10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2006

Commission file number: 1-10827

PAR PHARMACEUTICAL COMPANIES, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	22-3122182 (I.R.S. Employer Identification No.)
300 Tice Boulevard, Woodcliff Lake, New Jersey (Address of principal executive offices)	07677 (Zip Code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes o     No þ*

* The registrant’s Quarterly Report on Form 10-Q for the quarter ended July 1, 2006 was filed without Part I, Items 1 and 2, and the Rule 13a-14(a) and Section 906 certifications by its President and Chief Executive Officer and its Chief Financial Officer, as indicated therein and in the registrant’s Notification of Late Filing on Form 12b-25, filed with the Commission on August 11, 2006. Also, the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 was not filed within 40 days of the end of such quarter.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act:

Large accelerated filer  þ Accelerated filer  o Non-accelerated filer  o

Indicate by check mark whether the registrant is a shell registrant (as defined in Rule 12b-2 of the Exchange Act).

Yes  o     No  þ

Number of shares of Common Stock outstanding as of December 18, 2006: 35,956,798

***The following portions of this Form 10-Q have been omitted due to the registrant’s inability to file compliant financial statements at this time: Part I, Items 1 and 2; the Rule 13a-14(a) Certifications by the registrant’s President and Chief Executive Officer and the Chief Financial Officer; and the Section 906 Certifications by its President and Chief Executive Officer and the Chief Financial Officer. Please see the registrant’s Notification of Late Filing on Form 12b-25/A filed with the Commission as of the date hereof for more details. The omitted portions of this Form 10-Q will be included in an amendment to this Form 10-Q to be filed in accordance with Rule 12b-25(e).

TABLE OF CONTENTS
PAR PHARMACEUTICAL COMPANIES, INC.
FORM 10-Q
FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 2006

	PAGE
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements		2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2
Item 3. Quantitative and Qualitative Disclosures About Market Risk		2
Item 4. Controls and Procedures		4
PART II — OTHER INFORMATION
Item 1. Legal Proceedings		4
Item 1A. Risk Factors		9
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		12
Item 5. Other Information		12
Item 6. Exhibits		12
SIGNATURES		14
EMPLOYMENT AGREEMENT BY & BETWEEN PAR PHARMACEUTICAL COMPANIES AND PATRICK LEPORE
SEPARATION AGREEMENT BY & BETWEEN PAR PHARMACEUTICALS & MARK AUERBACH
SEPARATION AGREEMENT BY & BETWEEN PAR PHARMACEUTICALS & MICHAEL GRAVES
SEPARATION AGREEMENT BY & BETWEEN PAR PHARMACEUTICALS & SHANKAR HARIHARAN
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER
CERTIFICATION BY THE CHIEF FINANCIAL OFFICER

PART I — FINANCIAL INFORMATION

All financial information is reported in thousands, unless otherwise noted.

ITEM 1. Financial Statements

     As a result of the discovery by Par Pharmaceutical Companies, Inc. (the “registrant”) of certain accounting errors, the registrant has been in the process of restating its financial statements as of December 31, 2005 and 2004 and for each of the three years in the period ended December 31, 2005, as well as the restatement of selected financial data as of and for each of the five years in the period ended December 31, 2005. The registrant will also restate its quarterly results of operations for each of the two years in the period ended December 31, 2005. Additionally, the registrant will restate its quarterly results of operations for the first quarter of 2006. The restatement process is not yet complete. These aforementioned financial statements should no longer be relied upon. Due to the work involved in restating the affected financial statements, the registrant is presently unable to file Part I, Item 1 to this Quarterly Report on Form 10-Q. The registrant is working diligently to review and finalize the information subject to the restatement and intends to amend this Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 to include the information required by Part I, Item 1 as soon as practicable. Accordingly, this Report is qualified in its entirety by the absence of such information. Please see the registrant’s Notification of Late Filing on Form 12b-25/A filed with the Securities and Exchange Commission (the “SEC”) as of the date hereof for more details.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     As a result of the registrant’s discovery of certain accounting errors, the registrant has been in the process of restating its financial statements as of December 31, 2005 and 2004 and for each of the three years in the period ended December 31, 2005, as well as the restatement of selected financial data as of and for each of the five years in the period ended December 31, 2005. The registrant will also restate its quarterly results of operations for each of the two years in the period ended December 31, 2005. Additionally, the registrant will restate its quarterly results of operations for the first quarter of 2006. The restatement process is not yet complete. These aforementioned financial statements should no longer be relied upon. Due to the work involved in restating the affected financial statements, the registrant is presently unable to file Part I, Item 2 to this Quarterly Report on Form 10-Q. The registrant is working diligently to review and finalize the information subject to the restatement and intends to amend this Quarterly Report on Form 10-Q to include the information required by Part I, Item 2 as soon as practicable. Accordingly, this Report is qualified in its entirety by the absence of such information. Please see the registrant’s Notification of Late Filing on Form 12b-25/A filed with the SEC as of the date hereof for more details.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

     The registrant is subject to market risk primarily from changes in the market values of its investments in marketable debt and governmental agency securities. These instruments are classified as available for sale securities for financial reporting purposes and have minimal or no interest risk due to their generally short-term maturities. Professional portfolio managers managed 100% of these available for sale securities at September 30, 2006. The registrant also makes additional investments in overnight deposits and money market funds. These instruments are classified as cash and cash equivalents for financial reporting purposes and also have minimal or no interest risk due to their short-term natures.

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     The following table summarizes the estimated fair values of the marketable debt securities and certain other available for sale investments that subject the registrant to market risk at September 30, 2006 and December 31, 2005:

	September 30,		December 31,
	2006		2005
	Estimated Fair		Estimated Fair
	Value		Value
Securities issued by U.S. government and agencies	$	75,137	$	79,886
Debt securities issued by various state and local municipalities and agencies		13,749		13,721
Other marketable debt securities		14,522		13,200
Total marketable debt securities		103,408		106,807
Marketable equity securities available for sale		6,000		1,380
Total	$	109,408	$	108,187

Available for Sale Securities:

     The primary objectives for the registrant’s investment portfolio are liquidity and safety of principal. Investments are made with the intention to achieve a relatively high rate of return while, at the same time, preserving invested capital. The registrant’s investment policy limits investments to certain types of instruments issued by institutions and U.S. government agencies with investment-grade credit ratings. A significant change in prevailing interest rates could affect the market value of that portion of the $109,408, as of September 30, 2006, in available for sale securities that has a maturity of greater than one year.

     In addition to the debt investments described above, the registrant is also subject to market risk in respect to its investments in Advancis Pharmaceutical Corporation (“Advancis”), Abrika Pharmaceuticals, LLLP (“Abrika”) and Optimer Pharmaceuticals, Inc. (“Optimer”), as described below.

     In April 2005, the registrant acquired 3,333 shares of the Series C Preferred Stock of Optimer, a privately-held biotechnology registrant located in San Diego, California, for $12,000. The 3,333 shares represented, as of September 30, 2006, approximately 13% equity interest in Optimer. The registrant and Optimer have also entered into a collaboration agreement pursuant to which the registrant has a license to develop, market and distribute the antibiotic compound known as PAR-101 and has the option to expand the agreement to include up to three additional products. Because Optimer is privately-held, the registrant monitors the investment periodically to evaluate whether any changes in fair value become other-than temporary.

     In December 2004, the registrant acquired a 5% limited partnership interest in Abrika, a privately-held specialty generic pharmaceutical registrant located in Sunrise, Florida, for $8,361, including costs (Abrika has since converted into a corporation). Additionally, the registrant has entered into an agreement with Abrika to collaborate on the marketing of five products to be developed by Abrika. The first product is expected to be a transdermal fentanyl patch for the management of chronic pain. This patch is a generic version of Duragesic^®, marketed by Janssen Pharmaceutica Products, L.P., a division of Johnson & Johnson. Pursuant to this agreement, the registrant was required to pay up to $9,000 to Abrika at the time of the commercial launch of this product, subject to the attainment of certain profit targets. In February 2006, the registrant and Abrika amended their collaboration agreement and the registrant advanced Abrika $9,000. Abrika has agreed to repay the advance if it does not obtain the FDA’s final and unconditional approval of the transdermal fentanyl patch within two years of the amendment. The registrant also holds a convertible promissory note in the principal amount of $3,000, with interest accruing at 8.0% annually, for monies loaned to Abrika. Because Abrika is privately-held, the registrant monitors the investment on a periodic basis to evaluate whether any changes in fair value become other-than temporary.

     In October 2003, the registrant paid $10,000 to purchase 1,000 shares of the common stock of Advancis, a pharmaceutical registrant based in Germantown, Maryland, at $10 per share, in its initial public offering of 6,000 shares. In the second quarter of 2005, the registrant recorded an investment impairment of $8,280 related to its investment in Advancis. In June and July 2005, Advancis announced that it had failed to achieve the desired microbiological and clinical endpoints in its Amoxicillin PULSYS Phase III clinical trials for the treatment of pharyngitis/tonsillitis. Due to the

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results of the clinical trials, and the continued significant decline in the stock price of Advancis, the registrant determined that the decline in fair market value of its investment was other-than temporary and, as such, wrote the investment down to its fair market value as of July 3, 2005, which was $1,720, based on the market value of the common stock of Advancis at that date. As of September 30, 2006, the fair market value of the Advancis common stock held by the registrant was $6,000, based on the market value of such common stock at that date. As of December 31, 2005, the fair market value of the Advancis common stock held by the registrant was $1,380, based on the market value of such common stock at that date. The registrant divested its investment in Advancis common stock on October 4, 2006 for gross proceeds of $4,909.

ITEM 4. Controls and Procedures

     As a result of the registrant’s discovery of certain accounting errors, the registrant has been in the process of restating its financial statements as of December 31, 2005 and 2004 and for each of the three years in the period ended December 31, 2005, as well as the restatement of selected financial data as of and for each of the five years in the period ended December 31, 2005. The registrant will also restate its quarterly results of operations for each of the two years in the period ended December 31, 2005. In addition, the registrant will restate its quarterly results of operations for the first quarter of 2006. The restatement process is not yet complete. The registrant’s Management’s Report on Internal Control Over Financial Reporting will need to be restated and, accordingly, should no longer be relied upon. Although the registrant has not yet completed its analysis of the impact of this situation on its internal control over financial reporting, it has identified material weaknesses in its internal control over financial reporting and, consequently has concluded that its disclosure controls and procedures were not effective as of September 30, 2006. The conclusion differs from the registrant’s conclusion disclosed in the registrant’s Annual Report on Form 10-K for the year ended December 31, 2005 and its Quarterly Report on Form 10-Q for the quarter ended April 1, 2006.

PART II — OTHER INFORMATION

ITEM 1. Legal Proceedings

     As previously disclosed in the registrant’s Current Report on Form 8-K, filed July 24, 2006, the registrant and certain of its executive officers have been named as defendants in several purported stockholder class action lawsuits filed on behalf of purchasers of common stock of the registrant between April 29, 2004 and July 5, 2006. The lawsuits followed the registrant’s July 5, 2006 announcement that it will restate certain of its financial statements and allege that the registrant and certain members of its management engaged in violations of the Securities Exchange Act of 1934, as amended, by issuing false and misleading statements concerning the registrant’s financial condition and results. The class actions have been consolidated and are pending in the United States District Court, District of New Jersey. The Court has appointed co-lead plaintiffs and co-lead counsel. The registrant anticipates that the plaintiffs will file a consolidated amended complaint in January 2007. The registrant intends, and the members of management named as defendants have stated their intentions, to vigorously defend the lawsuits and any additional lawsuits that may be filed with respect to the restatement. Additionally, the registrant has been informed by a letter from the staff of the SEC, dated July 7, 2006, that the SEC is conducting an informal investigation of the registrant related to its proposed restatement. The registrant intends to fully cooperate with and assist the SEC in this investigation. The letter from the SEC states that the investigation should not be construed as an indication by the SEC or its staff that any violation of law has occurred or as a reflection upon any person, entity or security.

     On August 14, 2006, individuals claiming to be stockholders of the registrant filed a derivative action in the U.S. District Court for the Southern District of New York, purportedly on behalf of the registrant, against the current and certain former directors and certain current and former officers of the registrant as a nominal defendant. The plaintiffs in this action allege that, among other things, the named defendants breached their fiduciary duties to the registrant based on substantially the same factual allegations as the class action lawsuits referenced above. The plaintiffs also allege that certain of the defendants have been unjustly enriched based on their receipt of allegedly backdated options to purchase shares of common stock of the registrant, and seek to require those defendants to disgorge any profits made in connection

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with their exercise of such options and additional attendant damages relating to allegedly backdated options during the period from January 1, 1996 to the present. The action has been transferred to the United States District Court, District of New Jersey. The registrant intends, and each of the individuals named as defendants have stated their intentions, to vigorously defend against these allegations.

     On September 1, 2006, the registrant received a notice of purported default from the trustee of the registrant’s 2.875% Senior Subordinated Convertible Notes due 2010 (the “Notes”). The trustee claims, in essence, that the registrant’s failure to include financial statements in its Quarterly Report on Form 10-Q for the second quarter of 2006 constituted a default under Section 6.2 of the indenture, dated as of September 30, 2003 (the “Indenture”), between the registrant, as issuer, and American Stock Transfer & Trust Company, as trustee (the “Trustee”), relating to the Notes. The notice of default asserted that if the purported default continued unremedied for 30 days after the receipt of the notice, an “event of default” would occur under the Indenture. Under the Indenture, the occurrence of an event of default would give the Trustee or certain holders of the Notes the right to declare all unpaid principal and accrued interest on the Notes immediately due and payable. On October 2, 2006, the registrant received a notice of acceleration from the Trustee purporting to accelerate payment of the Notes.

     The registrant believes that it has complied with its obligations under the Indenture. Therefore, the registrant believes that the above-mentioned notice of default and notice of acceleration are invalid and without merit. While the indentures of some public companies specifically require those companies to provide trustees with copies of their annual and quarterly reports within 15 days of the date that those reports are due to be filed with the SEC, the registrant’s Indenture does not. Rather, under the Indenture, the registrant is required only to provide the Trustee with copies of its annual and other reports (or copies of such portions of such reports as the SEC may by rules and regulations prescribe) that it is required to file with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, within 15 calendar days after it files such annual and other reports with the SEC. Moreover, the Indenture specifically contemplates providing the Trustee with portions of reports. On August 24, 2006 (within 15 days of filing with the SEC), the registrant provided to the Trustee a copy of its Quarterly Report on Form 10-Q for the second quarter of 2006. The registrant’s Form 10-Q did not include the registrant’s financial statements for the second quarter of 2006 or its related Management’s Discussion and Analysis due to the registrant’s ongoing work to restate certain of its past financial statements, and, therefore, in accordance with SEC rules, the registrant filed a Notification of Late Filing on Form 12b-25 disclosing the omissions. The registrant’s Form 12b-25 was also provided to the Trustee on August 24, 2006. Accordingly, the registrant believes that it complied with the Indenture provision in question.

     After the registrant communicated its position to the Trustee, the Trustee filed a lawsuit, on October 19, 2006, on behalf of the holders of the Notes in Supreme Court of the State of New York, County of New York, alleging a breach of the Indenture and an alleged breach of a covenant of good faith and fair dealing. The lawsuit demands, among other things, that the registrant pay the holders of the Notes either the principal of, accrued and unpaid interest and Additional Interest (as such term is defined in the Indenture), if any, on the Notes or the difference between the fair market value of the Notes on October 2, 2006 and par, whichever the Trustee elects, or in the alternative, damages to be determined at trial, alleged by the Trustee to exceed $30 million. The registrant has filed a Notice of Removal to remove the lawsuit to the U.S. District Court for the Southern District of New York and has filed its answer to the complaint in that Court.

   Contractual Matters

     On May 3, 2004, Pentech Pharmaceutical, Inc. (“Pentech”) filed an action against the registrant in the United States District Court for the Northern District of Illinois. This action alleges that the registrant breached its contract with Pentech relating to the supply and marketing of paroxetine (PaxilÒ) and that the registrant breached fiduciary duties allegedly owed to Pentech. The registrant and Pentech are in dispute over the amount of gross profit share due to them. Discovery in this case has concluded. The Court denied cross motions for summary judgment relating to the construction of the contract, and denied Pentech’s motion for summary judgment against the registrant’s fraudulent inducement counterclaim. The registrant also filed a motion for summary judgment against Pentech’s breach of fiduciary duty claim, and that motion is pending. A trial date has not yet been set. The registrant intends to defend vigorously this action.

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     The registrant and Genpharm, Inc. (“Genpharm”) are parties to several contracts relating to numerous products currently being sold or under development. Genpharm has alleged that the registrant is in violation of those agreements and has brought an arbitration alleging those violations and seeking to terminate its agreements with the registrant. The registrant has denied any violation of such agreements and asserted counterclaims against Genpharm for Genpharm’s alleged violations of its agreements with the registrant. The arbitration has been resolved by settlement.

   Patent Related Matters

     On October 4, 2006, Novartis Corporation, Novartis Pharmaceuticals Corporation, and Novartis International AG (collectively “Novartis”) filed a lawsuit against the registrant in the United States District Court for the District of New Jersey. Novartis alleged that Par Pharmaceutical Companies, Inc., Par Pharmaceutical Inc., and Kali Laboratories, Inc. (collectively “Par”) infringed U.S. Patent No. 6,162,802 (the “‘802 patent”) by submitting a Paragraph IV certification to the FDA for approval of amlodipine and benazepril hydrochloride combination capsules. Par denies Novartis’s allegation, asserting that the ‘802 patent is not infringed and is invalid. Par also counterclaimed for declaratory judgments of non-infringement and invalidity of the ‘802 patent.

     On November 1, 2004, Morton Grove Pharmaceuticals, Inc. (“Morton Grove”) filed a lawsuit against the registrant in the United States District Court for the Northern District of Illinois seeking a declaratory judgment that four of the registrant’s patents relating to megestrol acetate oral suspension are invalid, unenforceable and not infringed by a Morton Grove product that was launched in the fourth quarter of 2004 that it acknowledges is covered by the registrant’s patent claims. The registrant is asserting counterclaims that the Morton Grove product infringes three patents and that such infringement was willful. Morton Grove amended its complaint to allege antitrust violations. Certain of the registrant’s claims of infringement by Morton Grove’s product are subject to the ruling of non-enablement in the Roxane lawsuit discussed below, while others are not. The registrant has moved to dismiss this claim and the motion to dismiss is pending. The registrant intends to defend vigorously this action and pursue its counterclaims against Morton Grove including its infringement claims affected by the Roxane lawsuit pending a final resolution in that case.

     On July 15, 2003, the registrant filed a lawsuit against Roxane Laboratories, Inc. (“Roxane”) in the United States District Court for the District of New Jersey. The registrant alleged that Roxane had infringed the registrant’s U.S. Patents numbered 6,593,318 and 6,593,320 and that the infringement was willful. Roxane has denied these allegations and has counterclaimed for declaratory judgments of non-infringement and invalidity of both patents. In addition, Roxane has filed an amended complaint asserting that the registrant’s patents in the litigation are unenforceable due to inequitable conduct before the U.S. Patent Office. On September 8, 2006, the Court issued a claim construction ruling on certain claim terms in dispute between the parties. Based on that construction, the Court ruled in favor of the registrant and dismissed Roxane’s motion for summary judgment of non-infringement. On November 8, 2006, the Court ruled that the claims at issue in these patents were invalid as non-enabled. The registrant believes the ruling of non-enablement is erroneous, and is reviewing its options, including an appeal of the ruling to the Federal Circuit Court of Appeals.

     On November 25, 2002, Ortho-McNeil Pharmaceutical, Inc. (“Ortho-McNeil”) filed a lawsuit against Kali Laboratories, Inc. ("Kali"), a wholly owned subsidiary of the registrant, in the United States District Court for the District of New Jersey. Ortho-McNeil alleged that Kali infringed U.S. Patent No. 5,336,691 (the “‘691 patent”) by submitting a Paragraph IV certification to the FDA for approval of tablets containing tramadol HCl and acetaminophen. The registrant is the exclusive marketing partner for these tablets through an agreement with Kali entered into before its acquisition by the registrant. Kali has denied Ortho-McNeil’s allegation, asserting that the ‘691 patent was not infringed and is invalid and/or unenforceable, and that the lawsuit is barred by unclean hands. Kali also has counterclaimed for declaratory judgments of non-infringement, invalidity and unenforceability of the ‘691 patent. Summary judgment papers were served on opposing counsel on May 28, 2004. The referenced summary judgment motion was fully briefed and submitted to the Court as of August 23, 2004. Ortho-McNeil submitted additional briefing on September 21, 2004. The Court stated that it will hold oral argument, which has not as of yet been scheduled. The registrant received FDA approval and began shipping tramadol in April 2005 and is still awaiting an answer from the Court regarding the referenced motion for summary judgment. Ortho-McNeil amended its complaint on July 27, 2005 to assert infringement against the registrant, and to include a claim for damages against the registrant and Kali. The registrant and Kali have answered and counterclaimed, alleging that the ‘691 patent is not infringed and is invalid and unenforceable for inequitable conduct. With regard to the referenced summary judgment motions, Ortho-McNeil submitted a supplemental brief on July 7, 2006. Kali submitted a responsive supplemental brief on July 17, 2006. On July 21, 2006, the Court held oral argument regarding these motions. The Court has not yet ruled on them. On August 1, 2006, the Patent and Trademark Office reissued the ‘691 patent. The registrant is assessing any impact of the reissue patent. On August 1 and August 4, 2006, Ortho-McNeil filed a complaint and then an amended complaint against Kali, the registrant and two other companies, Barr Laboratories, Inc. (“Barr”) and Caraco Pharmaceutical Laboratories, Ltd. (“Caraco”). Ortho-McNeil alleged infringement and willful infringement of the re-issue patent against the registrant through the registrant’s marketing of its tramadol and acetaminophen tablets. Ortho-McNeil made similar allegations against Barr and Caraco. The registrant intends to defend vigorously this action.

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     The registrant entered into a licensing agreement with developer Paddock Laboratories, Inc. (“Paddock”) to market testosterone 1% gel, a generic version of Unimed Pharmaceuticals, Inc.’s (“Unimed”) product Androgel^®. Pursuant to this agreement, the registrant is responsible for the management of any litigation and the payment of all legal fees associated with this product. The product, if successfully brought to market, would be manufactured by Paddock and marketed by the registrant. Paddock has filed an ANDA (that is pending with the FDA) for the testosterone 1% gel product. As a result of the filing of the ANDA, Unimed and Laboratories Besins Iscovesco (“Besins”), co-assignees of the patent-in-suit, filed a lawsuit against Paddock in the United States District Court for the Northern District of Georgia, alleging patent infringement on August 22, 2003. The registrant has an economic interest in the outcome of this litigation by virtue of its licensing agreement with Paddock. Unimed and Besins are seeking an injunction to prevent Paddock from manufacturing the generic product. On November 18, 2003, Paddock answered the complaint and filed a counterclaim, seeking a declaration that the patent-in-suit is invalid and/or not infringed by Paddock’s product. After Discovery was completed the lawsuit was resolved by settlement.

     On March 10, 2005, Apotex Inc. and Apotex Corp. (“Apotex”) filed a lawsuit against the registrant in the United States District Court for New Jersey, seeking a declaratory judgment that four of the registrant’s patents relating to megestrol acetate oral suspension are invalid, unenforceable and not infringed by an Apotex product that was launched in the third quarter of 2006. The registrant has moved for a preliminary injunction against Apotex pending resolution of the litigation and has asserted counterclaims that the Apotex product infringes at least one claim of United States Patent 6,593,318. However, as a result of a ruling of non-enablement of that claim in the Roxane lawsuit, the registrant has withdrawn its motion for a preliminary injunction. The registrant intends to seek a stay of the action pending possible appeal to the Federal Circuit Court of Appeals.

     On April 28, 2006, CIMA Labs, Inc. (“CIMA”) and Schwarz Pharma, Inc. (“Schwarz Pharma”) filed separate lawsuits against the registrant in the United States District Court for the District of New Jersey. CIMA and Schwarz Pharma each have alleged that the registrant infringed U.S. Patent Nos. 6,024,981 (the “‘981 patent”) and 6,221,392 (the “‘392 patent”) by submitting a Paragraph IV certification to the FDA for approval of alprazolam orally disintegrating tablets. CIMA owns the ‘981 and ‘392 patents and Schwarz Pharma is CIMA’s exclusive licensee. All 40 claims in the ‘981 patent were rejected in a non-final office action in a reexamination proceeding at the United States Patent and Trademark Office in February 2006. The ‘392 patent is also the subject of a reexamination proceeding. The registrant will continue to monitor this ongoing reexamination proceeding. In response to the lawsuits, the registrant has answered and counterclaimed denying CIMA’s and Schwarz Pharma’s infringement allegations, asserting that the’981 and ‘392 patents were not infringed and are invalid and/or unenforceable. A scheduling conference was held in the CIMA action on October 3, 2006 and Defendants have served their initial discovery requests on CIMA. A scheduling conference was held on October 24, 2006 in the Schwarz Pharma action. The Court has indicated that it will consolidate the two actions. The registrant intends to vigorously defend these actions and pursue its counterclaims.

     On February 18, 2005, GlaxoSmithKline (“GSK”) filed a lawsuit against Spectrum Pharmaceuticals, Inc. (“Spectrum”) in the United States District Court for the District of Delaware. GSK alleged that Spectrum’s October 2004 abbreviated new drug application for sumatriptan succinate injection 6mg/0.5mL infringed GSK’s U.S. Patent No. 5,037,845 and that the infringement was willful. Spectrum denied the allegations and counterclaimed for declaratory judgments of invalidity, non-infringement and unenforceability. The non-infringement counterclaim was subsequently withdrawn. The lawsuit has been resolved by settlement.

   Industry Related Matters

     On March 9, 2004, the Congress of California Seniors brought an action against GSK and the registrant concerning the sale of paroxetine in the State of California. This action alleges that the sale of paroxetine by GSK and the registrant in California constitutes, among other things, an unfair business practice. The case has been dismissed without prejudice to renewal.

     On September 10, 2003, the registrant and a number of other generic and brand pharmaceutical companies were sued by Erie County in New York State (the suit has since been joined by additional New York counties) that has alleged violations of laws (including the Racketeer Influenced and Corrupt Organizations Act, common law fraud and obtaining

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funds by false statements) related to participation in the Medicaid program. The complaint seeks declaratory relief; actual, statutory and treble damages, with interest; punitive damages; an accounting and disgorgement of any illegal profits; a constructive trust and restitution; and attorneys’ and experts’ fees and costs. This case was transferred to the United States District Court for the District of Massachusetts for coordinated and consolidated pre-trial proceedings. On June 15, 2005, a consolidated complaint was filed on behalf of a number of the New York counties and the City of New York. The complaint filed by Erie County in New York was not included in the consolidated complaint and has been removed to federal district court. In addition, on September 25, 2003, the Office of the Attorney General of the Commonwealth of Massachusetts filed a complaint in the District of Massachusetts against the registrant and 12 other leading generic pharmaceutical companies, alleging principally that the registrant and such other companies violated, through their marketing and sales practices, state and federal laws, including allegations of common law fraud and violations of Massachusetts false statements statutes, by inflating generic pharmaceutical product prices paid for by the Massachusetts Medicaid program. The registrant waived service of process with respect to the complaint. The complaint seeks injunctive relief, treble damages, disgorgement of excessive profits, civil penalties, reimbursement of investigative and litigation costs (including experts’ fees) and attorneys’ fees. On January 29, 2004, the registrant and the other defendants involved in the litigation brought by the Office of the Attorney General of the Commonwealth of Massachusetts filed a motion to dismiss, which was denied on August 15, 2005. The Commonwealth of Massachusetts subsequently filed an amended complaint, and the defendants, including the registrant, have filed a motion to dismiss the amended complaint. On August 4, 2004, the registrant and a number of other generic and brand pharmaceutical companies were also sued by the City of New York, which has alleged violations of laws (including common law fraud and obtaining funds by false statements) related to participation in its Medicaid program. The complaint seeks declaratory relief; actual, statutory and treble damages, with interest; punitive damages; an accounting and disgorgement of any illegal profits; a constructive trust and restitution; and attorneys’ and experts’ fees and costs. This case was transferred to the U.S. District Court for the District of Massachusetts for coordinated and consolidated pre-trial proceedings. In addition to Massachusetts, the Commonwealth of Kentucky, the State of Illinois and the State of Alabama have filed similar suits in their respective jurisdictions, all of which have been removed to federal district court. The lawsuit brought by the State of Alabama was remanded to the Alabama state court on August 11, 2005. Following the remand, on October 13, 2005, the Court denied the defendants’ motion to dismiss, but granted in part the defendants’ motion for a more definite statement, and further ruled that the State may amend its complaint within 90 days. On October 20, 2005, the State of Mississippi filed in the Chancery Court for Hinds County, Mississippi a complaint naming the registrant (among other companies) as a defendant. The registrant intends to defend vigorously these actions.

     On April 27, 2006, the State of Hawaii filed a complaint naming the registrant as a defendant that has alleged violations of laws related to participation in the Medicaid program. The Hawaii complaint pleads causes of action for (i) false claims; (ii) unfair or deceptive acts or practices; (iii) unfair competition; (iv) violation of the Deceptive Trade Practices Act; (v) non-disclosure; and (vi) unjust enrichment. The complaint seeks general and special damages; treble damages, or in the alternative, punitive damages; costs, pre-judgment and post-judgment interest, and attorneys’ fees; injunctive relief; and such other and further relief or equitable relief as the court deems just and proper. The registrant intends to defend vigorously these actions.

     On May 8, 2006, the County of Oswego filed a complaint against the registrant and certain other pharmaceutical companies. This complaint pleads causes of action for (i) fraud; (ii) violation of New York Social Services Law § 366-b; (iii) violation of New York Social Services Law § 145-b; (iv) violation of New York General Business Law § 349; (v) unjust enrichment; and (vi) fraudulent concealment. The County of Schenectady filed a similar complaint on May 9, 2006. The registrant intends to defend vigorously these actions.

     With respect to the Erie action, the court denied the motions to dismiss on September 7, 2006. The defendants removed the Erie action to the United States District Court for the Western District of New York on October 11, 2006. The registrant filed an answer to the complaint on October 18, 2006. A motion to remand the suit is pending.

     The defendants removed the Oswego and Schenectady suits to the United States District Court for the Northern District of New York on October 11, 2006. The registrant filed answers to each of these complaints on October 18, 2006. Motions to remand these suits are pending.

     With respect to the Alabama action, the registrant filed an answer to the Second Amended Complaint on January 30, 2006. On October 11, 2006, the defendants for the second time removed the case to the United States District Court for the Middle District of Alabama. On November 2, 2006, the matter was again remanded to State court.

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     With respect to the Illinois action, the State of Illinois filed a First Amended Complaint on August 2, 2006. The defendants removed this action for the second time to the United States District Court for the Northern District of Illinois on October 11, 2006.

     The court denied the defendants’ motions to dismiss in the action brought by the Commonwealth of Kentucky on June 23, 2006. The registrant answered the First Amended Complaint on July 19, 2006.

     With respect to the Mississippi action, the court denied the motion to dismiss, but granted the motion for a more definite statement. The State of Mississippi filed a First Amended Complaint on October 5, 2006. The defendants removed the action to the United States District Court for the Southern District of Mississippi on October 11, 2006. The registrant filed an answer to the First Amended Complaint on October 13, 2006. A motion to remand the suit is pending.

     The defendants removed the action brought by the State of Hawaii to the United States District Court for the District of Hawaii on August 10, 2006. A motion to remand the action is pending.

     Finally, the State of Alaska filed an Amended Complaint on October 17, 2006, naming the registrant and other pharmaceutical companies as defendants. The Alaska complaint pleads causes of action for (i) violation of the Alaska Unfair Trade Practices and Consumer Protection Act and (ii) unjust enrichment. The complaint seeks monetary damages; declarative relief; injunctive relief; compensatory, restitution, and/or disgorgement damages; civil penalties; punitive damages; costs, attorneys’ fees, and prejudgment interest; and other relief deemed just and equitable by the Court. The registrant intends to defend this action vigorously.

     The registrant cannot predict with certainty at this time the outcome or the effects on the registrant of the above listed litigations. The outcome of these litigations could include substantial damages, the imposition of substantial fines, penalties, and injunctive or administrative remedies. Accordingly, no assurances can be given that such litigations will not have a material adverse effect on the registrant’s financial condition, results of operations, prospects or business.

     The registrant is, from time to time, a party to certain other litigations, including product liability and patent actions. The registrant believes that these litigations are part of the ordinary course of its business and that their ultimate resolution will not have a material adverse effect on its financial condition, results of operations or liquidity. The registrant intends to defend or, in cases where the registrant is plaintiff, to prosecute these litigations vigorously.

ITEM 1A. Risk Factors

     The following information supplements the Risk Factors set forth in the registrant’s previously filed Annual Report on Form 10-K for 2005:

Risks that Relate to the registrant’s Accounting and Internal Controls

The registrant must restate its financial statements as of December 31, 2005 and 2004 and for each of the three years in the period ended December 31, 2005, as well as restate selected financial data as of and for each of the five years in the period ended December 31, 2005. The registrant will also restate quarterly results of operations for each of the two years in the period ended December 31, 2005. The registrant will also restate the first quarter of 2006. The restatement process is not yet complete. Investors should not rely on such prior financial statements until they are restated and filed with the Commission.

The financial statements listed above in the caption are collectively referred to herein as the “Prior Financial Statements.” The registrant has preliminarily identified certain accounting errors that will require it to restate the Prior Financial Statements. As a result, the registrant’s Audit Committee and Board of Directors have concluded that the Prior Financial Statements, including any related financial information contained in any of its previously filed SEC reports, should not be relied upon. The registrant is not able to predict when it will be able to deliver reliable financial statements for these historical periods or its financial statements required in this Quarterly Report on Form 10-Q.

The registrant expects that the cumulative effect of the restatement adjustments to revenues will total approximately $91 million as detailed in its Current Report on Form 8-K filed on December 14, 2006. The restatement adjustments include accounts receivable reserve errors resulting from delays in recognizing customer credits and the utilization of an inappropriate

9

methodology to estimate reserves that impacted the accuracy of recorded amounts for chargebacks, rebates, product returns and other accounts receivable reserves. The restatements of inventory and cost of goods sold relate to errors in the assessment of inventory valuation during the periods presented. Inventory write-downs resulted from the registrant’s determination that sales demand for certain inventory was less than the available inventory on hand and from inventory valuation procedures that included the tracing of recorded inventory amounts to actual qualities held. To the extent recorded inventory amounts could not be verified with physical quantities on hand, the recorded amounts were written off. Also the registrant had not historically adjusted inventory and cost of sales for manufacturing variances. The registrant will also restate its financial statements to correct additional errors relating to the accounting for a lease acquired in a business combination, accounting for the registrant’s investment in a joint venture, and other items. Following its determination to restate its financial statements, the registrant also determined that it would correct certain known errors, including sales cut-off adjustments, made in the application of GAAP that were previously not recorded because the registrant believed that such errors were not material, either individually or in the aggregate, to the registrant’s consolidated financial statements.

The restatement impact disclosed by the registrant in its Current Report on Form 8-K, filed on December 14, 2006, is unaudited and reflects only restatement adjustments identified to date. This estimate is subject to change as a result of any further adjustments arising from the restatement process and the audit of its restated financial statements by the registrant’s independent registered public accounting firm. The registrant can provide no assurance that additional matters will not be identified that will require further analysis relative to their impact on previously issued financial statements or that the amounts involved and nature and extent of the accounting errors may not ultimately differ materially from that described above.

Because the registrant currently does not have reliable financial statements for the specified historical periods and does not know precisely when it will have reliable financial statements for those periods, an investment in any of the registrant’s securities involves a very high degree of risk and uncertainty.

The registrant likely has material weaknesses in its internal control over financial reporting.

As disclosed in the registrant’s Form 8-K filed with the SEC July 6, 2006, due to accounting errors discovered by the registrant’s management, investors should not rely on Management’s Report on Internal Control Over Financial Reporting contained in the registrant’s Annual Report on Form 10-K for 2005. Although the registrant has not yet completed its analysis of the impact of the situation on its internal control over financial reporting, it has identified significant deficiencies and material weaknesses in its internal control over financial reporting during the affected periods. The registrant will describe the material weaknesses in its internal control over financial reporting and certain remediation measures that it has taken or intends to take to address material weaknesses in its Annual Report on Form 10-K/A for the period ended December 31, 2005 to be filed in connection with the restatement. The registrant will describe the material weaknesses in its internal control over financial reporting and certain remediation measures that it has taken, or intends to take, to address material weaknesses in its Annual Report on Form 10-K/A for the period ended December 31, 2005 to be filed in connection with the restatement. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the registrant’s ability to initiate, authorize, record, process or report external financial data reliably in accordance with U.S. generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the registrant’s annual or interim financial statements that is more than inconsequential will not be prevented or detected. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the registrant’s annual or interim financial statements will not be prevented or detected.

Accordingly, until the registrant completes its evaluation of its internal control over financial reporting in light of the identified accounting errors and remediates its internal controls, it will not be in a position to prepare reliable financial statements. The registrant can make no assurance as to when it will be able to complete its restatement and file restated financial statements with the Commission.

As a result of the required restatement, material information concerning the registrant’s operating results and financial condition is not available and is not expected to be available at any certain time.

Investors must evaluate whether to purchase or sell the registrant’s securities in light of the lack of current financial information concerning the registrant and in light of the above discussion. The registrant cannot accurately predict at what date accurate financial information will be available with respect to the Prior Financial Statements or the second and third quarters of 2006. Accordingly, any investment in the registrant’s securities involves a very high degree of risk and uncertainty.

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The registrant may lose existing customers or may not be successful in gaining new customers or commercial relationships as a result of the issues relating to the restatement of the Prior Financial Statements, its internal controls and related matters.

As a result of the accounting errors, related restatement of the Prior Financial Statements, identified issues related to the registrant’s internal controls and the registrant’s present inability to file financial information in this Quarterly Report on Form 10-Q, existing or potential customers, suppliers and partners may hesitate to enter into commercial relationships with the registrant. To date, these events have not had a material adverse impact on the registrant’s ability to conduct business. There can be no assurances, however, that such issues will not have a material adverse effect on the registrant’s ability to enter into or maintain commercial relationships in the future.

The registrant has received a notice of purported default and notice of acceleration with respect to its convertible notes and a lawsuit has been commenced.

     As previously disclosed on the registrant’s Current Report on Form 8-K filed September 6, 2006, on September 1, 2006, the registrant received a notice of purported default from the trustee of the registrant’s 2.875% Senior Subordinated Convertible Notes due 2010 (the “Notes”). The trustee claims, in essence, that the registrant’s failure to include financial statements in its Quarterly Report on Form 10-Q for the second quarter of 2006 constitutes a default under Section 6.2 of the indenture, dated as of September 30, 2003 (the “Indenture”), between the registrant, as issuer, and American Stock Transfer & Trust Company, as trustee (the “Trustee”), relating to the Notes. The notice of default asserted that if the purported default continues unremedied for 30 days after the receipt of the notice, an “event of default” would occur under the Indenture. Under the Indenture, the occurrence of an event of default would give the Trustee or certain holders of the Notes the right to declare all unpaid principal and accrued and unpaid interest on the Notes immediately due and payable. On October 2, 2006, the registrant received a notice from the Trustee purporting to accelerate payment of the principal of and accrued interest on the Notes. The registrant believes that it has complied with its obligations under the Indenture relating to the Notes. Therefore, the registrant believes that the above-mentioned notice of default and notice of acceleration are invalid and without merit. After the registrant communicated its position to the Trustee, the Trustee filed a lawsuit, on October 19, 2006, on behalf of the holders of the Notes in Supreme Court of the State of New York, County of New York, alleging a breach of the Indenture and an alleged breach of an alleged covenant of good faith and fair dealing. The lawsuit demands, among other things, that the registrant pay the holders of the Notes either the principal, accrued and unpaid interest and Additional Interest (as such term is defined in the Indenture), if any, on the Notes or the difference between the fair market value of the Notes on October 2, 2006 and par, whichever the Trustee elects, or, in the alternative, damages to be determined at trial, alleged to exceed $30 million. The registrant has filed a notice of removal to remove the lawsuit to the U.S. District Court for the Southern District of New York and has filed its answer to the complaint in that Court.

     If the Trustee’s position is upheld and an “event of default” in fact has occurred, the registrant could be obligated to immediately pay all outstanding principal and accrued and unpaid interest on the Notes to the holders of the Notes. Such an event would likely require the registrant to obtain alternative financing that may not be available to the registrant on favorable terms or at all, and could have a material adverse impact on the registrant’s operations, prospects, liquidity and the trading prices of its securities.

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ITEM 2. — Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities⁽¹⁾
Quarter Ending September 30, 2006

					Total Number of
					Shares of		Maximum Number
			Average		Common Stock		of Shares of
			Price Paid		Purchased as		Common Stock that
	Total Number of		per Share		Part of Publicly		May Yet Be
	Shares of		of		Announced		Purchased Under
	Common Stock		Common		Plans or		the Plans or
Period	Purchased		Stock		Programs		Programs(2)
July 2, 2006 through July 29, 2006		—		N/A		—		977,083
July 30, 2006 through August 26, 2006		—		N/A		—		977,083
August 27, 2006 through September 30, 2006		—		N/A		—		977,083

(1)

In April 2004, the Board authorized the repurchase of up to $50,000 of the registrant’s common stock. Repurchases are made, subject to compliance with applicable securities laws, from time to time in the open market or in privately negotiated transactions, whenever it appears prudent to do so. Shares of common stock acquired through the repurchase program are available for reissuance for general corporate purposes. The authorized amount remaining for stock repurchases under the repurchase program is $17.8 million. The repurchase program has no expiration date.

(2)

Based on the closing price of the registrant’s common stock on The New York Stock Exchange $18.24 at September 29, 2006.

Item 5. Other Information

The registrant entered into a separation agreement with Shankar Hariharan (the “Hariharan Agreement”), the registrant’s Executive Vice President and Chief Scientific Officer, on November 29, 2006 and effective as of November 22, 2006. Pursuant to the Hariharan Agreement, Mr. Hariharan separated from the registrant and the registrant agreed to pay Mr. Hariharan $842,000 in six installments beginning in the seventh month after his separation date. The first installment will be $491,166.70 and each of the five monthly installments thereafter will be $70,166.66. Additionally, for two years following the separation date, the registrant has agreed to maintain in effect for Mr. Hariharan coverage under the registrant’s life insurance and medical plans, unless Mr. Hariharan becomes eligible for comparable benefits from another employer. Additionally, a number of Mr. Hariharan’s options to purchase shares of common stock of the registrant and a number of the shares of restricted stock of the registrant previously granted to Mr. Hariharan will continue to vest and be exercisable, consistent with the terms of Mr. Hariharan’s employment agreement. Pursuant to the Hariharan Agreement, Mr. Hariharan has agreed to waive any claim that he may have against the registrant in connection with his employment relationship. Mr. Hariharan agreed that for one year following his separation date he will not solicit any suppliers or employees away from the registrant, and for two years following his separation date he will not provide any services that may compete with the business of the registrant.

The registrant entered into a separation agreement with Mark Auerbach (the “Auerbach Agreement”), the registrant’s former Executive Chairman and a former director, on December 1, 2006 and effective as of October 31, 2006. Pursuant to the Auerbach Agreement, Mr. Auerbach separated from the registrant and the registrant agreed to pay Mr. Auerbach $642,114 in six equal installments beginning in the seventh month after his separation date and continuing for five months thereafter. Additionally, for 24 months following his separation date, the registrant agreed to maintain in effect Mr. Auerbach’s coverage under the registrant’s medical plan. The registrant also agreed to vest all of Mr. Auerbach’s shares of restricted stock and his options to purchase shares of the registrant’s common stock, and Mr. Auerbach will have 24 months from his separation date in which to exercise all his stock options. Pursuant to the Auerbach Agreement, Mr. Auerbach waives any claim that he may have against the registrant in connection with his employment relationship. Mr. Auerbach agreed that for two years following his separation date he will not solicit any business or employees away from the registrant, and he will not provide any services that may compete with the business of the registrant.

ITEM 6. Exhibits

10.1	Employment agreement by and between Par Pharmaceutical Companies, Inc. and Patrick LePore, dated as of November 10, 2006.
10.2	Separation agreement by and between Par Pharmaceutical Companies, Inc. and Mark Auerbach, dated as of December 1, 2006.
10.3	Separation agreement by and between Par Pharmaceutical Companies, Inc. and Michael Graves, dated as of November 10, 2006.
10.4	Separation agreement by and between Par Pharmaceutical Companies, Inc. and Shankar Hariharan, dated as of November 29, 2006.
31.1	Certification of the Principal Executive Officer.
31.2	Certification of the Principal Financial Officer.
32.1	Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* (To be attached)
32.2	Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* (To be attached)

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* The certifications to be furnished as Exhibits 32.1 and 32.2 to the registrant’s Quarterly Report on Form 10-Q/A will not be deemed to be filed with the SEC and will not be incorporated by reference into any filing of the registrant under the Securities Act of 1933, as amended, or the Securities Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in any such filing.

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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.

	PAR PHARMACEUTICAL COMPANIES, INC. (registrant)
Date: December 21, 2006	/s/ Patrick G. LePore
	Patrick G. LePore
	President and Chief Executive Officer
Date: December 21, 2006	/s/ Gerard A. Martino
	Gerard A. Martino
	Executive Vice President and Chief Financial Officer

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EXHIBIT INDEX

10.1	Employment agreement by and between Par Pharmaceutical Companies, Inc. and Patrick LePore, dated as of November 10, 2006.
10.2	Separation agreement by and between Par Pharmaceutical Companies, Inc. and Mark Auerbach, dated as of December 1, 2006.
10.3	Separation agreement by and between Par Pharmaceutical Companies, Inc. and Michael Graves, dated as of November 10, 2006.
10.4	Separation agreement by and between Par Pharmaceutical Companies, Inc. and Shankar Hariharan, dated as of November 29, 2006.
31.1	Certification of the Principal Executive Officer.
31.2	Certification of the Principal Financial Officer.
32.1	Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2	Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

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EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

          EMPLOYMENT AGREEMENT (this “Agreement”), dated as of November 10, 2006, by and between PAR PHARMACEUTICAL COMPANIES, INC., and PAR PHARMACEUTICAL, INC., each a Delaware corporation (collectively, “Par” or “Employer”), and PATRICK LePORE (“Executive”).

RECITALS

     A. WHEREAS, Employer wishes to employ Executive in the capacity of President and Chief Executive Officer of Par Pharmaceutical Companies, Inc., and as President and Chief Executive Officer of Par Pharmaceutical, Inc., and Executive desires to provide services in these capacities; and

     B. WHEREAS, Employer and Executive desire to formalize the terms and conditions of Executive’s employment with Employer.

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

OPERATIVE PROVISIONS

     1. Employment.

          1.1 General. Par hereby employs Executive effective September 27, 2006 (the “Effective Date”), in the capacity of Chief Executive Officer and President of Par, at the compensation rate and benefits set forth in Section 2 hereof, for the Employment Term (as defined in Section 3.1 hereof). Executive hereby accepts such employment, subject to the terms and conditions herein contained. In all such capacities, Executive shall perform and carry out such duties and responsibilities as may be assigned to him from time to time by the Board of Directors (the “Board”) reasonably consistent with Executive’s position and this Agreement, and shall report to the Board.

          1.2 Time Devoted to Position. Executive, during the Employment Term, shall devote substantially all of his business time, attention and skills to the business and affairs of Employer.

          1.3 Certifications. Whenever the Chief Executive Officer and/or Chief Financial Officer of Employer are required by law, rule or regulation, or requested by any governmental authority or by Par’s auditors, to provide certifications with respect to Par’s financial statements or filings with the Securities and Exchange Commission or any other governmental authority, Executive shall sign such certifications as may be reasonably requested by Employer, with such exceptions as Executive deems necessary to make such certifications accurate and not misleading.

     2. Compensation and Benefits.

          2.1 Salary. At all times Executive is employed hereunder, Employer shall pay to Executive, and Executive shall accept, as full compensation for any and all services rendered and to be rendered by him during such period to Employer in all capacities, including, but not limited to, all services that may be rendered by him to any of Employer’s existing subsidiaries, entities and organizations hereafter formed, organized or acquired by Employer, directly or indirectly (each, a “Subsidiary” and collectively, the “Subsidiaries”), the following: (i) a base salary at the annual rate of six hundred and twenty thousand and four hundred dollars ($620,400.00) (the “Base Salary”); (ii) any additional bonus; and (iii) the benefits set forth in Sections 2.2, 2.3, and 2.4 hereof. The Base Salary shall be payable in accordance with the regular payroll practices of Employer applicable to senior executives, less such deductions as shall be required to be withheld by applicable law and regulations or otherwise.

          2.2 Bonus. Subject to Section 3.3 hereof, Executive may be considered for a bonus during the Employment Term in such amount (if any) as determined by the Board based on such performance criteria as it deems appropriate, including, without limitation, Executive’s performance and Employer’s earnings, financial condition, rate of return on equity, and compliance with regulatory requirements. Notwithstanding the preceding, the payment, timing, and amount of any bonus are solely within the discretion of the Board.

          2.3 Equity Awards. Executive shall be entitled to participate in long-term incentive plans commensurate with his title and position, including, without limitation, restricted stock, stock option, and similar equity plans of Employer as may be offered from time to time. In connection herewith, Executive has been granted thirty five thousand (35,000) shares of restricted stock of Par, and options to purchase one hundred twenty thousand (120,000) shares of common stock of Par, on the terms and conditions set forth in the 2004 Performance Equity Plan, as amended (the “2004 Plan”) and Executive’s Stock Option Agreement and Award Agreement. Notwithstanding the terms of any applicable plan or stock option agreement, in the event that Executive and Employer enter into another agreement for Executive’s employment after the Employment Term has expired, all restricted stock and stock options shall vest in their normal course subject to any related terms and conditions set forth in any subsequent agreement between the parties. However, if Executive is separated from Employer, for any reason whatsoever, prior to the last day of the Employment Term, all restricted stock and options granted to Executive shall be cancelled. If Executive remains employed for the entire Employment Term, but Executive and Employer do not enter into a new agreement for employment of Executive upon or prior to expiration of the Employment Term, all restricted stock shall vest on the day following the expiration of the Employment Term and all stock options shall be cancelled. Except as modified by the terms of this Section 2.3, all long-term incentive awards and grants pursuant to this paragraph shall be subject to the terms and conditions set forth in the 2004 Plan and the Stock Option and Award Agreements relating to such options and shares.

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          2.4 Executive Benefits.

               2.4.1 Expenses. Employer shall 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 Employer’s policies with respect thereto as in effect from time to time.

               2.4.2 Employer Plans. Executive shall be entitled to participate in such employee benefit and welfare plans and programs as Employer may from time to time generally offer or provide to executive officers of Employer 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.

               2.4.3 Vacation. Executive shall initially be entitled to four (4) weeks of paid vacation per calendar year, pro-rated for any partial year during the Employment Term.

               2.4.4 Automobile. Employer shall provide Executive with an automobile cash allowance in the amount of one thousand and fifty dollars ($1,050.00) (gross) per month.

               2.4.5 Life Insurance. Employer shall obtain (provided, that Executive qualifies on a non-rated basis) a term life insurance policy, the premiums of which shall be borne by Employer and the death benefits of which shall be payable to Executive’s estate, or as otherwise directed by Executive, in the amount of three million dollars ($3,000,000.00) throughout the Employment Term.

     3. Employment Term; Termination.

          3.1 Employment Term. Executive’s employment hereunder shall commence on the Effective Date (as defined in Section 1.1 hereof) and, except as otherwise provided in Section 3.2 hereof, shall continue until the first (1st) anniversary of the Effective Date (the “Employment Term”). Executive’s employment shall terminate on the first (1st) anniversary of the Effective Date (the end of the Employment Term). With the exception of the terms that specifically survive this agreement (such as the terms set forth in Section 4 hereof), the terms of this Agreement that operate to employ Executive shall not be effective after the first (1st) anniversary of the Effective Date, and under no circumstances shall Executive be employed pursuant to any term of this Agreement beyond the first (1st) anniversary of the Effective Date. Should Employer and Executive mutually agree that Executive will become employed by Employer for another term, a new employment agreement must be entered into by the parties. Upon termination of the Employment Term pursuant to this Section 3.1, or pursuant to Sections 3.2.1 through 3.2.6 hereof, inclusive, Executive shall be released from any duties hereunder (except as set forth in Section 4 hereof) and the obligations of Employer to Executive shall be as set forth in Section 3.3 hereof only.

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          3.2 Events of Termination. The Employment Term shall 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 Term shall terminate on the date of his death.

               3.2.2 Without Cause By Executive. Executive may terminate the Employment Term at any time during such Employment Term for any reason whatsoever by giving a Notice of Termination to Employer. The Date of Termination (as defined in Section 3.4.2 herein) pursuant to this Section 3.2.2 shall be thirty (30) days after the Notice of Termination is given or such shorter period as Employer shall determine, in Employer’s sole discretion, provided that Employer shall pay to Executive that amount of the Base Salary that would have been earned between the 30-day period and such shorter period.

               3.2.3 Disability. In the event of Executive’s Disability (as hereinafter defined), Employer may, at its option, terminate the Employment Term 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. For purposes of this Agreement, “Disability” means disability as defined in any long-term disability insurance policy provided by Employer and insuring Executive, or, in the absence of any such policy, the inability of Executive for one hundred eighty (180) days in any twelve (12) month period to substantially perform his duties hereunder as a result of a physical or mental illness, all as determined in good faith by the Board.

               3.2.4 Cause. Employer may, at its option, terminate the Employment Term for “Cause” based on objective factors determined in good faith by a majority of the Board as set forth in a Notice of Termination to Executive specifying the reasons for termination and the failure of Executive to cure same within ten (10) days after Employer shall have given the Notice of Termination; provided, however, that in the event the Board in good faith determines that the underlying reasons giving rise to such determination cannot be cured, then the ten (10) day period shall not apply and the Date of Termination shall be the date the Notice of Termination is given. For purposes of this Agreement, “Cause” shall mean (i) Executive’s conviction of, guilty or no contest plea to, or confession of guilt to, a felony or other crime involving moral turpitude; (ii) an act or omission by Executive in connection with his employment that constitutes fraud, criminal misconduct, breach of fiduciary duty, dishonesty, gross negligence, malfeasance, willful misconduct or other conduct that is materially harmful or detrimental to Employer; (iii) a material breach by Executive of this Agreement; (iv) continuing failure to perform such duties as are assigned to Executive by Employer in accordance with this Agreement, other than a failure resulting from a disability as defined in Section 3.2.3; (v) Executive’s knowingly taking any action on behalf of Employer or any of its Subsidiaries or affiliates without appropriate authority to take such action; (vi) Executive’s knowingly taking any action in conflict of interest with Employer or any of its Subsidiaries or affiliates given Executive’s position with Employer; and/or (vii) the commission of an act of personal dishonesty by Executive in connection with Employer that involves personal profit.

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               3.2.5 Without Cause By Employer. Employer may, at its option, terminate the Employment Term 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 or such shorter period as Employer shall determine, in Employer’s sole discretion, provided that Employer shall pay to Executive that amount of the Base Salary that would have been earned between the 30-day period and such shorter period.

               3.2.6 Employer’s Material Breach. Executive may, at his option, terminate the Employment Term upon Employer’s material breach of this Agreement and the continuation of such breach for more than ten (10) days after written demand for cure of such breach is given to Employer by Executive (which demand shall identify the manner in which Employer has materially breached this Agreement). Employer’s material breach of this Agreement shall mean (i) the failure of Employer to make any payment that it is required to make hereunder to Executive when such payment is due or within two (2) business days thereafter; (ii) the assignment to Executive, without Executive’s express written consent, of duties inconsistent with his position, 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 his positions with Employer, except in connection with the termination of the Employment Term by Employer for cause, without cause, for disability, as a result of Executive’s death or voluntary resignation, or by Executive other than pursuant to this Section 3.2.6; (iii) a reduction by Employer in Executive’s Base Salary; or (iv) a permanent reassignment of Executive’s primary work location, without the consent of Executive, to a location more than thirty five (35) miles from Employer’s executive offices in Woodcliff Lake, New Jersey.

          3.3 Obligations of Employer Following Termination of the Employment Term. In the event that the Employment Term is terminated by Employer or Executive for any reason prior to its expiration, Employer shall pay to Executive, in a single lump-sum, an amount equal to any unpaid but earned Base Salary through the Date of Termination. Executive shall be entitled to no other separation pay other than as described in 3.3.1 below. Executive shall be entitled to no bonuses, and all benefits and allowances provided for herein shall terminate as of the Date of Termination.

               3.3.1 Termination Without Cause by Employer or by Executive for Employer’s Material Breach. In the event that the Employment Term is terminated without cause by Employer as set forth in Section 3.2.5 herein, or by Executive for Employer’s material breach as set forth in Section 3.2.6 hereof, Employer shall pay Executive his salary as set forth in Section 2.1 hereof for the remainder of the Employment Term. Executive shall be entitled to no other compensation or benefits during the remainder of the Employment Term. In the event that Executive, after Employer’s termination without cause or Executive’s termination for employer’s material breach, directly or indirectly provides any services (whether in the management, sales, marketing, public relations, finance, research, development, general office, administrative or

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other areas) as an employee, agent, stockholder, officer, director, consultant, advisor, investor or other representative of Employer’s competitors in the branded or generic pharmaceutical industry in any state or country in which Employer does or seeks to do business as defined in Section 4.4 hereof, such continued salary payments as described in this Section 3.3.1 shall immediately cease and Employer shall have no further obligations to pay salary under this Section.

          3.4 Definitions.

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

               3.4.2 “Date of Termination” Defined. “Date of Termination” means either such date as the Employment Term is expired if not renewed, or such date as the Employment Term is terminated, in accordance with, respectively, Sections 3.1 or 3.2 hereof.

     4. Confidentiality/ Non-Solicitation/Non-Compete.

          4.1 “Confidential Information” Defined. “Confidential Information” means any and all information (oral or written) relating to Employer or any of its Subsidiaries or any person controlling, controlled by, or under common control with Employer or any of its Subsidiaries or any of their respective activities, including, but not limited to, information relating to: technology; research, test procedures and results; machinery and equipment; manufacturing processes; financial information; products; identity and description of materials and services used; purchasing; costs; pricing; customers and prospects; advertising, promotion and marketing; and selling, servicing and information pertaining to any governmental investigation, except such information which becomes public, other than as a result of a breach of the provisions of Section 4.2 hereof. Without limiting the foregoing, Confidential Information shall also include all information related to products targeted for development by Employer and/or its Subsidiaries, subjects of research and development, projected launch dates, the United States Food and Drug Administration (FDA) protocols, projected dates for regulatory filings, consumer studies, market research, clinical research, business plans, content of the New Product Planning Committee meetings, planned expenditures, profit margins, strategic evaluation plans and initiatives, and those commissioned by Employer through outside vendors or consultants, and the content of all business and strategic planning conducted with or through third parties. Executive’s obligation not to disclose Confidential Information shall be as set forth in Section 4.2 of this Agreement, and shall include his obligation not to place himself in any business position in which use or disclosure of Employer’s confidences will be likely, expected or inevitable, for Executive’s own benefit or the benefit of any other person or entity.

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          4.2 Non-disclosure of Confidential Information. Executive shall 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 for the benefit of any person or entity other than Employer (except as may be required under legal process by subpoena or other court order).

          4.3 Non-Solicitation. Executive shall not, while employed by Employer and 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 Employer or any of its Subsidiaries to discontinue or alter his/her or its relationship with Employer or any of its Subsidiaries.

          4.4 Non-Competition. Executive shall not, while employed by Employer and for a period equal to one (1) year following the Date of Termination, directly or indirectly provide any services (whether in the management, sales, marketing, public relations, finance, research, development, general office, administrative or other areas) as an employee, agent, stockholder, officer, director, consultant, advisor, investor or other representative of Employer’s competitors in the branded or generic pharmaceutical industry in any state or country in which Employer does or seeks to do business. Employer’s competitors include any entity, individual or affiliate of such company or individual that develops, sells, markets or distributes any products that compete with or are the same or similar to those of Employer.

          However, the restrictions of this paragraph 4.4 shall not apply if the Employment Term is terminated by Employer pursuant to Section 3.2.5 hereof or by Executive properly pursuant to 3.2.6 hereof; nor shall this paragraph prohibit Executive from being a passive owner of not more than one percent (1%) of any publicly-traded class of capital stock of any entity engaged in a competing business.

          4.5 Injunctive Relief. The parties hereby acknowledge and agree that (a) the type, scope and periods of restrictions imposed in paragraph 4 are necessary, fair and reasonable to protect Employer’s legitimate business interests and to prevent the inevitable disclosure of Employer’s Confidential Information; (b) Employer will be irreparably injured in the event of a breach by Executive of any of his obligations under this Section 4; (c) monetary damages will not be an adequate remedy for any such breach; (d) Employer will be entitled to injunctive relief, in addition to any other remedy which it may have, in the event of any such breach; and (e) the existence of any claims that Executive may have against Employer, whether under this Agreement or otherwise, will not be a defense to the enforcement by Employer 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 that 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 shall survive any termination of the Employment Term by either party and any investigation made with respect to the breach thereof by Employer at any time.

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     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 upon receipt when delivered by hand, overnight delivery or telecopy (with confirmed delivery), or three (3) business days after posting, when delivered by registered or certified mail or private courier service, postage prepaid, return receipt requested, as follows:

     If to Employer, to:

Par Pharmaceutical Companies, Inc.
300 Tice Boulevard
Woodcliff Lake, New Jersey 07677
Attention: Chairman
Telecopy No. (201) 802-4180

     Copy to:

Christine A. Amalfe, Esq.
Gibbons, Del Deo, Dolan, Griffinger & Vecchione, P.C.
One Riverfront Plaza
Newark, New Jersey 07102-5496
Telecopy No. (973) 639-6230

     If to Executive, to:

Patrick LePore
c/o Par Pharmaceutical Companies, Inc.
300 Tice Boulevard
Woodcliff Lake, New Jersey 07677

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

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          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 Employer 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.

          5.6 Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey applicable to contracts made and to be wholly performed therein.

          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 any of his duties or assign his rights hereunder. This Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their respective heirs, legal representatives, successors and permitted assigns. Employer 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 Employer, 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 Employer 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 Employer 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 shall 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.

          5.11 Enforcement; Jurisdiction. 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

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such prevailing party in connection therewith. Any legal action, suit or proceeding, in equity or at law, arising out of or relating to this Agreement shall be instituted exclusively in the State or Federal courts located in the State of New Jersey, and each party agrees not to assert, by way of motion, as a defense or otherwise, in any such action, suit or proceeding, any claim that such party is not subject personally to the jurisdiction of any such court, that the action, suit or proceeding is brought in an inconvenient forum, that the venue of the action, suit or proceeding is improper or should be transferred, or that this Agreement or the subject matter hereof may not be enforced in or by any such court. Each party further irrevocably submits to the jurisdiction of any such court in any such action, suit or proceeding. Any and all service of process and any other notice in any such action, suit or proceeding shall be effective against any party if given personally or by registered or certified mail, return receipt requested or by any other means of mail that requires a signed receipt, postage prepaid, mailed to such party as herein provided. Nothing herein contained shall be deemed to affect or limit the right of any party to serve process in any other manner permitted by applicable law.

          5.12 Arbitration.

               (a) Any dispute under Section 3 hereof, including, but not limited to, the determination by the Board of a termination for Cause pursuant to Section 3.2.4 hereof, or in respect of the breach thereof shall be settled by arbitration in the State of New Jersey. The arbitration shall 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 ten (10) days after such demand is given in accordance with Section 5.3 hereof, each of the parties shall designate an arbitrator and provide written notice of such appointment upon the other party. If either party fails within the specified time to appoint such arbitrator, the other party shall be entitled to appoint both arbitrators. The two (2) arbitrators so appointed shall appoint a third arbitrator. If the two (2) arbitrators appointed fail to agree upon a third arbitrator within ten (10) days after their appointment, then an application may be made by either party hereto, upon written notice to the other party, to the American Arbitration Association (the “AAA”), or any successor thereto, or if the AAA or its successor fails to appoint a third arbitrator within ten (10) days after such request, then either party may apply, with written notice to the other, to the Superior Court of New Jersey, Bergen County, for the appointment of a third arbitrator, and any such appointment so made shall be binding upon both parties hereto.

               (b) The decision of the arbitrators shall be final and binding upon the parties. The party against whom the award is rendered (the “non-prevailing party”) shall 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 shall 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 shall be conducted, to the extent consistent with this Section 5.12, in accordance with the then prevailing rules of commercial arbitration of the AAA or its successor. The arbitrators shall have the right to retain and consult experts and competent authorities skilled in the matters under

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arbitration, but all consultations shall be made in the presence of both parties, who shall have the full right to cross-examine the experts and authorities. The arbitrators shall 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 shall 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.

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

PAR PHARMACEUTICAL COMPANIES, INC.
By:	/s/ Peter S. Knight
	Name:	Peter S. Knight
	Title:	Chairperson of the Compensation Committee
PAR PHARMACEUTICAL, INC.
By:	/s/ Gerard A. Martino
	Name:	Gerard A. Martino
	Title:	Executive Vice President and Chief Financial Officer
EXECUTIVE
/s/ Patrick G. LePore
Patrick G. LePore

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EX-10.2

EXHIBIT 10.2

SEPARATION AND RELEASE AGREEMENT

     This Separation and Release Agreement (“Agreement”) is made by and between PAR PHARMACEUTICAL COMPANIES, INC., and PAR PHARMACEUTICAL, INC. (collectively referred to as “THE COMPANY”), and MARK AUERBACH (“EMPLOYEE”), a specified employee of THE COMPANY. The Effective Date of this Agreement shall be as set forth in Section 8 herein.

RECITALS

     A. For purposes of this Agreement, “THE COMPANY” means PAR PHARMACEUTICAL COMPANIES, INC., and PAR PHARMACEUTICAL, INC., and each and any of their parent and subsidiary corporations, affiliates, departments and divisions.

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

     C. As a result of EMPLOYEE’s separation from THE COMPANY, and to fully and finally resolve all issues concerning EMPLOYEE’s employment relationship with THE COMPANY, and to reiterate certain terms contained in EMPLOYEE’s Employment Agreement dated September 16, 2003, THE COMPANY and EMPLOYEE have decided to enter into this Agreement.

     For and in consideration of the mutual promises and covenants in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

OPERATIVE PROVISIONS

          1. Separation of Employment. THE COMPANY and EMPLOYEE agree that EMPLOYEE shall separate from THE COMPANY effective at the end of business on October 31, 2006 (“Separation Date”), such separation of employment with THE COMPANY occurring pursuant to Section 3.2.5 of that certain Employment Agreement dated as of September 16, 2003 by and between the parties (“Employment Agreement”).

          2. Pay, Benefits and Stock Options Upon Separation.

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

EMPLOYEE hereby agrees that he is entitled to no other payment from THE COMPANY as the result of his separation or during the aforementioned period.

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

               (c) Stock Options. The parties agree that as of October 30, 2006 EMPLOYEE has been granted options for 328,816 shares of THE COMPANY’s common stock. Of these, 95,855 options are unvested. In accordance with the Employment Agreement, these unvested options shall vest as of the Separation Date. EMPLOYEE shall have twenty-four (24) months from such date to exercise all options, at the exercise price related to the respective option grants, provided that the relevant stock option plan remains in effect and such options have not otherwise expired. EMPLOYEE’S exercise of such options is governed by Section 3.3.6(b) of the Employment Agreement as well as the terms of the applicable plan, referenced in the Employment Agreement.

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

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

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

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expenses, and is entitled to no further payments or bonuses from THE COMPANY whatsoever for services rendered or any other reason, except as set forth herein.

          4. Consideration.

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

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

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

          6. General Release and Waiver of Claims. Solely in connection with EMPLOYEE’s employment relationship with THE COMPANY and in accordance with Section 3.3 of the Employment Agreement, and in consideration of the additional promises and covenants made by THE COMPANY in this Agreement, EMPLOYEE hereby knowingly and voluntarily compromises, settles and releases THE COMPANY from any and all past, present, or future claims, demands, obligations, or causes of action, whether based on tort, contract, statutory or other theories of recovery for anything that has occurred up to and including the date of EMPLOYEE’s execution of this Agreement. The released claims include those EMPLOYEE may have or has against THE COMPANY, or which may later accrue to or be acquired by EMPLOYEE against THE COMPANY and its predecessors, successors in interest, assigns, parent and subsidiary organizations, affiliates, and partners, and its past, present, and future officers, directors, shareholders, agents, and employees, and their heirs and assigns. EMPLOYEE specifically agrees to release and waive all claims for wrongful termination and any claim for retaliation or discrimination in employment under federal or state law or regulation including, but not limited to, discrimination based on age, sex, race, disability, handicap, national origin or any claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, as amended by the Older Workers’ Benefits Protection Act (ADEA), the Americans with Disabilities Act of 1990 (ADA), the New Jersey Law Against Discrimination (LAD), the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Employee Retirement Income Security Act (ERISA), the Immigration Reform and Control Act (IRCA), the Fair Labor Standards Act (FLSA), the Conscientious Employee Protection Act (CEPA), the Family Medical Leave Act (FMLA), the New Jersey Family Leave Act (NJFLA) and the New Jersey wage and hour law. The release of claims agreed to herein specifically excludes any claims relating to a breach of this Agreement and any non-employment-related counterclaims

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

          7. Covenant Not to Sue.

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

               (b) THE COMPANY represents that it is currently not aware of any basis for any cause of action against EMPLOYEE relative to any matter that involved THE COMPANY and that occurred up to and including the date of THE COMPANY’s execution of this Agreement, except, however, for the sake of clarity, the parties acknowledge that there is currently pending shareholder litigation in which claims have been asserted against EMPLOYEE.

               (c) EMPLOYEE agrees, not inconsistent with EEOC Enforcement Guidance or Non-Waivable Employee Rights Under EEOC-Enforced Statutes dated April 11, 1997, and to the fullest extent permitted by laws, not to sue or file a charge, complaint, grievance or demand for arbitration against THE COMPANY in any claim, arbitration, suit, action, investigation or other proceeding of any kind which relates to any matter that involved THE COMPANY, and that occurred up, to and including the date of EMPLOYEE’s execution of this Agreement, other than those non-employment-related counterclaims that EMPLOYEE might assert against THE COMPANY if THE COMPANY were to sue EMPLOYEE, unless required to do so by court order, subpoena or other directive by a court, administrative agency, arbitration panel or legislative body, or unless required to enforce this Agreement. Nothing in this Agreement shall prevent EMPLOYEE from (i) commencing an action or proceeding to enforce this Agreement, or (ii) exercising EMPLOYEE’s right under the Older Workers Benefit Protection Act of 1990 to challenge the validity of EMPLOYEE’s waiver of ADEA claims set forth in this Agreement.

          8. Consideration and Revocation Periods: Effective Date. EMPLOYEE also understands and acknowledges that the ADEA requires THE COMPANY to provide EMPLOYEE with at least twenty one (21) calendar days to consider this Agreement (“Consideration Period”) prior to its execution. EMPLOYEE also understands that he is entitled to revoke this Agreement at any time during the seven (7) days following EMPLOYEE’s execution of this Agreement (“Revocation Period”) by notifying THE COMPANY in writing of his revocation. This Agreement shall become effective on the day after the seven-day Revocation Period has expired unless timely notice of EMPLOYEE’s revocation has been delivered to THE COMPANY (the “Effective Date”).

          9. Return of Company Property. On his Separation Date EMPLOYEE agrees forthwith to deliver to THE COMPANY all of THE COMPANY’s property in his possession or under his custody and control, including but not limited to all keys, and tangible

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items, notebooks, documents, records and other data relating to research or experiments conducted by any person relating to the products, formulas, formulations, processes or methods of manufacture of THE COMPANY, and to its customers and pricing of products, except that EMPLOYEE shall be entitled to keep the Blackberry device provided to him by THE COMPANY. EMPLOYEE represents to THE COMPANY that all confidential and proprietary information of THE COMPANY stored on the Blackberry device has been returned to THE COMPANY.

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

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

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

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

          13. Confidentiality. EMPLOYEE agrees to keep both the existence and the terms of this Agreement completely confidential, except that EMPLOYEE may discuss this Agreement with EMPLOYEE’s attorney, accountant, or other professional person who may assist EMPLOYEE in evaluating, reviewing, or negotiating this Agreement, and as otherwise permitted or required under applicable law and EMPLOYEE understands and agrees that his disclosure of the terms of this Agreement contrary to the terms set forth herein will constitute a breach of this Agreement; provided, that EMPLOYEE may disclose his covenants not to solicit or compete, set forth in Paragraph 11 and 12 of this Agreement, or in the relevant provisions of the Employment Agreement, to a successor employer or potential successor employer.

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

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

          16. Disclosure of Information. EMPLOYEE represents and warrants that he is not aware of any material non-public information concerning THE COMPANY, its business or its affiliates that he has not disclosed to the Board of Directors of THE COMPANY prior to the date of this Agreement or that is required to be disclosed by THE COMPANY in its filings under the Securities Exchange Act of 1934 with the Securities and Exchange Commission (“SEC”) and that has not been so disclosed.

          17. Cooperation. EMPLOYEE hereby agrees that:

               (a) EMPLOYEE will make himself reasonably available to THE COMPANY either by telephone or, if reasonably necessary, in person upon reasonable advance notice, to assist THE COMPANY in connection with any matter relating to services performed by him on behalf of THE COMPANY prior to the Separation Date.

               (b) EMPLOYEE further agrees that he will take reasonable actions to cooperate fully with THE COMPANY in relation to any investigation or hearing with the SEC or any other governmental agency, as well as in the defense or prosecution of any claims or actions now in existence, including but not limited to ongoing commercial litigation matters, shareholder

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derivative actions, and class action law suits, or which may be brought or threatened in the future against or on behalf of THE COMPANY, its directors, shareholders, officers, or employees.

               (c) EMPLOYEE will take reasonable actions to cooperate in connection with such claims or actions referred to in Section 17(b) above including, without limitation, his being available to meet with THE COMPANY to prepare for any proceeding (including depositions, fact-findings, arbitrations or trials), to provide affidavits, to assist with any audit, inspection, proceeding or other inquiry, and to act as a witness in connection with any litigation or other legal proceeding affecting THE COMPANY.

               (d) EMPLOYEE further agrees that should he be contacted (directly or indirectly) by any individual or any person representing an individual or entity that is or may be legally or competitively adverse to THE COMPANY in connection with any claims or legal proceedings against THE COMPANY, he will promptly notify THE COMPANY of that fact in writing. Such notification shall include a reasonable description of the content of the communication with the legally or competitively adverse individual or entity.

               (e) Notwithstanding the provisions herein, EMPLOYEE acknowledges that his cooperation obligation requires him to participate truthfully and accurately in all matters contemplated under Section 17. THE COMPANY shall reimburse EMPLOYEE for all out-of-pocket expenses incurred by EMPLOYEE as a result of or arising out of any actions taken by EMPLOYEE pursuant to this Section 17, including without limitation, all travel, meal and lodging expenses. THE COMPANY shall not be required to reimburse EMPLOYEE for any attorneys fees incurred as a result of or arising out of any actions taken by EMPLOYEE pursuant to this Section 17.

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

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

          20. No Reliance Upon Representations. EMPLOYEE hereby represents and acknowledges that in executing this Agreement, EMPLOYEE does not rely and has not relied upon any representation or statement made by THE COMPANY or by any of THE COMPANY’s past or present agents, representatives, employees or attorneys with regard to the subject matter, basis or effect of this Agreement other than as set forth in this Agreement.

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          21. Tax Advice.

               (a) THE COMPANY makes no representations regarding the federal or state tax consequences of the payments or benefits referred to above and provided for herein, and shall not be responsible for any tax liability, interest or penalty including but not limited to those which may arise under Internal Revenue Service Code Section 409A, incurred by EMPLOYEE which in any way arises out of or is related to said payments or benefits. With the exception of the regular payroll deductions for federal and state withholding and employment taxes, EMPLOYEE agrees that it shall be his sole responsibility to pay any amount that may be due and owing as federal or state taxes, interest and penalties, including but not limited to those which may arise under Internal Revenue Service Code Section 409A, arising out of the payments or benefits provided for herein.

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

               (c) EMPLOYEE and THE COMPANY further agree that they and their attorneys will give mutual notice of any claims by the Internal Revenue Service (“IRS”), or any other taxing authority or other governmental agency (whether federal, state or local), which may be made against EMPLOYEE or THE COMPANY and its attorneys arising out of or relating to the payments or benefits hereunder.

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

          23. Entire Agreement. When read in conjunction with the Employment Agreement, this Agreement constitutes the entire Agreement between the parties relating to EMPLOYEE’s separation from and release of employment-related claims against THE COMPANY, and it shall not be modified except in writing signed by the party to be bound.

          24. Severability. If a court finds any provision of this Agreement invalid or unenforceable as applied to any circumstance, the remainder of this Agreement and the application of such provision shall be interpreted so as best to effect the intent of the parties hereto. The parties further agree to replace any such void or unenforceable provision of this

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Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business, or other purposes of the void or unenforceable provision.

          25. Governing Law and Jurisdiction. Notwithstanding any provision of the Employment Agreement to the contrary, this Agreement shall be governed by the laws of the State of New Jersey and any claims hereunder shall be pursued in the state or federal courts located in the State of New Jersey.

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

          27. Construction. The terms and language of this Agreement are the result of arm’s length negotiations between both parties hereto and their attorneys. Consequently, there shall be no presumption that any ambiguity in this Agreement should be resolved in favor of one party and against another. Any controversy concerning the construction of this Agreement shall be decided neutrally without regard to authorship.

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

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

[SIGNATURE LINES CONTAINED ON NEXT PAGE]

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     EMPLOYEE AGREES THAT: (1) HE HAS FULLY READ THIS AGREEMENT; (2) HE HAS TAKEN THE TIME NECESSARY TO REVIEW COMPLETELY AND FULLY UNDERSTAND THIS AGREEMENT; AND (3) HE FULLY UNDERSTANDS THIS AGREEMENT, ACCEPTS IT, AGREES TO IT, AND AGREES THAT IT IS FULLY BINDING UPON HIM FOR ALL PURPOSES.

EMPLOYEE
 

/s/ Mark Auerbach  

MARK AUERBACH 

Sworn and subscribed before me this
1st day of December, 2006

/s/ Laurie J. Magargal

Notary Public
Laurie J. Magargal
Notary Public of New Jersey
My Commission Expires 6/30/2010

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

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EX-10.3

EXHIBIT 10.3

SEPARATION AND RELEASE AGREEMENT

     This Separation and Release Agreement (“Agreement”) is made by and between PAR PHARMACEUTICAL COMPANIES, INC., and PAR PHARMACEUTICAL, INC. (collectively referred to as “THE COMPANY”), and MICHAEL GRAVES (“EMPLOYEE”), a specified employee of THE COMPANY. The Effective Date of this Agreement shall be as set forth in Paragraph 9 herein.

RECITALS

     A. For purposes of this Agreement, “THE COMPANY” means PAR PHARMACEUTICAL COMPANIES, INC., and PAR PHARMACEUTICAL, INC., and each and any of their parent and subsidiary corporations, affiliates, departments, divisions, and/or joint ventures.

     B. EMPLOYEE has been employed by THE COMPANY as President of the Generic Products Division.

     C. As a result of EMPLOYEE’s separation from THE COMPANY, and to fully and finally resolve all issues concerning EMPLOYEE’s employment relationship with THE COMPANY, THE COMPANY and EMPLOYEE have decided to enter into this Agreement.

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

OPERATIVE PROVISIONS

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

          2. Pay, Benefits and Stock Options Upon Separation.

               (a) Separation Pay. THE COMPANY agrees to pay EMPLOYEE one hundred and sixty nine thousand dollars, ($169,000.00), in one lump sum, payable on January 1, 2007. The aforementioned payment shall be subject to all appropriate federal and state withholding and employment taxes. EMPLOYEE hereby agrees that he is entitled to no other payment from THE COMPANY as the result of his separation other than as set forth herein.

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

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

               (c) Stock Options. EMPLOYEE agrees that as of the Separation Date, he has been granted options to purchase 164,853 shares of THE COMPANY’s common stock. Of this amount, 18,863 options are currently not vested. These unvested options shall vest as of the Separation Date. EMPLOYEE shall have twenty-four (24) months from such date to exercise all options, at the exercise price related to the respective option grants, provided that the relevant stock option plan remains in effect and such options have not otherwise expired; and provided further that options that have an exercise price that is less than the closing price of THE COMPANY’S share price on the New York Stock Exchange on the Separation Date shall expire on December 31, 2007. Except as noted above, EMPLOYEE’S exercise of such options is governed by the terms of the applicable plan.

               (d) Restricted Stock. EMPLOYEE agrees that as of the Separation Date, he has been granted 37,869 shares of THE COMPANY’s restricted stock. Of this amount, 33,362 shares are currently not vested. These unvested shares shall vest as of the Separation Date.

               (e) Unused Vacation. THE COMPANY shall, on the Separation Date, pay EMPLOYEE for his unused vacation days, which THE COMPANY and EMPLOYEE agree total twenty-four and one-half (24.5) days.

               (f) Outplacement Services. THE COMPANY shall, on the Separation Date, pay EMPLOYEE ten thousand dollars ($10,000.00) to be utilized by EMPLOYEE for executive-level outplacement services.

               (g) The payments and benefits contained in this Section 2 are contingent upon EMPLOYEE’s continued compliance with Sections 5, 8, 11, 12, 13 and 14 of this Agreement.

          3. Earned Salary. EMPLOYEE acknowledges and agrees that he has been paid in full for all work performed for THE COMPANY, and is entitled to no further payments or bonuses from THE COMPANY whatsoever for services rendered or any other reason, except as set forth herein.

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

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

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

          6. Indemnification and Advancement of Legal Fees.

               (a) Mandatory Indemnification. In accordance with Section 5.1 of THE COMPANY’s Bylaws, and as more definitively set forth therein, THE COMPANY agrees to indemnify and hold harmless, to the fullest extent now or hereafter permitted by applicable law, EMPLOYEE if he is, or is threatened to be made, a party to or otherwise involved in any Proceeding, (as defined in the Bylaws), by reason of the fact that EMPLOYEE is or was an Authorized Representative, (as defined in the Bylaws), against all expenses (including attorneys’ fees and disbursements), judgments, fines (including excise taxes and penalties) and amounts paid in settlement actually and reasonably incurred by EMPLOYEE in connection with such Proceeding, whether the basis of EMPLOYEE’s involvement in the Proceeding is an alleged act or omission in EMPLOYEE’s capacity as an Authorized Representative or in another capacity while serving in such capacity or both.

               (b) Advancement of Expenses. In accordance with Section 5.2 of THE COMPANY’s Bylaws, THE COMPANY shall promptly pay all expenses (including attorneys’ fees and disbursements) actually and reasonably incurred by EMPLOYEE in defending or appearing (otherwise than as a plaintiff) in any Proceeding in advance of the final disposition of such Proceeding upon receipt of an undertaking by or on behalf of EMPLOYEE to repay all amounts so advanced if it shall ultimately be determined by a final, unappealable judicial decision that EMPLOYEE is not entitled to be indemnified for such expenses under the Bylaws or otherwise.

               (c) Permissive Indemnification and Advancement of Expenses. In accordance with Section 5.3 of THE COMPANY’s Bylaws, THE COMPANY may, as determined by the Board in its discretion, from time to time indemnify EMPLOYEE if he is, or is threatened to be made, a party to or otherwise involved in any Proceeding by reason of the fact that EMPLOYEE is or was an Authorized Representative, against all expenses (including attorneys’ fees and disbursements), judgments, fines (including excise taxes and penalties) and amounts paid in settlement actually and reasonably incurred by EMPLOYEE in connection with such Proceeding, whether the basis of EMPLOYEE’s involvement in the Proceeding is an alleged act or omission in EMPLOYEE’s capacity as an Authorized Representative or in another capacity while serving in such capacity or both. THE COMPANY may, as determined by the

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

          7. General Release and Waiver of Claims. Solely in connection with EMPLOYEE’s employment relationship with THE COMPANY, and in consideration of the promises and covenants made by THE COMPANY in this Agreement, EMPLOYEE hereby knowingly and voluntarily compromises, settles and releases THE COMPANY from any and all past, present, or future claims, demands, obligations, or causes of action, whether based on tort, contract, statutory or other theories of recovery for anything that has occurred up to and including the date of EMPLOYEE’s execution of this Agreement. The released claims include those EMPLOYEE may have or has against THE COMPANY, or which may later accrue to or be acquired by EMPLOYEE against THE COMPANY and its predecessors, successors in interest, assigns, parent and subsidiary organizations, affiliates, and partners, and its past, present, and future officers, directors, shareholders, agents, and employees, and their heirs and assigns. EMPLOYEE specifically agrees to release and waive all claims for wrongful termination and any claim for retaliation or discrimination in employment under federal or state law or regulation including, but not limited to, discrimination based on age, sex, race, disability, handicap, national origin or any claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967 as amended by the Older Workers’ Benefits Protection Act of 1990 (ADEA and OWBPA), the Americans with Disabilities Act of 1990 (ADA), the New Jersey Law Against Discrimination (LAD), the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Employee Retirement Income Security Act (ERISA), the Immigration Reform and Control Act (IRCA), the Fair Labor Standards Act (FLSA), the Conscientious Employee Protection Act (CEPA), the Family Medical Leave Act (FMLA), the New Jersey Family Leave Act (NJFLA) and the New Jersey wage and hour laws. The release of claims agreed to herein specifically excludes any claims relating to a breach of this Agreement.

          8. Covenant Not to Sue.

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

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

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

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

          9. Consideration and Revocation Periods: Effective Date. EMPLOYEE also understands and acknowledges that the ADEA requires THE COMPANY to provide EMPLOYEE with at least twenty one (21) calendar days to consider this Agreement (“Consideration Period”) prior to its execution. EMPLOYEE also understands that he is entitled to revoke this Agreement at any time during the seven (7) days following EMPLOYEE’s execution of this Agreement (“Revocation Period”) by notifying THE COMPANY in writing of his revocation. This Agreement shall become effective on the day after the seven-day Revocation Period has expired unless timely notice of EMPLOYEE’s revocation has been delivered to THE COMPANY (the “Effective Date”).

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

          11. Confidential Information. “Confidential Information” means any and all information (oral or written) relating to THE COMPANY or any of its subsidiaries or any person controlling, controlled by, or under common control with THE COMPANY or any of its subsidiaries or any of their respective activities, including, but not limited to, information relating to: technology; research; test procedures and results; machinery and equipment; manufacturing processes; financial information; products; identity and description of materials and services used; purchasing; costs; pricing; customers and prospects; advertising, promotion and marketing; and selling, servicing and information pertaining to any governmental investigation, except such information which becomes public, other than as a result of a breach of the provisions hereof.

               EMPLOYEE acknowledges that during EMPLOYEE’s employment with THE COMPANY, EMPLOYEE has had access to Confidential Information. EMPLOYEE agrees that at all times hereafter EMPLOYEE will (i) hold in trust, keep confidential and not disclose to any third party or make any use of the Confidential Information of THE COMPANY or its customers; (ii) not cause the transmission, removal or transport of Confidential Information of THE COMPANY or its customers, and (iii) not publish, disclose, or otherwise disseminate Confidential Information of THE COMPANY or its customers except as otherwise permitted under applicable law.

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

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

          14. No Public Statements. EMPLOYEE and THE COMPANY represent and warrant that they will refrain from making any public statement regarding EMPLOYEE’s separation from THE COMPANY for ninety (90) days following the Separation Date, absent written approval from the other. However, THE COMPANY is permitted to make any disclosures regarding EMPLOYEE’s status or this agreement as required by law or regulations, including release of such information or that is required to be disclosed by THE COMPANY in its filings under the Securities Exchange Act of 1934 with the Securities and Exchange Commission (“SEC”).

          15. Disclosure of Information. EMPLOYEE represents and warrants that he is not aware of any material non-public information concerning THE COMPANY, its business or its affiliates that he has not disclosed to the Board of Directors of THE COMPANY prior to the date of this Agreement or that is required to be disclosed by THE COMPANY in its filings under the Securities Exchange Act of 1934 with the SEC and that has not been so disclosed.

          16. Cooperation. EMPLOYEE hereby agrees that:

               (a) EMPLOYEE will make himself available to THE COMPANY either by telephone or, if THE COMPANY believes necessary, in person upon reasonable notice, to assist THE COMPANY in connection with any matter relating to services performed by him on behalf of THE COMPANY prior to the Separation Date.

               (b) EMPLOYEE further agrees that he will cooperate fully with THE COMPANY in relation to any investigation or hearing with the SEC or any other governmental agency, as well as in the defense or prosecution of any claims or actions now in existence, including but not limited to ongoing commercial litigation matters, shareholder derivative actions, and class action law suits, or which may be brought or threatened in the future against or on behalf of THE COMPANY, its directors, shareholders, officers, or employees.

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               (c) EMPLOYEE will cooperate in connection with such claims or actions referred to in Paragraph 16(b) above including, without limitation, his being available to meet with THE COMPANY to prepare for any proceeding (including depositions, fact-findings, arbitrations or trials), to provide affidavits, to assist with any audit, inspection, proceeding or other inquiry, and to act as a witness in connection with any litigation or other legal proceeding affecting THE COMPANY. THE COMPANY shall reimburse EMPLOYEE for any reasonable travel expenses incurred by EMPLOYEE in connection therewith and shall also, in the event that EMPLOYEE’s participation as set forth herein exceeds one business day, pay employee a per diem rate of fourteen hundred dollars ($1,400) for each subsequent day.

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

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

               (f) THE COMPANY shall assist the EMPLOYEE in the preparation and filing of his final reports for the year 2006 as an officer of THE COMPANY under Section 16 of the Securities Exchange Act of 1934, as amended.

          17. Injunctive Relief. EMPLOYEE acknowledges that his failure to abide by Sections 5, 11, 12, 13 and 14 of this Agreement will result in immediate and irreparable damage to THE COMPANY and will entitle THE COMPANY to injunctive relief from a court having appropriate jurisdiction.

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

          19. No Reliance Upon Representations. EMPLOYEE hereby represents and acknowledges that in executing this Agreement, EMPLOYEE does not rely and has not relied upon any representation or statement made by THE COMPANY or by any of THE COMPANY’s past or present agents, representatives, employees or attorneys with regard to the subject matter, basis or effect of this Agreement other than as set forth in this Agreement.

          20. Tax Advice.

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

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EMPLOYEE which in any way arises out of or is related to said payments or benefits. With the exception of the regular payroll deductions for federal and state withholding and employment taxes, EMPLOYEE agrees that it shall be his sole responsibility to pay any amount that may be due and owing as federal or state taxes, interest and penalties, including but not limited to those which may arise under Internal Revenue Service Code Section 409A, arising out of the payments or benefits provided for herein.

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

               (c) EMPLOYEE further agrees to (i) hold harmless THE COMPANY and its attorneys against, and indemnify THE COMPANY and its attorneys for, any and all losses and/or damages arising from claims by the Internal Revenue Service (“IRS”), or any other taxing authority or other governmental agency (whether federal, state or local), which may be made against THE COMPANY and its attorneys arising out of or relating to the payments or benefits hereunder and (ii) reimburse THE COMPANY and its attorneys for any resulting payment, including without limitation, all penalties and interest payable to the IRS, or any other taxing authority or governmental agency.

               (d) EMPLOYEE and THE COMPANY further agree that they and their attorneys will give mutual notice of any such claims. EMPLOYEE agrees that he will cooperate in the defense of such claim. In any action commenced against EMPLOYEE to enforce the provisions of this paragraph, THE COMPANY and its attorneys shall be entitled to recover their attorneys’ fees, costs, disbursements, and the like incurred in prosecuting the action.

          21. Entire Agreement. This Agreement constitutes the entire Agreement between the parties relating to EMPLOYEE’s separation from and release of employment-related claims against THE COMPANY, and it shall not be modified except in writing signed by the party to be bound.

          22. Severability. If a court finds any provision of this Agreement invalid or unenforceable as applied to any circumstance, the remainder of this Agreement and the application of such provision shall be interpreted so as best to effect the intent of the parties hereto. The parties further agree to replace any such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business, or other purposes of the void or unenforceable provision.

          23. Governing Law and Jurisdiction. Notwithstanding any agreement to the contrary, this Agreement shall be governed by the laws of the State of New Jersey and any claims hereunder shall be pursued in the state or federal courts located in the State of New Jersey.

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           24. Survival of Terms. EMPLOYEE understands and agrees that the terms set out in this Agreement, including the confidentiality and non-solicitation provisions, shall survive the signing of this Agreement and the receipt of benefits thereunder.

          25. Construction. The terms and language of this Agreement are the result of arm’s length negotiations between both parties hereto and their attorneys. Consequently, there shall be no presumption that any ambiguity in this Agreement should be resolved in favor of one party and against another. Any controversy concerning the construction of this Agreement shall be decided neutrally without regard to authorship.

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

     EMPLOYEE AGREES THAT: (1) HE HAS FULLY READ THIS AGREEMENT; (2) HE HAS TAKEN THE TIME NECESSARY TO REVIEW COMPLETELY AND FULLY UNDERSTAND THIS AGREEMENT; AND (3) HE FULLY UNDERSTANDS THIS AGREEMENT, ACCEPTS IT, AGREES TO IT, AND AGREES THAT IT IS FULLY BINDING UPON HIM FOR ALL PURPOSES.

EMPLOYEE
/s/ Michael Graves
MICHAEL GRAVES
PAR PHARMACEUTICAL COMPANIES, INC.
/s/ Patrick G. LePore
By:	Patrick G. LePore
	President and C.E.O.
PAR PHARMACEUTICAL, INC.
/s/ Gerard A. Martino
By:	Gerard A. Martino
	Executive Vice President and Chief Financial Officer

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EX-10.4

EXHIBIT 10.4

SEPARATION AND RELEASE AGREEMENT

     This Separation and Release Agreement (“Agreement”) is made by and between PAR PHARMACEUTICAL COMPANIES, INC., and PAR PHARMACEUTICAL, INC. (collectively referred to as “THE COMPANY”), and SHANKAR HARIHARAN (“EMPLOYEE”), a specified employee of THE COMPANY. The Effective Date of this Agreement shall be as set forth in Section 9 herein.

RECITALS

     A. For purposes of this Agreement, “THE COMPANY” means PAR PHARMACEUTICAL COMPANIES, INC., and PAR PHARMACEUTICAL, INC., and each and any of their parent and subsidiary corporations, affiliates, departments, divisions, and/or joint ventures.

     B. EMPLOYEE has been employed by THE COMPANY as Executive Vice President and Chief Scientific Officer.

     C. As a result of EMPLOYEE’s separation from THE COMPANY, and to fully and finally resolve all issues concerning EMPLOYEE’s employment relationship with THE COMPANY, THE COMPANY and EMPLOYEE have decided to enter into this Agreement.

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

OPERATIVE PROVISIONS

          1. Separation of Employment. THE COMPANY and EMPLOYEE agree that EMPLOYEE shall separate from THE COMPANY effective at the end of business on November 22, 2006 (“Separation Date”), such separation of employment with THE COMPANY occurring pursuant to Section 3.2.5 of that certain Employment Agreement dated as of May 28, 2004 by and between the parties (“Employment Agreement”). All capitalized terms used herein without definition will have the same respective meanings as provided in the Employment Agreement.

          2. Pay, Benefits and Stock Options Upon Separation.

               (a) Separation Pay. In accordance with Section 3.3.2 of the Employment Agreement, EMPLOYEE is, on account of his separation from THE COMPANY, entitled to severance in the amount of eight hundred forty-two thousand dollars ($842,000.00), which severance shall be payable in six (6) installments beginning in the seventh (7^th) month after the Separation Date. The first installment shall consist of a payment of four hundred ninety one thousand one hundred sixty six dollars and seventy cents ($491,166.70), and shall be tendered on the first payroll cycle of June 2007, and in each of the five (5) months thereafter a payment of seventy thousand one hundred sixty six dollars and sixty six cents ($70,166.66) shall be tendered at regular payroll cycles. All payments shall be tendered in accordance with THE

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COMPANY’s regular payroll practices. The aforementioned payments shall be subject to all appropriate federal and state withholding and employment taxes. EMPLOYEE hereby agrees that he is entitled to no other payment from THE COMPANY as the result of his separation or during the aforementioned period other than as set forth herein.

               (b) Benefits/Termination. In accordance with Section 3.3.5 of the Employment Agreement, on account of EMPLOYEE’s separation from THE COMPANY, THE COMPANY shall, for a twenty-four (24) month period from the Separation Date, maintain in effect for EMPLOYEE coverage under THE COMPANY’S life insurance, medical, health and accident, and disability plans and programs in which EMPLOYEE and his family were entitled to participate immediately prior to the Separation Date; provided, that such benefits shall immediately terminate in the event EMPLOYEE becomes eligible for comparable benefits coverage by a subsequent employer prior to the expiration of the twenty-four (24) month period. Following the termination of the twenty-four (24) month period, if EMPLOYEE is not eligible for comparable benefits coverage as an employee rather than as a dependent under another employer’s benefit program, EMPLOYEE will have the opportunity to elect continuation coverage pursuant to COBRA and will then be responsible for the execution of the COBRA continuation of coverage forms. EMPLOYEE will also have the opportunity at the expiration of the twenty-four (24) month period at EMPLOYEE’s expense to convert the life insurance policy maintained by THE COMPANY on the life of EMPLOYEE to an individual policy to be maintained by EMPLOYEE. All other benefits and allowances, except those in which EMPLOYEE has vested rights under the terms of an employee benefit plan or as otherwise provided herein, terminate as of the Separation Date.

               (c) Stock Options. The parties agree that, pursuant to Section 2.3 of the Employment Agreement, EMPLOYEE has been granted options to purchase 50,000 shares of THE COMPANY’s common stock. Of these, 37,500 options are unvested. These unvested options shall vest pursuant to Section 3.3.6 of the Employment Agreement and subject to all limitations and restrictions identified therein. EMPLOYEE agrees that, with the exception of those options granted pursuant to Section 2.3 of the Employment Agreement, as identified in this Section 2(c), any other options to purchase shares of THE COMPANY’s common stock shall expire as set forth in the 2004 Performance Equity Plan, Amended and Restated as of May 24, 2005 and the applicable terms of the stock award agreement(s).

               (d) Restricted Stock. The parties agree that, pursuant to Section 2.3 of the Employment Agreement, EMPLOYEE has been granted 60,000 shares of THE COMPANY’s restricted stock. Of these, 33,750 shares are unvested. These unvested shares shall vest pursuant to Section 3.3.6 of the Employment Agreement and subject to all limitations and restrictions identified therein. EMPLOYEE agrees that, with the exception of those shares granted pursuant to Section 2.3 of the Employment Agreement, as identified in this Section 2(d), any other restricted stock granted to EMPLOYEE shall expire as set forth in the 2004 Performance Equity Plan, Amended and Restated as of May 24, 2005 and the applicable terms of the stock award agreement(s).

               (e) Unused Vacation. THE COMPANY shall, on the Separation Date, pay EMPLOYEE for his unused vacation days, which THE COMPANY and EMPLOYEE agree total twenty five and one-half (25.5) days.

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               (f) In accordance with the Employment Agreement, the payments and benefits contained in Section 2(a)-(d) are contingent upon EMPLOYEE’s continued compliance with Sections 4 and 5 of the Employment Agreement, as referenced in Sections 6 through 18 herein.

          3. Earned Salary and Expenses. EMPLOYEE acknowledges and agrees that he has been paid in full for all work performed (except for three (3) days between November 19, 2007 and the Separation Date), and has received reimbursement for all business expenses, and is entitled to no further payments or bonuses from THE COMPANY whatsoever for services rendered or any other reason, except as set forth herein. THE COMPANY agrees to pay EMPLOYEE for the three (3) days referenced herein on the Separation Date.

          4. Consideration.

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

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

          5. Indemnification and Advancement of Legal Fees.

               (a) Mandatory Indemnification. In accordance with Section 5.1 of THE COMPANY’s Bylaws, and as more definitively set forth therein, THE COMPANY agrees to indemnify and hold harmless, to the fullest extent now or hereafter permitted by applicable law, EMPLOYEE if he is, or is threatened to be made, a party to or otherwise involved in any Proceeding, (as defined in the Bylaws), by reason of the fact that EMPLOYEE is or was an Authorized Representative, (as defined in the Bylaws), against all expenses (including attorneys’ fees and disbursements), judgments, fines (including excise taxes and penalties) and amounts paid in settlement actually and reasonably incurred by EMPLOYEE in connection with such Proceeding, whether the basis of EMPLOYEE’s involvement in the Proceeding is an alleged act or omission in EMPLOYEE’s capacity as an Authorized Representative or in another capacity while serving in such capacity or both.

               (b) Advancement of Expenses. In accordance with Section 5.2 of THE COMPANY’s Bylaws, THE COMPANY shall promptly pay all expenses (including attorneys’ fees and disbursements) actually and reasonably incurred by EMPLOYEE in

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defending or appearing (otherwise than as a plaintiff) in any Proceeding in advance of the final disposition of such Proceeding upon receipt of an undertaking by or on behalf of EMPLOYEE to repay all amounts so advanced if it shall ultimately be determined by a final, unappealable judicial decision that EMPLOYEE is not entitled to be indemnified for such expenses under the Bylaws or otherwise.

               (c) Permissive Indemnification and Advancement of Expenses. In accordance with Section 5.3 of THE COMPANY’s Bylaws, THE COMPANY may, as determined by the Board in its discretion, from time to time indemnify EMPLOYEE if he is, or is threatened to be made, a party to or otherwise involved in any Proceeding by reason of the fact that EMPLOYEE is or was an Authorized Representative, against all expenses (including attorneys’ fees and disbursements), judgments, fines (including excise taxes and penalties) and amounts paid in settlement actually and reasonably incurred by EMPLOYEE in connection with such Proceeding, whether the basis of EMPLOYEE’s involvement in the Proceeding is an alleged act or omission in EMPLOYEE’s capacity as an Authorized Representative or in another capacity while serving in such capacity or both. THE COMPANY may, as determined by the Board in its discretion from time to time, pay expenses actually and reasonably incurred by EMPLOYEE by reason of EMPLOYEE’s involvement in such a Proceeding in advance of the final disposition of the Proceeding.

          6. No Public Statements. EMPLOYEE and THE COMPANY represent and warrant that they will refrain from making any public statement regarding EMPLOYEE’s separation from THE COMPANY for ninety (90) days following the Separation Date, absent written approval from the other. However, THE COMPANY is permitted to make any disclosures regarding EMPLOYEE’s status or this agreement as required by law or regulations, including release of such information or that is required to be disclosed by THE COMPANY in its filings under the Securities Exchange Act of 1934 with the Securities and Exchange Commission (“SEC”).

          7. General Release and Waiver of Claims.

               (a) Solely in connection with EMPLOYEE’s employment relationship with THE COMPANY and in accordance with Section 3.3 of the Employment Agreement, and in consideration of the additional promises and covenants made by THE COMPANY in this Agreement, EMPLOYEE hereby knowingly and voluntarily compromises, settles and releases THE COMPANY from any and all past, present, or future claims, demands, obligations, or causes of action, whether based on tort, contract, statutory or other theories of recovery for anything that has occurred up to and including the date of EMPLOYEE’s execution of this Agreement. The released claims include those EMPLOYEE may have or has against THE COMPANY, or which may later accrue to or be acquired by EMPLOYEE against THE COMPANY and its predecessors, successors in interest, assigns, parent and subsidiary organizations, affiliates, and partners, and its past, present, and future officers, directors, shareholders, agents, and employees, and their heirs and assigns. EMPLOYEE specifically agrees to release and waive all claims for wrongful termination and any claim for retaliation or discrimination in employment under federal or state law or regulation including, but not limited to, discrimination based on age, sex, race, disability, handicap, national origin or any claims under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of

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1967, as amended by the Older Workers’ Benefits Protection Act (ADEA), the Americans with Disabilities Act of 1990 (ADA), the New Jersey Law Against Discrimination (LAD), the Consolidated Omnibus Budget Reconciliation Act (COBRA), the Employee Retirement Income Security Act (ERISA), the Immigration Reform and Control Act (IRCA), the Fair Labor Standards Act (FLSA), the Conscientious Employee Protection Act (CEPA), the Family Medical Leave Act (FMLA), the New Jersey Family Leave Act (NJFLA) and the New Jersey wage and hour law. The release of claims agreed to herein specifically excludes any claims relating to a breach of this Agreement.

          8. Covenant Not to Sue.

               (a) Each party represents and agrees that such party has not filed any lawsuits or arbitrations against the other party, or filed or caused to be filed any charges or complaints against the other party with any municipal, state or federal agency charged with the enforcement of any law or any self-regulatory organization. EMPLOYEE agrees, not inconsistent with EEOC Enforcement Guidance or Non-Waivable Employee Rights Under EEOC-Enforced Statutes dated April 11, 1997, and to the fullest extent permitted by laws, not to sue or file a charge, complaint, grievance or demand for arbitration against THE COMPANY in any claim, arbitration, suit, action, investigation or other proceeding of any kind which relates to any matter that involved THE COMPANY, and that occurred up, to and including the date of EMPLOYEE’s execution of this Agreement, unless required to do so by court order, subpoena or other directive by a court, administrative agency, arbitration panel or legislative body, or unless required to enforce this Agreement. Nothing in this Agreement shall prevent EMPLOYEE from (i) commencing an action or proceeding to enforce this Agreement, or (ii) exercising EMPLOYEE’s right under the Older Workers Benefit Protection Act of 1990 to challenge the validity of EMPLOYEE’s waiver of ADEA claims set forth in this Agreement.

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

          9. Consideration and Revocation Periods: Effective Date. EMPLOYEE also understands and acknowledges that the ADEA requires THE COMPANY to provide EMPLOYEE with at least twenty one (21) calendar days to consider this Agreement (“Consideration Period”) prior to its execution. EMPLOYEE also understands that he is entitled to revoke this Agreement at any time during the seven (7) days following EMPLOYEE’s execution of this Agreement (“Revocation Period”) by notifying THE COMPANY in writing of his revocation. This Agreement shall become effective on the day after the seven-day Revocation Period has expired unless timely notice of EMPLOYEE’s revocation has been delivered to THE COMPANY (the “Effective Date”).

          10. Return of Company Property. On his Separation Date, EMPLOYEE agrees to comply with Section 4.17 of the Employment Agreement.

          11. Confidential Information. EMPLOYEE acknowledges that he will comply with the confidentiality covenants contained in Section 4 of the Employment Agreement.

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          12. Covenants Not to Solicit.

               (a) Covenant Not To Solicit Suppliers and Others. EMPLOYEE acknowledges that he will comply with the nonsolicitation covenants contained in Section 4.8 of the Employment Agreement.

               (b) Covenant Not To Hire or Solicit Employees. EMPLOYEE acknowledges that he will comply with the nonsolicitation covenants contained in Section 4.9 of the Employment Agreement. However, this covenant shall not be applicable to hiring or offering to hire pursuant to a response to a general advertisement by a subsequent employer with which EMPLOYEE is affiliated, so long as these methods are not utilized to solicit or attract COMPANY employees only or to target COMPANY employees.

          13. Covenant Not to Compete. EMPLOYEE acknowledges that he will comply with the covenants not to compete contained in Section 4.7 of the Employment Agreement, as same is further defined by Section 4.7.1 of said Employment Agreement.

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

          15. No Disparagement. EMPLOYEE agrees to refrain from any publication or any type of communication, oral or written, of a defamatory or disparaging statement pertaining to THE COMPANY, its past, present and future officers, agents, directors, supervisors, employees or representatives. Nothing in this Section shall be construed as prohibiting EMPLOYEE from making any disclosures as required by law or statute, including the release of such information as is required to be disclosed by EMPLOYEE in connection with any legal proceeding, or as otherwise required by law.

          16. Technology, Products and Inventions. EMPLOYEE shall comply with Sections 4.3, 4.5, and 4.14 of the Employment Agreement with regard to Intellectual Property, research and development, and the like, as well as copyright and property rights thereto.

          17. Disclosure of Information. EMPLOYEE represents and warrants that he is not aware of any material non-public information concerning THE COMPANY, its business or its affiliates that he has not disclosed to the Board of Directors of THE COMPANY prior to the date of this Agreement or that is required to be disclosed by THE COMPANY in its filings under the Securities Exchange Act of 1934 with the Securities and Exchange Commission (“SEC”) and that has not been so disclosed.

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          18. Cooperation. EMPLOYEE and THE COMPANY acknowledge that each will comply with his or its respective obligations pursuant to the cooperation covenants contained Section 4.16 of the Employment Agreement.

          19. Injunctive Relief. As set forth in Section 4.18 of the Employment Agreement, EMPLOYEE acknowledges that his failure to abide by Sections 6 and 10 through 18 of this Agreement, and their counterparts in the Employment Agreement (as well as any other paragraph in the Employment Agreement which is the subject of Paragraph 4.18 therein), will result in immediate and irreparable damage to THE COMPANY and will entitle THE COMPANY to injunctive relief from a court having appropriate jurisdiction.

          20. Securities Exchange Act Reporting. THE COMPANY shall assist the EMPLOYEE in the preparation and filing of his final reports for the year 2006 as an officer of THE COMPANY under Section 16 of the Securities Exchange Act of 1934, as amended.

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

          22. No Reliance Upon Representations. EMPLOYEE hereby represents and acknowledges that in executing this Agreement, EMPLOYEE does not rely and has not relied upon any representation or statement made by THE COMPANY or by any of THE COMPANY’s past or present agents, representatives, employees or attorneys with regard to the subject matter, basis or effect of this Agreement other than as set forth in this Agreement.

          23. Tax Advice.

               (a) THE COMPANY makes no representations regarding the federal or state tax consequences of the payments or benefits referred to above and provided for herein, and shall not be responsible for any tax liability, interest or penalty including but not limited to those which may arise under Internal Revenue Service Code Section 409A, incurred by EMPLOYEE which in any way arises out of or is related to said payments or benefits. With the exception of the regular payroll deductions for federal and state withholding and employment taxes, EMPLOYEE agrees that it shall be his sole responsibility to pay any amount that may be due and owing as federal or state taxes, interest and penalties, including but not limited to those which may arise under Internal Revenue Service Code Section 409A, arising out of the payments or benefits provided for herein.

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

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          24. Employment Agreement. The parties acknowledge and agree that all pertinent terms of the Employment Agreement shall remain in full force and effect and are enforceable, to the extent any such terms therein survive or govern the period after the Term of that Employment Agreement and have not been specifically modified by this Agreement. The event of revocation of this Separation and Release Agreement in accordance with Section 9 herein in no way affects the validity or enforceability of the Employment Agreement; and in the event of revocation, to the extent any pertinent terms of this Agreement reiterate or confirm the terms of the Employment Agreement, the Employment Agreement shall govern.

          25. Entire Agreement. When read in conjunction with the Employment Agreement, this Agreement constitutes the entire Agreement between the parties relating to EMPLOYEE’s separation from and release of employment-related claims against THE COMPANY, and it shall not be modified except in writing signed by the party to be bound. In the event of any conflict between this Agreement and the Employment Agreement, this Agreement shall control.

          26. Severability. If a court finds any provision of this Agreement invalid or unenforceable as applied to any circumstance, the remainder of this Agreement and the application of such provision shall be interpreted so as best to effect the intent of the parties hereto. The parties further agree to replace any such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business, or other purposes of the void or unenforceable provision.

          27. Governing Law and Jurisdiction. EMPLOYEE and THE COMPANY agree that the governing law and jurisdiction sections of the Employment Agreement (Sections 5.6 and 5.11) apply to this Agreement and the Employment Agreement.

          28. Survival of Terms. EMPLOYEE understands and agrees that the terms set out in this Agreement, including the confidentiality, non-compete and non-solicitation provisions, shall survive the signing of this Agreement and the receipt of benefits thereunder.

          29. Construction. The terms and language of this Agreement are the result of arm’s length negotiations between both parties hereto and their attorneys. Consequently, there shall be no presumption that any ambiguity in this Agreement should be resolved in favor of one party and against another. Any controversy concerning the construction of this Agreement shall be decided neutrally without regard to authorship.

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

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     EMPLOYEE AGREES THAT: (1) HE HAS FULLY READ THIS AGREEMENT; (2) HE HAS TAKEN THE TIME NECESSARY TO REVIEW COMPLETELY AND FULLY UNDERSTAND THIS AGREEMENT; AND (3) HE FULLY UNDERSTANDS THIS AGREEMENT, ACCEPTS IT, AGREES TO IT, AND AGREES THAT IT IS FULLY BINDING UPON HIM FOR ALL PURPOSES.

EMPLOYEE
 

/s/ Shankar Harihan  

SHANKAR HARIHARAN 

Sworn and subscribed before me this
29 day of November, 2006

/s/ Merrye E. Siegel

Notary Public
Merrye E. Siegel
Notary Public of State of New York
No. 4900619
Qualified in Suffolk County
Commission Expires 08-09-2009

PAR PHARMACEUTICAL COMPANIES, INC.
/s/ Patrick G. LePore
By:	Patrick G. LePore
	President and C.E.O.
PAR PHARMACEUTICAL, INC.
/s/ Gerard A. Martino
By:	Gerard A. Martino
	Executive Vice President and Chief Financial Officer

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EX-31.1

Exhibit 31.1

Certification Pursuant to Rule 13a-14(a) of the Exchange Act

This certification will be provided when the registrant completes its restatement of certain financial statements and an evaluation of its disclosure controls and procedures and internal control over financial reporting and amends this Form 10-Q to include the financial and information required by Part I, Items 1 and 2. Please see the registrant’s Notification of Late Filing on Form 12b-25/A filed with the Commission as of the date hereof for more details.

EX-31.2

Exhibit 31.2

Certification Pursuant to Rule 13a-14(a) of the Exchange Act

This certification will be provided when the registrant completes its restatement of certain financial statements and an evaluation of its disclosure controls and procedures and internal control over financial reporting and amends this Form 10-Q to include the financial and information required by Part I, Items 1 and 2. Please see the registrant’s Notification of Late Filing on Form 12b-25/A filed with the Commission as of the date hereof for more details.

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

This certification will be provided when the registrant completes its restatement of certain financial statements and an evaluation of its disclosure controls and procedures and internal control over financial reporting and amends this Form 10-Q to include the financial and information required by Part I, Items 1 and 2. Please see the registrant’s Notification of Late Filing on Form 12b-25/A filed with the Commission as of the date hereof for more details.

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

This certification will be provided when the registrant completes its restatement of certain financial statements and an evaluation of its disclosure controls and procedures and internal control over financial reporting and amends this Form 10-Q to include the financial and information required by Part I, Items 1 and 2. Please see the registrant’s Notification of Late Filing on Form 12b-25/A filed with the Commission as of the date hereof for more details.