termination of the officer’s employment in certain circumstances.

The foregoing description of the awards does not purport to be complete and is qualified in its entirety by reference to the Terms of Executive Retention Restricted Shares Award and Terms of Executive Retention Stock Option Award, which are filed herewith as Exhibits 10.1 and 10.2, respectively, and incorporated herein by reference.

Item 9.01

Financial Statements and Exhibits.

(d)

The following exhibits are furnished with this Current Report on Form 8-K:

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Exhibit No.	Description
10.1	Form of Terms of Executive Retention Restricted Shares Award
10.2	Form of Terms of Executive Retention Stock Option Award

Certain statements in this Current Report on Form 8-K constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. To the extent that any statements made in this Current Report on Form 8-K contain information that is not historical, such statements are essentially forward-looking and are subject to certain risks and uncertainties, including the risks and uncertainties discussed from time to time in the Company’s filings with the SEC, including its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Any forward-looking statements included in this Current Report on Form 8-K are made as of the date hereof only, based on information available to the Company as of the date hereof, and, subject to any applicable law to the contrary, the Company assumes no obligation to update any forward-looking statements.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated as of:  November 20, 2008

PAR PHARMACEUTICAL COMPANIES, INC.

(Registrant)

/s/ Thomas J. Haughey

Thomas J. Haughey, Executive Vice President

and General Counsel

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EXHIBIT INDEX

     The following exhibits are furnished with this Current Report on Form 8-K:

Exhibit No.	Description
10.1	Form of Terms of Executive Retention Restricted Shares Award
10.2	Form of Terms of Executive Retention Stock Option Award

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EX-10.1

EXHIBIT 10.1

PAR PHARMACEUTICAL COMPANIES, INC.

TERMS OF EXECUTIVE RETENTION RESTRICTED SHARES AWARD

This document sets forth the terms of the award of Restricted Shares (as defined in Section 1.1 below) granted by PAR PHARMACEUTICAL COMPANIES, INC. (the “Company”) pursuant to a Certificate of Restricted Shares (the “Certificate”) displayed at the website of Smith Barney Benefits Access®.  The Certificate, which specifies the  person to whom the Restricted Shares have been awarded (the “Participant”), other specific details of the award, and the electronic acceptance of the Certificate at the website of Smith Barney, are incorporated herein by reference.

WHEREAS, the Board of Directors (the “Board”) of the Company has authorized and approved the Par Pharmaceutical Companies, Inc. 2004 Performance Equity Plan (the “Plan”), which has been approved by the stockholders of the Company;  

WHEREAS, the Plan, in part, provides for the grant of Restricted Shares to certain employees of the Company and any Subsidiary of the Company;

WHEREAS, pursuant to the Plan, the Committee has approved an award to the Participant of Restricted Shares, designated in the Certificate, on the terms and conditions set forth in the Plan and in these Terms of Executive Retention Restricted Shares Award.  Capitalized terms used but not defined in these Terms shall have the meanings set forth in the Plan.

NOW, THEREFORE, the parties, intending to be legally bound, agree as follows:

1.

RESTRICTED SHARES

1.1

Grant of Restricted Shares.

(a)

Subject to the terms and conditions hereinafter set forth and set forth in the Plan, the Company grants as of the date of grant specified on the Certificate (the “Date of Grant”) to the Participant shares of its common stock, par value $.01 per share (“Common Stock”), specified on the Certificate, and subject to the restrictions set forth in Section 1.2 of these Terms, the terms and conditions of the Plan and the other terms and conditions contained in these Terms (the “Restricted Shares”).  If and when the restrictions set forth in Section 1.2 expire in accordance with these Terms, and upon the satisfaction of all other applicable conditions as to the Restricted Shares, such shares not forfeited pursuant to Section 1.4 hereof shall no longer be considered Restricted Shares for purposes of these Terms.

(b)

As soon as practicable after the Date of Grant, the Company shall direct that a stock certificate or certificates representing the applicable Restricted Shares be registered in the name of, and issued to, the Participant.  Such certificate or certificates shall be held in the custody of the Company or its designee until such Shares have vested (or such applicable portion of the Shares as may become vested) in accordance with the schedule in Section 1.3(a).  On or before the date of acceptance of these Terms, the Participant has delivered to the Company one or more stock powers endorsed in blank relating to the Restricted Shares.

(c)

Each certificate for the Restricted Shares shall bear the following legend (the “Legend”):

The ownership and transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Par Pharmaceutical Companies, Inc. 2004 Performance Equity Plan and the associated Terms of Executive Retention Restricted Shares Award entered into between the registered owner and Par Pharmaceutical Companies, Inc.  Copies of such Plan and Terms are on file in the executive offices of Par Pharmaceutical Companies, Inc., 300 Tice Boulevard, Woodcliff Lake, NJ 07677.

In addition, the stock certificate or certificates for the Restricted Shares shall be subject to such stop-transfer orders and other restrictions as the Company may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which Common Stock is then listed, and any applicable federal or state securities law, and the Company may cause a legend or legends to be placed on such certificate or certificates to make appropriate reference to such restrictions.

(d)

As soon as administratively practicable following the vesting of all or any portion of the Restricted Shares, and upon the satisfaction of all other applicable conditions as to such vested Restricted Shares, including the payment by the Participant of all applicable withholding taxes, the Company shall deliver or cause to be delivered to the Participant a certificate or certificates for the applicable vested Restricted Shares that shall not bear the Legend.  

1.2

Restrictions.

(a)

Beginning with the Date of Grant, the Participant shall have all rights and privileges of a stockholder as to the Restricted Shares, including the right to vote and receive dividends or other distributions with respect to the Restricted Shares, except that the following restrictions shall apply:

(i)  the Participant shall not be entitled to delivery of the certificate or certificates for the Restricted Shares until such Restricted Shares are deemed vested in accordance with the schedule in Section 1.3(a), and are not otherwise

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forfeited pursuant to Section 1.4 hereof and upon the satisfaction of all other applicable conditions;

(ii)  none of the Restricted Shares may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of prior to the date such Restricted Shares are deemed vested in accordance with the schedule in Section 1.3(a), except as provided in Section 8.3 of the Plan or as otherwise permitted by the Committee in its sole discretion or pursuant to rules adopted by the Committee in accordance with the Plan;

(iii)  all shares of Common Stock distributed as a dividend or distribution, if any, with respect to the Restricted Shares prior to the date such Restricted Shares are deemed vested in accordance with the schedule in Section 1.3(a) shall be delivered to and held by the Company and subject to the same restrictions as the related Restricted Shares until the vesting of such Restricted Shares, and subject to the satisfaction of all other applicable conditions; and

(iv)  all of the Restricted Shares shall be subject to forfeiture on the terms and conditions set forth in Section 1.4 hereof; if forfeited, the Restricted Shares shall be returned to the Company and all rights of the Participant with respect to the Restricted Shares shall terminate in their entirety on the terms and conditions set forth in Section 1.4 hereof.

(b)

Any attempt to dispose of Restricted Shares or any interest in the Restricted Shares in a manner contrary to the restrictions set forth in these Terms shall be void and of no effect.

1.3

Vesting.  

(a)

Such portion of the Restricted Shares shall be deemed vested and no longer subject to forfeiture under Section 1.4 hereof or the restrictions set forth in Section 1.2 hereof in accordance with the following schedule:

Vesting Date	Vesting Percentage
Prior to Third Anniversary of Date of Grant	0%
Third Anniversary of Date of Grant	100%

(b)

Notwithstanding paragraph (a) above, if both conditions of (i) and (ii) of this Section 1.3(b) are satisfied, the Participant shall be deemed vested in a number of Restricted Shares equal to 66-2/3% of the total number of Restricted Shares granted in the Certificate and such Shares shall no longer be subject to forfeiture under Section 1.4 hereof or the restrictions set

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forth in Section 1.2 hereof:

(i)  the Committee determines that the Fair Market Value of the Company’s Common Stock exceeds one hundred twenty percent (120%) of the Fair Market Value of the Company’s Common Stock on the Date of Grant (as specified in the Certificate) on at least twenty (20) business days during the fiscal quarter ending on December 31, 2010, and

(ii)  the Participant remains continuously employed with the Company, its Affiliates and/or its Subsidiaries from the Date of Grant through November 18, 2010 or until such time as the condition set forth in (i) above is met.

Any fractional share resulting from the above vesting calculation shall be rounded up to the next whole share.

(c)

Notwithstanding paragraph (a) above, upon a “Change of Control” of the Company, all rights of the Participant to the Restricted Shares that have not vested shall immediately vest and no longer be subject to forfeiture under Section 1.4 hereof or the restrictions set forth in Section 1.2 hereof.  

1.4

Forfeiture.  

(a)

Subject to Section 1.6 hereof, if prior to the date such Restricted Shares are deemed vested in accordance with the schedule in Section 1.3(a), (i) the Participant’s employment with the Company, its Affiliates and/or its Subsidiaries is terminated for any reason, including termination by reason of resignation, other than as specified in subsections (b) or (c) below, (ii) there occurs a material breach of these Terms by the Participant or (iii) the Participant fails to meet the tax withholding obligations described in Section 1.5(b) hereof, all rights of the Participant to the Restricted Shares that have not vested in accordance with Section 1.3 hereof as of the date of such occurrence shall terminate immediately and be forfeited in their entirety.  

(b)

If (i) the Participant’s employment with the Company, its Affiliates and/or its Subsidiaries is terminated for any reason other than death, disability, retirement, resignation or other termination by the Participant, or discharge “for cause”, and (ii) such termination occurs after the second anniversary of the Date of Grant, the Participant shall be deemed vested in a pro rata portion of the Restricted Shares equal to the total number of Restricted Shares granted in the Certificate multiplied by the “Ratio,” and that number of Restricted Shares (to the extent not previously vested in accordance with Section 1.3) shall immediately vest and no longer be subject to forfeiture.  As used herein, “for cause” shall have the same meaning as the term “cause,” “for cause” or such similar term as defined in any agreement between the Company (or any such Affiliate or Subsidiary) and the Participant or, in the event no such agreement exists, based upon objective factors determined in good faith by the Company.  As used herein, “Ratio” shall mean a fraction, the numerator of which is the total number of full calendar months occurring between the Date of Grant and the date of the Participant’s termination of employment, and the denominator of which is thirty-six (36).  Any fractional share resulting from the above calculation shall be rounded up to the next whole share.  Any Restricted Shares not deemed

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vested in accordance with Section 1.3 hereof or this Section 1.4(b) shall terminate immediately and be forfeited in their entirety upon the Participant’s termination of employment with the Company, its Affiliates and/or its Subsidiaries.

(c)

In the event that the Participant’s employment with the Company, its Affiliates and/or its Subsidiaries, is terminated due to the Participant’s death or disability, all rights of the Participant (or, in the event of the Participant’s death, the Participant’s Beneficiary) to the Restricted Shares that have not vested shall immediately vest and no longer be subject to forfeiture.  

(d)

In the event of any forfeiture under this Section 1.4 hereof, the certificate or certificates representing the forfeited Restricted Shares shall be canceled to the extent of any Restricted Shares that were forfeited.

1.5

Withholding.

(a)

The Committee shall determine the amount of any withholding or other tax required by law to be withheld or paid by the Company with respect to any income recognized by the Participant with respect to the Restricted Shares.

(b)

The Participant shall be required to meet any applicable tax withholding obligation in accordance with the provisions of Article 18 of the Plan.

(c)

The Committee shall be authorized, in its sole discretion, to establish such rules and procedures relating to the use of shares of Common Stock to satisfy tax withholding obligations as it deems necessary or appropriate to facilitate and promote the conformity of the Participant’s transactions under the Plan and these Terms with Rule 16b-3 under the Securities Exchange Act of 1934, as amended, if such Rule is applicable to transactions by the Participant.

1.6

Committee’s Discretion.  Notwithstanding any provision of these Terms to the contrary, the Committee shall have discretion under Section 17.1 of the Plan to waive any forfeiture of the Restricted Shares as set forth in Section 1.4 hereof, the restrictions set forth in Section 1.2 hereof and any other conditions set forth in these Terms.

2.

REPRESENTATIONS OF THE PARTICIPANT

The Participant hereby represents to the Company that the Participant has read and fully understands the provisions of these Terms and the Plan and his or her decision to participate in the Plan is completely voluntary.  Further, the Participant acknowledges that the Participant is relying solely on his or her own advisors with respect to the tax consequences of this restricted stock award.

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3.

NOTICES

All notices or communications under these Terms shall be in writing, addressed as follows:

To the Company:

Par Pharmaceutical Companies, Inc.

300 Tice Boulevard

Woodcliff Lake, NJ  07677

Attention:  General Counsel

To the Participant:

Address on file with the Company

Any such notice or communication shall be (a) delivered by hand (with written confirmation of receipt) or sent by a nationally recognized overnight delivery service (receipt requested) or (b) be sent certified or registered mail, return receipt requested, postage prepaid, addressed as above (or to such other address as such party may designate in writing from time to time), and the actual date of receipt shall determine the time at which notice was given.

4.

ASSIGNMENT; BINDING AGREEMENT

These Terms shall be binding upon and inure to the benefit of the heirs and representatives of the Participant and the assigns and successors of the Company, but neither these Terms nor any rights hereunder shall be assignable or otherwise subject to hypothecation by the Participant.

5.

ENTIRE AGREEMENT; AMENDMENT; TERMINATION

These Terms and the Certificate represent the entire agreement of the parties with respect to the subject matter hereof.  The provisions of the Plan are incorporated in these Terms in their entirety.  In the event of any conflict between the provisions of these Terms and the Certificate and the Plan, the provisions of the Certificate or the Plan, as the case may be, shall control.  These Terms may be amended at any time by written agreement of the parties hereto.

6.

GOVERNING LAW

These Terms and their validity, interpretation, performance and enforcement shall be governed by the laws of the State of Delaware other than the conflict of laws provisions of such laws.

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7.

SEVERABILITY

Whenever possible, each provision in these Terms shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of these Terms shall be held to be prohibited by or invalid under applicable law, then (a) such provision shall be deemed amended to accomplish the objectives of the provision as originally written to the fullest extent permitted by law and (b) all other provisions of these Terms shall remain in full force and effect.

8.

NO RIGHT TO CONTINUED EMPLOYMENT OR PARTICIPATION; EFFECT ON OTHER PLANS

These Terms shall not confer upon the Participant any right with respect to continued employment by the Company, its Affiliates or its Subsidiaries or continued participation under the Plan, nor shall it interfere in any way with the right of the Company, its Affiliates and its Subsidiaries to terminate the Participant’s employment at any time.  Payments received by the Participant pursuant to these Terms shall not be included in the determination of benefits under any pension, group insurance or other benefit plan of the Company, its Affiliates or any Subsidiaries in which the Participant may be enrolled or for which the Participant may become eligible, except as may be provided under the terms of such plans or determined by the Board.

9.

NO STRICT CONSTRUCTION

No rule of strict construction shall be implied against the Company, the Committee or any other person in the interpretation of any of the terms of the Plan, these Terms or any rule or procedure established by the Committee.

10.

USE OF THE WORD “PARTICIPANT”

Wherever the word “Participant” is used in any provision of these Terms under circumstances where the provision should logically be construed to apply to the executors, the administrators, or the person or persons to whom the Restricted Shares may be transferred by will or the laws of descent and distribution, the word “Participant” shall be deemed to include such person or persons.

11.

FURTHER ASSURANCES

The Participant agrees, upon demand of the Company or the Committee, to do all acts and execute, deliver and perform all additional documents, instruments and agreements (including, without limitation, stock powers with respect to shares of Common Stock issued as a dividend or distribution on Restricted Shares) that may be reasonably required by the Company or the Committee, as the case may be, to implement the provisions and purposes of these Terms and the Plan.

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IN WITNESS WHEREOF, the parties have duly executed these Terms, as of the day and year first above written.

PAR PHARMACEUTICAL COMPANIES, INC.

Thomas J. Haughey

Executive Vice President and General Counsel

PARTICIPANT

(Acceptance designated electronically at the

website of Smith Barney)

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EX-10.2

EXHIBIT 10.2

PAR PHARMACEUTICAL COMPANIES, INC.

TERMS OF EXECUTIVE RETENTION STOCK OPTION AWARD

This document sets forth the terms of an Option (as defined in Section 1 below) to purchase shares of common stock granted by PAR PHARMACEUTICAL COMPAMIES, INC. (the “Company”) pursuant to a Certificate of Stock Option Grant (the “Certificate”) displayed at the website of Smith Barney Benefits Access®.  The Certificate, which specifies the person to whom the Option is granted (the “Optionee”) and other specific details of the grant, and the electronic acceptance of the Certificate at the website of Smith Barney, are incorporated herein by reference.

WHEREAS, the Board of Directors (the “Board”) of the Company has authorized and approved the Par Pharmaceutical Companies, Inc. 2004 Performance Equity Plan (the “Plan”), which has been approved by the stockholders of the Company;  

WHEREAS, the Plan, in part, provides for the grant of Options to certain employees of the Company and any Subsidiary of the Company;

WHEREAS, pursuant to the Plan, the Committee has approved an award to the Optionee designated in the Certificate of an option to purchase common stock of the Company on the terms and subject to the conditions set forth in the Plan and these Terms of Executive Retention Stock Option Award.  Capitalized terms used but not defined in these Terms or the Certificate shall have the meanings set forth in the Plan.

NOW, THEREFORE, in consideration of the foregoing and of the terms and conditions herein contained, the parties hereto agree as follows:

1.

Grant of Options.

  Subject to the terms and conditions hereinafter set forth and set forth in the Plan, the Company hereby grants as of the date specified on the Certificate (the “Grant Date”) to the Optionee, as a matter of separate agreement and not in lieu of salary, or any other compensation for services, the right and option (the “Option”) to purchase all or any part of an aggregate number of shares of Common Stock (the “Option Shares”) specified on the Certificate on the terms and conditions set forth herein and therein.

2.

Nonqualified Option; Withholding Tax.

  This Option shall not be deemed an “Incentive Stock Option” under the Internal Revenue Code (“Code”).  The Company shall be entitled, if the Compensation and Management Development Committee of the Board of Directors of the Company (the “Committee”) deems it necessary or desirable, to withhold (or secure payment from the Optionee in lieu of withholding) the amount of any withholding or other tax required by law to be withheld or paid by the Company in connection with the issuance of the Option Shares.

3.

Grant Price.

  The grant price of each Option Share shall be the grant price specified on the Certificate.

4.

Exercise Period.

4.1

Grant Expiration Date; Vesting.

4.1.1

Option Term.  Subject to the vesting provisions of Section 4.1.2, the Option shall be exercisable during the period (the “Exercise Period”) commencing on the Grant Date and terminating at the close of business on the date (the “Grant Expiration Date”) specified on the Certificate.  All rights to exercise the Option shall terminate on the Grant Expiration Date.  

4.1.2

Vesting.  

(a)

Service-Based Vesting Schedule.  Subject to this Section 4 and Section 5 hereof, this Option shall be deemed vested and exercisable in accordance with the following schedule:

Vesting Date	Vesting Percentage
Prior to Third Anniversary of the Grant Date	0%
Third Anniversary of the Grant Date	100%

(b)

Accelerated Performance-Based Vesting.  Notwithstanding the vesting schedule in Section 4.1.2(a), if both conditions of (i) and (ii) of this Section 4.1.2(b) are satisfied, the Option shall be deemed vested and exercisable with respect to a number of Option Shares equal to 66-2/3% of the total number of Option Shares granted in the Certificate:

(i)  the Committee determines that the Fair Market Value of the Company’s Common Stock exceeds one hundred twenty percent (120%) of the Option Grant Price (as specified in the Certificate) on at least twenty (20) business days during the fiscal quarter ending on December 31, 2010, and

(ii)  the Optionee remains continuously employed with the Company or any of its subsidiaries from the Grant Date through November 18, 2010 or until such time as the condition set forth in (i) above is met.

Any fractional share resulting from the above vesting calculation shall be rounded up to the next whole share.

(c)

Forfeiture of Option on Termination of Employment.  Any portion of the Option that has not vested in accordance with the schedule in Section 4.1.2(a) or the performance-based vesting provisions of Section 4.1.2(b) prior to the Optionee’s termination of employment for any reason other than as specified in Sections 4.2.5(b) or 4.2.6 shall be forfeited and of no further effect upon such termination.  

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4.2

Effect of Termination of Employment.

4.2.1

Termination Upon Death or Disability.

  Upon the termination of the Optionee's employment by reason of the death or disability (for purposes of the Plan) of the Optionee, this Option or any unexercised portion thereof, which was otherwise exercisable on the date of such termination, shall terminate unless such Option, to the extent exercisable on such date, is exercised by the Optionee or the executor or administrator of his estate, as the case may be, within one year after the date of such termination of his employment.  However, should the death of the Optionee occur during the one-year period following the termination of the employment of the Optionee by reason of his disability, the Option, to the extent exercisable on the date of termination of employment, may be exercised by the executor or administrator of the Optionee's estate within one year following such death.  A transfer of the Option by the Optionee by will or by laws of descent and distribution shall not be effective to bind the Company unless the Company shall have been furnished with written notice thereof and such other evidence as the Company may deem necessary or desirable to establish the validity of the transfer and the acceptance by the transferee or transferees of the terms and conditions of the Option.  Notwithstanding anything herein to the contrary, in no event shall the Option be exercisable after the Grant Expiration Date.

4.2.2

Termination by Reason of Retirement.

  Should the employment of the Optionee terminate during the term of the Option by reason of retirement by the Optionee on or after age 65, or with the approval of the Committee, from active employment with the Company or any subsidiary prior to age 65 (“Retirement”), this Option or any unexercised portion thereof which was otherwise exercisable on the date of such termination, shall terminate within thirty (30) days of the date of such termination unless the Committee, at or before the time of such Retirement, shall determine that the Option shall remain exercisable by the Optionee for a period of one year following the effective date of such termination of employment; provided, however, that if the Optionee dies within such one-year period, the Option may be exercised by the executor or administrator of the Optionee's estate within one year following such death.  Notwithstanding anything herein to the contrary, in no event shall the Option be exercisable after the Grant Expiration Date.

4.2.3

Termination by Reason of Resignation.

  Should the employment of the Optionee terminate during the term of the Option by reason of resignation by the Optionee (for any reason other than Retirement), this Option or any unexercised portion thereof which was otherwise exercisable on the date of such resignation, shall terminate unless such Option, to the extent exercisable on the date of such resignation, is exercised within thirty (30) days of the date on which the Optionee resigns.  Notwithstanding anything herein to the contrary, in no event shall the Option be exercisable after the Grant Expiration Date.

4.2.4

Termination For Cause.

  If the Optionee's employment is terminated “for cause,” this Option or any unexercised portion thereof shall terminate and be of no further force and effect from the date of termination.  Termination “for cause” as used herein means the termination of Optionee's employment by the Company (or, if applicable, any subsidiary thereof), “for cause” as defined in any agreement between the Company (or any such subsidiary) and the Optionee or, in the event no such agreement exists, based upon objective factors determined in good faith by the Company.

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4.2.5

Termination Without Cause.

(a)

Termination Prior to Second Anniversary.  If the employment of the Optionee with the Company or any of its subsidiaries is terminated for any reason other than death, disability, Retirement, resignation or discharge “for cause” at any time prior to the second anniversary of the Grant Date, this Option or any unexercised portion thereof which was otherwise exercisable on the date of such termination, shall terminate unless such Option, to the extent exercisable on the date of such termination in accordance with Section 4.1.2, is exercised within ninety (90) days of the date on which he ceases to be an employee.  Notwithstanding anything herein to the contrary, in no event shall the Option be exercisable after the Grant Expiration Date.  

(b)

Termination After Second Anniversary.  Notwithstanding the provisions of Section 4.2.5(a), (i) if the employment of the Optionee with the Company or any of its subsidiaries is terminated for any reason other than death, disability, Retirement, resignation or any other termination by the Optionee, or discharge “for cause” and (ii) such termination occurs on or after the second anniversary of the Grant Date and prior to the third anniversary of the Grant Date, the Optionee’s right to exercise the Option with respect to that number of Option Shares equal to the total number of Option Shares granted in the Certificate multiplied by the “Ratio.”  In that event, this Option or any unexercised portion thereof which was otherwise exercisable on the date of the Optionee’s termination, shall terminate unless such Option, to the extent exercisable on the date of such termination in accordance with Section 4.1.2 or this Section 4.2.5, is exercised within ninety (90) days of the date on which the Optionee ceases to be an employee.  Notwithstanding anything herein to the contrary, in no event shall the Option be exercisable after the Grant Expiration Date.  As used herein, “Ratio” shall mean a fraction, the numerator of which is the total number of full calendar months occurring between the Grant Date and the date of the Optionee’s termination of employment, and the denominator of which is thirty-six (36).  Any fractional Option Share that becomes exercisable as a result of the above calculation shall be rounded up to the next whole share.  

4.2.6

Change of Control.

  Upon a “Change of Control” of the Company, the Optionee's right to exercise the Option shall be immediately vested and accelerated in full and the Optionee may, during the  Exercise Period, exercise the Option for the remaining unexercised portion of the Option (notwithstanding that such portion of the Option had not yet otherwise become fully exercisable under Section 4.1 with respect to all or part of the Option Shares at the date of such Change of Control); provided, however, that nothing herein contained shall extend the Grant Expiration Date.  

4.2.7

Sale of Company.

  Upon a Sale (as defined below), the Board of Directors or the Committee may elect either (i) to continue the Option without any payment or (ii) to cause to be paid to the Optionee, upon consummation of the Sale, a payment equal to the excess, if any, of the Sale Consideration receivable by the holders of shares of Common Stock in such a Sale (the “Sale Consideration”) over the purchase price for this Option for each share of Common Stock the Optionee shall then be entitled to acquire hereunder. If the Board of Directors of the Company elect to continue the Option, then the Company shall cause effective provisions to be made so that the Optionee shall have the right, by exercising this Option prior to the Grant Expiration Date, to purchase the kind and amount of shares of stock and other

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securities and property receivable upon such a Sale by a holder of the number of shares of Common Stock which might have been purchased upon exercise of the Option immediately prior to the Sale.  The value of the Sale Consideration receivable by the holder of a share of Common Stock, if it shall be other than cash, shall be determined, in good faith, by the Board of Directors of the Company.  Upon payment to the Optionee of the Sale Consideration, the Optionee shall have no further rights in connection with the Option granted hereunder, this Option shall be terminated and surrendered for cancellation and the Option shall be null and void.  For the purposes hereof, a “Sale” shall occur, in any single transaction or series of related transactions, upon the consummation of the events set forth under subsection (c) of the definition of a “Change of Control” in Section 2.8 of the Plan.

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5.

Forfeiture Provisions Following a Termination of Employment.

  Notwithstanding any provision under these Terms or in the Plan to the contrary, in any instance where the rights of the Optionee to exercise any unexercised portion of the Option extend past the date of termination of the Optionee's employment, all of such rights shall immediately and automatically terminate and be forfeited if, in the determination of the Committee, the Optionee at any time during a twenty-four month period following his or her termination of employment, directly or indirectly, either (i) personally or (ii) as an employee, agent, partner, stockholder, officer or director of, consultant to, or otherwise of any entity or person engaged in any business in which the Company or any of its subsidiaries is engaged, or is actively proposing to engage at the time of such termination of employment, engages in conduct that breaches his or her duty of loyalty to the Company or any of its subsidiaries or that is in material competition with the Company or any of its subsidiaries or is materially injurious to the Company or any of its subsidiaries, monetarily or otherwise, which conduct shall include, but not be limited to:  (i) disclosing or using any confidential information pertaining to the Company or any of its subsidiaries; (ii) any attempt, directly or indirectly, to induce any employee of the Company or any of its subsidiaries to be employed or perform services elsewhere; or (iii) any attempt, directly or indirectly, to solicit the trade of any customer or supplier or prospective customer or supplier of the Company or any or its subsidiaries; or (iv) disparaging the Company or any of its subsidiaries or any of their respective officers or directors.  The determination of whether any conduct, action or failure to act falls within the scope of activities contemplated by this Section shall be made by the Committee, in its discretion, and shall be final and binding upon the Optionee.  A determination that any particular conduct, action or failure falls outside the scope of activities contemplated by this Section shall not imply that, or be determinative of whether, such conduct, action or failure is otherwise lawful or appropriate.  For purposes of this Section, the Optionee shall not be deemed to be a stockholder of a competing entity if the Optionee’s record and beneficial ownership of equity securities of said entity amount to not more than one percent (1%) of the outstanding equity securities of any company subject to the periodic and other reporting requirements of the 1934 Act.  In the event the existence of any circumstance which would trigger the forfeiture of an award pursuant to this Section 5 but for the fact that the Optionee has previously been converted into or exercised for other securities of the Company (e.g., upon the exercise of stock options), or converted into cash or other property (e.g., upon the sale by or for the account of the Optionee of Common Stock acquired by him or her upon the exercise of Stock Options), whether before or after the termination of employment, then, in such event, said securities, or cash or other property, as the case may be, shall be deemed to be held in trust for the Company and shall be promptly paid over to the Company upon demand (net of any amounts that may have been theretofore actually paid by the Optionee to the Company in respect thereof (i.e., as the cash grant price of an option)).  The Optionee further recognizes that (i) the Company would be irreparably injured in the event of a breach of any of his obligations under this Section 5; (ii) monetary damages would not be an adequate remedy for any such breach; and (iii) the Company shall be entitled to injunctive relief, in addition to any other remedies that it may have, in the event of any such breach.

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6.

Nontransferability of Option.

  Except as provided in Section 4, this Option and the rights and privileges conferred hereby may not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process.  Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this Option or any right or privilege conferred hereby, contrary to the provisions hereof, or upon the levy of any attachment or similar process on the rights and privileges conferred hereby, this Option and the rights and privileges conferred hereby shall immediately become null and void.

7.

Payment of Purchase Price.

  The purchase price of the shares of Common Stock as to which the Option is exercised shall be paid in full at the time of exercise, as hereinafter provided.  The purchase price may be paid with (i) Common Stock of the Company already owned by, and in the possession of, the Optionee, or (ii) any combination of U.S. dollars or Common Stock of the Company.  Anything herein to the contrary notwithstanding, any required withholding tax shall be paid by the Optionee in full in U.S. dollars at the time of exercise of the Option.  Payments in U.S. dollars may be made by wire transfer, certified or bank check, or personal check, in each case payable to the order of the Company; provided, however, that the Company shall not deliver certificates representing any Option Shares purchased until the Company has confirmed the receipt of good and available funds in payment of the purchase price thereof.  Shares of Common Stock of the Company used to satisfy the grant price of the Option shall be valued at the Fair Market Value on the date of exercise (as defined in the Plan).  The Optionee shall not have any of the rights of a shareholder with respect to the Option Shares until the Option Shares have been issued after the due exercise of the Option.  Payment may also be made, in the discretion of the Company, by the delivery (including, without limitation, by fax) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions to a broker-dealer to sell or margin a sufficient portion of the shares and deliver the sale or margin loan proceeds directly to the Company to pay for the grant price.  

8.

Exercise of Option.

  Subject to the terms and conditions set forth herein, the Option may be exercised by written notice to the Company pursuant to Section 14.1 hereof.  Such notice shall state the election to exercise the Option and the number of Option Shares with respect to which it is being exercised, and shall be signed by the person or persons so exercising the Option.  Such notice may also contain such investment representations as the Company may from time to time require.  Such notice shall be accompanied by payment of the full purchase price of the Option Shares, and the Company shall issue a certificate or certificates evidencing the Option Shares as soon as practicable after the notice is received (subject to receipt of good and available funds as provided in Section 7 above).  Payment of the purchase price shall be made in U.S. dollars, by delivery of securities of the Company, or by a combination of U.S. dollars and securities, as provided in Section 7 above.  The certificate or certificates evidencing the Option Shares shall be registered in the name of the person or persons so exercising the Option.  In the event the Option is being exercised by any person or persons other than the Optionee as provided in Section 4.2 above, the notice shall be accompanied by appropriate proof of the right of such person or persons to exercise the Option.

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9.

Transfer of Option Shares.

9.1

Restriction.

  Anything in these Terms to the contrary notwithstanding, the Optionee hereby agrees that he shall not sell, transfer by any means or otherwise dispose of the Option Shares acquired by him without registration under the 1933 Act, or in the event that they are not so registered, unless (i) an exemption from the 1933 Act is available thereunder, and (ii) the Optionee has furnished the Company with notice of such proposed transfer and the Company's legal counsel, in its reasonable opinion, shall deem such proposed transfer to be so exempt.

9.2

Notification to Company.

  The Optionee agrees that if he should dispose of any Option Shares, including a disposition by sale, exchange, gift or transfer of legal title within twelve (12) months from the date such Option Shares are transferred to him, he shall notify the Company promptly of such disposition or transfer.

10.

Anti-Dilution Provisions.

  In the event of a stock dividend, subdivision, combination or reclassification of shares, or any other change in the corporate structure or shares of the Company, the number of Option Shares covered by any unexercised portion of the Option and the related purchase price per share shall be adjusted proportionately; provided, however, that upon the dissolution or liquidation of the Company, or upon any merger, consolidation or other form of reorganization, the Option may be terminated and be of no further effect.

11.

Company Representations.

  The Company hereby represents and warrants to the Optionee that:

(a)

the Company, by appropriate and all required action, is duly authorized to enter into these Terms and consummate all of the transactions contemplated hereunder; and

(b)

the Option Shares, when issued and delivered by the Company to the Optionee in accordance with the terms and conditions hereof, will be duly and validly issued and fully paid and non-assessable.

12.

Optionee Representations.

  The Optionee hereby represents and warrants to the Company that:

(a)

The Company has made available to the Optionee a copy of all reports and documents required to be filed by the Company with the Securities and Exchange Commission pursuant to the 1934 Act within the last twelve (12) months and all reports issued by the Company to its stockholders during such period;

(b)

The Optionee must bear the economic risk of the investment in the Option Shares, which cannot be sold by him unless they are registered under the 1933 Act or an exemption therefrom is available thereunder;

(c)

The Optionee has had both the opportunity to ask questions of and receive answers from the Company and all persons acting on its behalf concerning the terms and conditions of the offer made hereunder;

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(d)

The Optionee is aware that the Company shall place stop transfer orders with its transfer agent against the transfer of the Option Shares in the absence of registration under the 1933 Act or an exemption therefrom as provided herein; and

(e)

The Optionee is aware that nothing in these Terms shall confer upon the Optionee any right to continue in the employ or as a director or agent of the Company or shall affect the right of the Company to terminate the employment or relationship of the Optionee with the Company.

13.

Amendments to Plan; Conflicts.

  No amendment or modification of the Plan shall be construed as to terminate the Option granted under these Terms.  In the event of a conflict between the provisions of the Plan and the provisions of these Terms, the provisions of the Plan shall in all respects be controlling.

14.

Miscellaneous.

14.1

Notices.

  All notices required or permitted hereunder shall be in writing and shall be deemed to be properly given when personally delivered to the party entitled to receive the notice or when sent by certified or registered mail, postage prepaid, properly addressed to the party entitled to receive such notice at the address stated below:

If to Company:

Par Pharmaceutical Companies, Inc.

300 Tice Boulevard

Woodcliff Lake, NJ  07677

If to Optionee:

Address of Optionee on file with the Company.

14.2

Waiver.

  The waiver by any party hereto of a breach of any provision of these Terms shall not operate or be construed as a waiver of any other or subsequent breach.

14.3

Entire Agreement.

  The Plan is incorporated herein by reference.  The Plan, these Terms and the Certificate constitute the entire agreement between the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified except by means of a writing signed by the Company and Optionee.

14.4

Binding Effect; Successors.

  These Terms and the Certificate shall inure to the benefit of and be binding upon the parties hereto and to the extent not prohibited herein, their respective heirs, successors, assigns and representatives.  Nothing in these Terms or the Certificate, expressed or implied, is intended to confer on any person other than the parties hereto and as provided above, their respective heirs, successors, assigns and representatives, any rights, remedies, obligations or liabilities.

14.5

Governing Law.

  These Terms shall be governed by and construed in accordance with the laws of the State of Delaware.

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14.6

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 of or interpretation of any of the terms or provisions of these Terms.

IN WITNESS WHEREOF, the parties hereunto set their hands as of the date the Certificate is accepted on the website of Smith Barney.

PAR PHARMACEUTICAL COMPANIES, INC.

Thomas J. Haughey

Executive Vice President and General Counsel

OPTIONEE

(Acceptance designated electronically

at the website of Smith Barney)

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