Employment Agreement - Barr Laboratories Inc. and William T. McKee


                              EMPLOYMENT AGREEMENT

         AGREEMENT dated as of the 7th day of February, 2001 between Barr
Laboratories, Inc., a New York corporation having its principal executive
offices at 300 Corporate Drive, Building #10, Bradley Corporate Park, Blauvelt,
New York 10913 (the "Company"), and William T. McKee (the "Employee").

                                   WITNESSETH:

         WHEREAS, the Company wishes to assure itself of the services of the
Employee and provide an inducement for the Employee to remain in its employ; and

         WHEREAS, the Employee is willing to remain in the employ of the Company
for the period and on the other terms and conditions hereafter set forth;

         NOW, THEREFORE, the Company and the Employee hereby agree as follows:

         1. Employment. The Company agrees to employ the Employee, and the
Employee agrees to remain in the employ of the Company, during the term of this
Agreement and on the other terms and conditions hereafter set forth.

         2. Term. The term of this Agreement shall commence on February 7, 2001
(the "Commencement Date") and shall terminate at the close of business on the
third anniversary of the Commencement Date unless sooner terminated in
accordance with the terms of this Agreement or extended as hereinafter provided.
The term of this Agreement shall be extended, without further action by the
Company or the Employee, on the date (the "Extension Effective Date") which is
six months before the third anniversary of the Commencement Date and on the date
(also an "Extension Effective Date") which is six months before each subsequent
anniversary of the Commencement Date, for successive periods of twelve months
each, unless either party shall have given written notice to the other party, in
the manner set forth in paragraph 8(e) or (f) below, prior to the Extension
Effective Date in question, that the term of this Agreement that is in effect at
the time such written notice is given is not to be extended or further extended,
as the case may be.

         3. Positions and Responsibilities; Place of Performance.

                  (a) Throughout the term of this Agreement, the Employee agrees
to remain in the employ of the Company, and the Company agrees to employ the
Employee, as its Senior Vice President, Chief Financial Officer and Treasurer,
reporting to the Chief Executive Officer of the Company (the "CEO") and/or the
President and Chief Operations Officer of the Company (the "COO"). As the Senior
Vice President, Chief Financial Officer and Treasurer of the Company, the
Employee shall be responsible for managing and supervising, and shall have
responsibility for the day-to-day operation of, the audit, finance, treasury and
accounting functions of the Company, including financial
   2
controls, subject to the authority of the Board of Directors of the Company (the
"Board"), the Chairman and Chief Executive Officer of the Company (the "CEO")
and the COO, and shall have all of the powers, authority, duties and
responsibilities usually incident to the position and role of Senior Vice
President, Chief Financial Officer and Treasurer, and shall perform such other
reasonable duties, consistent with the position of Senior Vice President, Chief
Financial Officer and Treasurer, as may lawfully be assigned to him by the
Board, the CEO or the COO.

                  (b) In connection with his employment by the Company, the
Employee shall be based at the principal executive offices of the Company in
Rockland County, New York and agrees to travel, to the extent reasonably
necessary to perform his duties and obligations under this Agreement, to Company
facilities and other destinations elsewhere.

                  (c) During the term of this Agreement, the Employee shall
serve the Company on an exclusive basis and shall devote all his business time,
attention, skill and efforts to the faithful performance of his duties
hereunder; provided that the Employee may engage in community service and
charitable activities that do not interfere with the performance of his duties
and responsibilities hereunder.

         4. Compensation. For all services rendered by the Employee in any
capacity during the term of this Agreement, and for his undertakings with
respect to confidential information set forth in paragraph 6 below, the Employee
shall be entitled to the following:

                  (a) a salary, payable in installments not less frequent than
monthly, at the annual rate of two hundred and forty-five thousand dollars
($245,000.00), with such increases in such rate, if any, as the Compensation
Committee of the Board may approve from time to time during the term of this
Agreement (the annual salary rate as increased from time to time during the term
of this Agreement being hereafter referred to as the "Base Salary");

                  (b) participation in the Company's annual executive incentive
or bonus plan as in effect from time to time, with the opportunity to receive an
award in accordance with the terms and conditions of such plan, for each fiscal
year of the Company that commences or terminates during the term of this
Agreement, of up to 40% of the Base Salary earned during such year (or such
higher percentage as the Board or a committee of the Board may prescribe from
time to time during the term of this Agreement), it being understood that any
award for the fiscal year of the Company in which the term of this Agreement
commences or terminates pursuant to the terms hereof shall be prorated based on
the portion of such fiscal year that coincides with the term of this Agreement,
and that any award for the fiscal year of the Company in which the term of this
Agreement terminates pursuant to the terms hereof shall be made at the same time
as awards (if any) are made to other participants with respect to such fiscal
year;


                                       2
   3
                  (c) participation in the Company's stock incentive plan as
from time to time in effect, subject to the terms and conditions of such plan;

                  (d) the business and personal use of an automobile at Company
expense including, without limitation, payment or reimbursement of automobile
insurance and maintenance expenses in accordance with the Company's automobile
policy applicable to senior officers on the date of this Agreement;

                  (e) participation in all Company health, welfare, savings and
other employee benefit and fringe benefit plans (including vacation pay plans or
policies and life and disability insurance plans) in which other senior officers
of the Company participate during the term of this Agreement, subject in all
events to the terms and conditions of such plans as in effect from time to time.
Nothing in this paragraph (e) shall preclude the Company from amending or
terminating any such plan at any time. The plans covered by this paragraph (e)
shall not include the annual incentive or stock incentive plans, which are
covered by paragraphs (b) and (c) above.

         5.       Termination of Employment.

                  (a) Termination by the Company without Good Cause or by the
Employee for Good Reason.

                           (i) If during the term of this Agreement the
Employee's employment with the Company is terminated by the Company without Good
Cause or is terminated by the Employee for Good Reason other than at or after
the expiration of the term of this Agreement as the same may have been extended
in accordance with the provisions of paragraph 2 above, the Company, subject to
compliance by the Employee with the provisions of paragraph 6 below, relating to
confidential information, shall, as liquidated damages, and as additional
consideration for the Employee's undertakings under paragraph 6 below, pay the
Employee a lump sum amount of money equal to 1.5 times the Employee's Base
Salary.

                           (ii) If the term of this Agreement as the same may
have been extended in accordance with the provisions of paragraph 2 above is not
extended or further extended because the Company gives written notice of
non-extension to the Employee as provided in paragraph 2 above, and the Company
does not have Good Cause for termination of the Employee's employment at the
time of giving such notice, then the Company, subject to fulfillment by the
Employee of his obligations under this Agreement during the balance of the term
and his compliance with the provisions of paragraph 6 below, relating to
confidential information, shall, as non-renewal compensation, and as additional
consideration for the Employee's undertakings under this Agreement including
paragraph 6 below, pay the Employee a lump sum amount of money equal to 1.0
times the Employee's Base Salary. The Company shall pay such amount upon the
expiration of the term that is in effect at the time the Company gives such
written notice of non-extension to the Employee.


                                       3
   4
                           (iii) The foregoing provisions of (including any
payments under) this paragraph 5(a) shall be in lieu of any severance pay that
may be payable under any plan or practice of the Company. Subparagraphs 5(a)(i)
and 5(a)(ii) above are intended to be mutually exclusive, and in no event shall
such subparagraphs, either individually or collectively, be construed to require
the Company to pay an amount of money in excess of 1.5 times the Employee's Base
Salary under such subparagraphs, either individually or collectively.

                  (b) Termination by the Company for Good Cause or by the
Employee without Good Reason. If, during the term of this Agreement, the
Employee's employment by the Company is terminated by the Company for Good Cause
or by the Employee without Good Reason, the Employee shall not be entitled to
receive any compensation under paragraph 4 above acruing after the date of such
termination or any payment under paragraph 5(a) above. The provisions of this
paragraph 6(b) shall be in addition to, and not in lieu of, any other rights and
remedies the Company may have at law or in equity or under any other provision
of this Agreement in respect of such termination of employment.

                  (c) Good Cause Defined. For purposes of this Agreement, the
Company shall have "Good Cause" to terminate the Employee's employment during
the term of this Agreement if:

                           (i) the Employee fails to substantially perform his
duties hereunder for any reason or fails to devote substantially all his
business time exclusively to the affairs of the Company, and such failure is not
discontinued within a reasonable period of time, in no event to exceed 30 days,
after the Employee receives written notice from the Company of such failure; or

                           (ii) the Employee commits an act of dishonesty
resulting or intended to result directly or indirectly in gain or personal
enrichment at the expense of the Company; or

                           (iii) the Employee is grossly negligent or engages in
willful misconduct or insubordination in the performance of his duties
hereunder; or

                           (iv) the Employee breaches his obligations under
paragraph 6 below, relating to confidential information.

                  (d) Good Reason Defined. For purposes of this Agreement, the
Employee shall have "Good Reason" to terminate his employment during the term of
this Agreement only if:

                           (i) the Company fails to provide compensation or
benefits that the Company is obligated to provide under paragraph 4 above and
the failure is not remedied within 30 days after the Company receives written
notice from the Employee of such failure; or


                                       4
   5
                           (ii) the Company assigns the Employee duties,
responsibilities or reporting relationships not contemplated by paragraph 3
above without his consent, or limits his duties or responsibilities contemplated
by paragraph 3 above in any respect materially detrimental to him, and in either
case the situation is not remedied within 30 days after the Company receives
written notice from the Employee of the situation; or

                           (iii) he is removed from, or not elected or reelected
to, the position of Senior Vice President, Chief Financial Officer and Treasurer
of the Company, and the Company does not have Good Cause for doing so; or

                           (iv) the Company relocates his office outside of
either the Company's principal executive offices or the greater New York City
metropolitan area without his written consent (given in a personal rather than
representative capacity) and the situation is not remedied within 30 days after
the Company receives written notice from the Employee of the situation.

         6. Confidential Information. The Employee agrees not to disclose,
either while in the Company's employ or at any time thereafter, to any person
not employed by the Company, or not engaged to render services to the Company,
except with the prior written consent of an authorized officer of the Company or
as necessary or appropriate for the performance of his duties hereunder, any
confidential information obtained by him while in the employ of the Company,
including, without limitation, information relating to any of the inventions,
processes, formulae, plans, devices, compilations of information, research,
methods of distribution, suppliers, customers, client relationships, marketing
strategies or trade secrets of the Company or any subsidiary thereof; provided,
however, that this provision shall not preclude the Employee from use or
disclosure of information known generally to the public or of information not
considered confidential by persons engaged in the businesses conducted by the
Company or any subsidiary thereof, or from disclosure required by law or court
order. The Employee also agrees that upon leaving the Company's employ he will
not take with him, without the prior written consent of an authorized officer of
the Company, and he will surrender to the Company, any record, list, drawing,
blueprint, specification or other document or property of the Company or any
subsidiary thereof, together with any copy or reproduction thereof, mechanical
or otherwise, which is of a confidential nature relating to the Company or any
subsidiary thereof, or without limitation, relating to its or their methods of
distribution, suppliers, customers, client relationships, marketing strategies
or any description of any formulae or secret processes, or which was obtained by
him or entrusted to him during the course of his employment with the Company.

         7.       Severability

                  (a) In the event that any provision of this Agreement shall be
determined to be invalid or unenforceable for any reason, the remaining
provisions of this Agreement not so invalid or unenforceable shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law; and


                                       5
   6
                  (b) Any provision of this Agreement which may for any reason
be invalid or unenforceable in any jurisdiction shall remain in effect and be
enforceable in any jurisdiction in which such provision shall be valid and
enforceable.

         8. General Provisions.

                  (a) No right or interest to or in any payments to be made
under this Agreement shall be subject to anticipation, alienation, sale,
assignment, encumbrance, pledge, charge or hypothecation or to execution,
attachment, levy or similar process, or assignment by operation of law. All
payments to be made by the Company hereunder shall be subject to the withholding
of such amounts as the Company may determine it is required to withhold under
the laws or regulations of any governmental authority, whether foreign, federal,
state or local.

                  (b) To the extent that the Employee acquires a right to
receive payments from the Company under this Agreement, such right shall be no
greater than the right of an unsecured general creditor of the Company. All
payments to be made hereunder shall be paid from the general funds of the
Company and no special or separate fund shall be established and no segregation
of assets shall be made to assure payment of any amount hereunder.

                  (c) This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without giving
effect to the principles of conflicts of laws of that State.

                  (d) This Agreement shall be binding upon and inure to the
benefit of the Company, its successors and assigns, and the Employee, his heirs,
devisees, distributees and legal representatives.

                  (e) Any notice or other communication to the Company pursuant
to any provision of this Agreement shall be given in writing and will be deemed
to have been delivered:

                           (i) when delivered in person to the Corporate
Secretary or Chief Executive Officer of the Company; or

                           (ii) one week after it is deposited in the United
States certified or registered mail, postage prepaid, addressed to the Corporate
Secretary of the Company at 300 Corporate Drive, Building #10, Bradley Corporate
Park, Blauvelt, New York 10913 or at such other address of which the Company may
from time to time give the Employee written notice in accordance with paragraph
8(f) below.

                  (f) Any notice or other communication to the Employee pursuant
to any provision of the Agreement shall be given in writing and will be deemed
to have been delivered:


                                       6
   7
                           (i) when delivered to the Employee in person, or

                           (ii) one week after it is deposited in the United
States certified or registered mail, postage prepaid, addressed to the Employee
at his address as it appears on the records of the Company or at such other
address of which the Employee may from time to time give the Company written
notice in accordance with paragraph 8(e) above.

                  (g) No provision of this Agreement may be amended, modified or
waived unless such amendment, modification or waiver shall be agreed to in a
writing signed by the Employee and an authorized officer of the Company.

                  (h) This instrument contains the entire agreement of the
parties relating to the subject matter of this Agreement and supersedes and
replaces all prior agreements and understandings with respect to such subject
matter, and the parties have made no agreements, representations or warranties
relating to the subject matter of this Agreement which are not set forth herein.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

                                             BARR LABORATORIES, INC.


                                             By: PAUL M. BISARO
[SEAL]
Attest:

CATHERINE F. HIGGINS
Asst. Secretary

                                             WILLIAM MCKEE

                                             Employee


                                       7