Exhibit 10.1
WATSON PHARMACEUTICALS, INC.
KEY EMPLOYEE AGREEMENT
     This Key Employee Agreement (“Agreement”) is entered into as of October 30,
2009, (the “Effective Date”), by and between Robert Todd Joyce (“Executive”) and
Watson Pharmaceuticals, Inc. (the “Company”), a Nevada corporation.
     Whereas, the Company desires to employ Executive to provide personal
services to the Company, and wishes to provide Executive with certain
compensation and benefits in return for his services; and
     Whereas, Executive wishes to be employed by the Company and provide
personal services to the Company in return for certain compensation and
benefits, including the benefits provided under this Agreement;
     Now, Therefore, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed by and between the parties hereto as
follows:
     1. Employment by the Company. Subject to terms set forth herein, the
Company agrees to employ Executive in the position of Senior Vice President and
Chief Financial Officer and Executive hereby accepts employment effective as of
the Effective Date. In this position, Executive shall perform such duties as are
assigned from time to time by the Chief Executive Officer (“CEO”) of the Company
(the “Designated Officer”). During his employment with the Company, Executive
will devote his best efforts and substantially all of his business time and
attention (except for vacation periods as set forth herein and reasonable
periods of illness or other incapacity permitted by the Company’s general
employment policies) to the business of the Company. Executive shall abide by
the general employment policies and procedures of the Company, except that
wherever the terms of this Agreement may differ from or are in conflict with the
Company’s general employment policies or procedures, this Agreement shall
control.
     2. Compensation.
          2.1 Salary. For services to be rendered hereunder, Executive shall
receive a base salary as set forth in Section 1 of the Compensation and
Severance Terms Schedule, attached hereto as Exhibit A. Executive will be
considered annually for adjustments in base salary in accordance with Company
policy and subject to review and approval by the Board of Directors (the
“Board”) or its Compensation Committee (the “Compensation Committee”), as
appropriate.
          2.2 Bonus. Executive shall be eligible to participate in the Company’s
bonus plan at the senior executive level throughout the duration of Executive’s
employment with the Company. The Company shall have the sole discretion to
determine whether Executive is entitled to any such bonus and to determine the
amount of the bonus. The amount of Executive’s bonus may be determined in part
based on Executive’s performance with respect to certain goals established by
the Company and attainment by the Company of its planned financial objectives
for the bonus period. Notwithstanding the foregoing, no bonus is guaranteed to
Executive. Any

 

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bonus is subject to the approval of the Board or the Compensation Committee, as
appropriate. The Company retains the authority to review, grant, deny or revise
any bonus in its sole discretion. To be eligible to receive a bonus, Executive
must remain in employment with the Company throughout the entire fiscal year or
as otherwise required by the applicable bonus plan as adopted by the Company
from time to time. The target level of such bonus is set forth in Section 2 of
Exhibit A attached hereto.
          2.3 Long Term Incentive Awards. Subject to the approval of the Board
or the Compensation Committee, as appropriate, Executive shall receive the long
term incentive awards (if any) set forth in Section 3 of Exhibit A, and such
additional long term incentive awards as may from time to time be granted,
pursuant to the terms and conditions set forth in the applicable award agreement
and plan documents, copies of which will be made available upon Executive’s
request. For the purposes of this Agreement, all long term incentive awards
(e.g.,stock options, restricted stock and restricted stock units) granted to
Executive by the Company prior to the Effective Date, granted hereunder, or
granted in the future shall be referred to hereinafter as the “Awards.”
          2.4 Paid Time Off. Executive shall be eligible to accrue paid time off
(“PTO”) during the term of this Agreement, in accordance with the Company’s
standard policy regarding PTO and in an amount commensurate with other employees
at a level similar to that of the Executive.
          2.5 Standard Company Benefits. Executive shall be entitled to all
rights and benefits for which he is eligible under the terms and conditions of
the standard Company benefits plans (e.g., health and disability insurance,
401(k) retirement plan, etc.) and other benefits and incentives which may be in
effect from time to time and provided by the Company to employees at levels
similar to the Executive.
     3. Proprietary Information and Inventions.
          Executive has executed the Employee Proprietary Information and
Inventions Agreement (the “Inventions Agreement”) attached hereto as Exhibit C.
Executive acknowledges that the Inventions Agreement remains in full force and
effect and is made a part hereof by this reference.
     4. Outside Activities.
          4.1 Activities. Except with the prior written consent of the CEO or
the Board, as appropriate, Executive will not during his employment with the
Company undertake or engage in any other employment, occupation or business
enterprise, other than ones in which Executive is a passive investor. Executive
may engage in civic and not-for-profit activities so long as such activities do
not materially interfere with the performance of his duties hereunder. Executive
will not during his employment with the Company publicly disparage the Company
or any of its subsidiaries, or their respective past or present products,
officers, directors, employees or agents.
          4.2 Investments and Interests. During his employment by the Company,
Executive agrees not to acquire, assume or participate in, directly or
indirectly, any position, investment or interest known by him to be adverse to
or in conflict with the interest of the

 

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Company, its business or prospects, financial or otherwise. By way of
clarification, nothing contained in this Agreement shall prevent Executive from
holding, for investment purposes only, no more than one percent (1%) of the
capital stock of any publicly traded company.
          4.3 Non-Competition. During his employment by the Company, except on
behalf of the Company, Executive will not directly or indirectly, whether as an
officer, director, stockholder, partner, proprietor, associate, representative,
consultant, or in any capacity whatsoever engage in, become financially
interested in, be employed by or have any business connection with any other
person, corporation, firm, partnership or other entity whatsoever known by him
to compete directly with the Company, anywhere in the world, in any line of
business engaged in (or planned to be engaged in) by the Company.
     5. Other Agreements.
          Executive represents and warrants that his employment by the Company
will not conflict with and will not be constrained by any prior agreement or
relationship with any third party. Executive represents and warrants that he
will not disclose to the Company or use on behalf of the Company any
confidential information governed by any agreement with any third party except
in accordance with an agreement between the Company and any such third party.
During Executive’s employment by the Company, Executive may use, in the
performance of his duties, all information generally known and used by persons
with training and experience comparable to his own and all information which is
common knowledge in the industry or otherwise legally in the public domain.
     6. Termination Of Employment.
          6.1 At-Will Employment. Executive’s relationship with the Company is
at-will. The Company shall have the right to terminate Executive’s employment
with the Company at any time with or without Cause and with or without notice.
          6.2 Termination by Company for Cause. If the Company terminates
Executive’s employment at any time for Cause, Executive’s salary shall cease on
the date of termination; and Executive will not be entitled to severance pay,
pay in lieu of notice or any other such compensation.
               (a) Definition of “Cause.” For purposes of this Agreement,
“Cause” shall mean (i) Executive’s conviction of any felony; (ii) Executive’s
gross misconduct, material violation of Company policy, or material breach of
Executive’s duties to the Company, which Executive fails to correct within
thirty (30) days after Executive is given written notice by the CEO or the
Designated Officer; or (iii) Executive’s failure to relocate his principal
residence by August 1, 2010, to a location in reasonable day-to-day proximity to
the Company’s commercial headquarters located in New Jersey.
          6.3 Termination by Company Without Cause. If the Company terminates
Executive’s employment at any time without Cause, Executive shall be entitled to
severance benefits as set forth in Section 4.1 of the Compensation and Severance
Terms Schedule, attached hereto as Exhibit A.

 

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          6.4 Executive’s Voluntary Resignation. Executive may terminate his
employment with the Company at any time, with or without Good Reason, and with
or without notice. In the event Executive voluntarily terminates his employment
other than for Good Reason, he will not be entitled to severance pay, pay in
lieu of notice or any other such compensation.
          6.5 Executive’s Resignation for Good Reason. Executive may resign his
employment for Good Reason so long as Executive tenders his resignation to the
Company within sixty (60) days after the occurrence of the event which forms the
basis for his termination for Good Reason. If Executive terminates his
employment for Good Reason, Executive shall be eligible for severance benefits
as set forth in Section 4.2 of Exhibit A, attached hereto.
               (a) Definition of “Good Reason.” For purposes of this Agreement,
“Good Reason” shall mean any one of the following events which occurs on or
after the Effective Date: (i) after a Change of Control (as defined in
Section 7.1), any material reduction of the Executive’s then existing annual
base salary, except to the extent the annual base salary of all other executive
officers at levels similar to Executive is similarly reduced (provided such
reduction does not exceed fifteen percent (15%) of Executive’s then existing
annual base salary); (ii) after a Change of Control, any material reduction in
the package of benefits and incentives, taken as a whole, provided to the
Executive (except that employee contributions may be raised to the extent of any
cost increases imposed by third parties) or any action by the Company which
would materially and adversely affect the Executive’s participation or reduce
the Executive’s benefits under any such plans, except to the extent that such
benefits and incentives of all other executive officers at levels similar to
Executive are similarly reduced; (iii) after a Change of Control, any material
diminution of the Executive’s duties and responsibilities, taken as a whole,
excluding for this purpose an isolated, insubstantial or inadvertent action not
taken in bad faith which is remedied by the Company immediately after notice
thereof is given by the Executive; (iv) after a Change of Control, a requirement
that the Executive materially relocate to a work site that would increase the
Executive’s one-way commute distance by more than thirty-five (35) miles from
his then principal residence, unless the Executive accepts such relocation
opportunity; (v) any material breach by the Company of its obligations under
this Agreement; or (vi) any failure by the Company to obtain the assumption of
this Agreement by any successor or assign of the Company; provided, however,
that the Executive may not resign his employment for Good Reason unless: (A) the
Executive has provided the Company with at least 30 days prior written notice of
the Executive’s intent to resign for Good Reason (which notice must be provided
within 60 days following the occurrence of the event(s) purported to constitute
Good Reason); and (B) the Company has not remedied the alleged violation(s)
within 30-days following its receipt of the written notice of intent to resign
for Good Reason.
          6.6 Termination for Death or Disability. Executive’s employment with
the Company will be terminated in the event of Executive’s death, or any
illness, disability or other incapacity in such a manner that Executive is
physically rendered unable regularly to perform his duties hereunder for a
period in excess of one hundred eighty (180) consecutive days or more than one
hundred eighty (180) days in any consecutive twelve (12) month period. The
determination regarding whether Executive is physically unable regularly to
perform his duties shall be made by the Board. Executive’s inability to be
physically present on the Company’s premises shall not constitute a presumption
that Executive is unable to perform such duties. In

 

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the event that Executive’s employment with the Company is terminated for death
or disability as described in this Section 6.6, Executive or Executive’s heirs,
successors, and assigns shall not receive any compensation or benefits other
than payment of accrued salary and PTO and such other benefits as expressly
required in such event by applicable law or the terms of applicable benefit
plans.
          6.7 Cessation. If Executive violates any provision of Section 8 of
this Agreement or the Employee Proprietary Information and Inventions Agreement
and Executive fails to correct such violation within ten (10) days after
Executive is given written notice by the CEO or the Designated Officer, then any
severance payments or other benefits being provided to Executive will cease
immediately, and Executive will not be entitled to any further compensation from
the Company.
     7. Change of Control.
          7.1 Definition. For purposes of this Agreement, Change of Control
means the occurrence of any of the following:
               (a) a sale of assets representing fifty percent (50%) or more of
the net book value and of the fair market value of the Company’s consolidated
assets (in a single transaction or in a series of related transactions);
               (b) a liquidation or dissolution of the Company;
               (c) a merger or consolidation involving the Company or any
subsidiary of the Company after the completion of which: (i) in the case of a
merger (other than a triangular merger) or a consolidation involving the
Company, the shareholders of the Company immediately prior to the completion of
such merger or consolidation beneficially own (within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), or comparable successor rules), directly or indirectly, outstanding
voting securities representing less than fifty percent (50%) of the combined
voting power of the surviving entity in such merger or consolidation, and
(ii) in the case of a triangular merger involving the Company or a subsidiary of
the Company, the shareholders of the Company immediately prior to the completion
of such merger beneficially own (within the meaning of Rule 13d-3 promulgated
under the Exchange Act, or comparable successor rules), directly or indirectly,
outstanding voting securities representing less than fifty percent (50%) of the
combined voting power of the surviving entity in such merger and less than fifty
percent (50%) of the combined voting power of the parent of the surviving entity
in such merger;
               (d) an acquisition by any person, entity or “group” (within the
meaning of Section 13(d) or 14(d) of the Exchange Act or any comparable
successor provisions), other than any employee benefit plan, or related trust,
sponsored or maintained by the Company or an affiliate of the Company and other
than in a merger or consolidation of the type referred to in clause “(c)” of
this sentence, of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rules) of
outstanding voting securities of the Company representing more than fifty
percent (50%) of the combined voting power of the Company (in a single
transaction or series of related transactions); or

 

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               (e) in the event that the individuals who, as of the Effective
Date, are members of the Board (the “Incumbent Board”), cease for any reason to
constitute at least fifty percent (50%) of the Board. (If the election, or
nomination for election by the Company’s shareholders, of any new member of the
Board is approved by a vote of at least fifty percent (50%) of the Incumbent
Board, such new member of the Board shall be considered as a member of the
Incumbent Board.)
          7.2 Termination After a Change of Control. In the event Executive’s
employment with the Company is terminated without Cause, or Executive resigns
for Good Reason, within ninety (90) days prior to or twenty-four (24) months
following a Change of Control (a “Change of Control Termination”), then
Executive shall be eligible for severance benefits as set forth in Section 4.3
of Exhibit A, attached hereto.
          7.3 Parachute Payments. In the event that it shall be determined under
this Section 7.3 that any payment or benefit to Executive or for the benefit of
Executive or on Executive’s behalf (whether paid or payable or distributed or
distributable) pursuant to the terms of this Agreement or any other agreement,
arrangement or plan with the Company or any Affiliate (as defined below)
(including, without limitation, the severance benefits as set forth in
Section 4.3 of Exhibit A, attached hereto) (individually, a “Payment” and
collectively, the “Payments”) would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), or
any successor provision thereto (the “Excise Tax”), then Executive shall be
entitled to receive from the Company one or more additional payments
(individually, a “Gross-Up Payment” and collectively, the “Gross-Up Payments”)
in an aggregate amount such that the net amount of the Payments and the Gross-Up
Payments retained by Executive after the payment of all Excise Taxes (and any
interest and penalties imposed with respect to such Excise Taxes) on the
Payments and all federal, state and local income tax, employment taxes and
Excise Taxes (including any interest and penalties imposed with respect to such
taxes and Excise Taxes) on the Gross-Up Payments provided for in this
Section 7.3, and taking into account any lost or reduced tax deductions on
account of the Gross-Up Payments, shall be equal to the Payments. For purposes
of this Section 7.3, an “Affiliate” shall mean any successor to all or
substantially all of the business and/or assets of the Company, any person
acquiring ownership or effective control of the Company or ownership of a
substantial portion of the assets of the Company’s assets, or any other person
whose relationship to the Company, such successor or such person acquiring
ownership or control is such as to require attribution between the parties under
Section 318(a) of the Code.

 

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               (a) All determinations required to be made under this
Section 7.3, including whether and when any Gross-Up Payment is required and the
amount of such Gross-Up Payment, and the assumptions to be utilized in arriving
at such determinations, shall be made by the Accountants (as defined below),
which shall provide Executive and the Company with detailed supporting
calculations with respect to such Gross-Up Payment within thirty (30) days of
the receipt of notice from Executive or the Company that Executive has received
or will receive a Payment. For the purposes of this Section 7.3, the
“Accountants” shall mean the Company’s independent certified public accounting
firm serving immediately prior to the Change of Control (or other change in
ownership or effective control, or change in ownership of a substantial portion
of the assets, of a corporation, as defined in Section 280G of the Code) with
respect to which such determination is being made. In the event that the
Accountants are also serving as the accountants, auditors or consultants for the
individual, entity or group effecting the Change of Control (or other change in
ownership or effective control, or change in ownership of a substantial portion
of the assets, of a corporation, as defined in Section 280G of the Code), the
Company shall appoint another nationally recognized independent certified public
accounting firm, reasonably acceptable to Executive, to make the determinations
required hereunder (which accounting firm shall then be referred to as the
“Accountants” hereunder). All fees and expenses of the Accountants shall be
borne solely by the Company.
               (b) For the purposes of determining whether any of the Payments
will be subject to the Excise Tax and the amount of such Excise Tax, such
Payments will be treated as “parachute payments” within the meaning of section
280G of the Code, and all “parachute payments” in excess of the “base amount”
(as defined under Section 280G(b)(3) of the Code) of Executive shall be treated
as subject to the Excise Tax, unless and except to the extent that, in the
opinion of the Accountants, such Payments (in whole or in part) either do not
constitute “parachute payments” or represent reasonable compensation for
services actually rendered (within the meaning of section 280G(b)(4) of the
Code) in excess of the “base amount,” or such “parachute payments” are otherwise
not subject to such Excise Tax.
               (c) For purposes of determining the amount of the Gross-Up
Payment, Executive shall be deemed to pay federal income taxes at the highest
applicable marginal rate of federal income taxation for the calendar year in
which the Gross-Up Payment is to be made and to pay any applicable state and
local income taxes at the highest applicable marginal rate of taxation for the
calendar year in which the Gross-Up Payment is to be made, net of the maximum
reduction in federal income taxes which could be obtained from the deduction of
such state or local taxes if paid in such year (determined without regard to
limitations on deductions based upon the amount of Executive’s adjusted gross
income); and to have otherwise allowable deductions for federal, state and local
income tax purposes at least equal to those disallowed because of the inclusion
of the Gross-Up Payment in Executive’s adjusted gross income.
               (d) Any determination by the Accountants shall be binding upon
the Company and Executive. As a result of uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accountants hereunder, it is possible that the Gross-Up Payment made will have
been an amount less than the Company should have paid pursuant to this
Section 7.3 (the “Underpayment”). In the event that the Company exhausts its

 

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remedies pursuant to Section 7.3(f) and Executive is required to make a payment
of any Excise Tax, the Underpayment shall be promptly paid by the Company to or
for Executive’s benefit.
               (e) Executive shall notify the Company in writing of any claim by
the Internal Revenue Service or other taxing authority that, if successful,
would require the payment by the Company of a Gross-Up Payment. Such
notification shall be given as soon as practicable after Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which Executive gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes, interest and/or penalties with
respect to such claim is due). If the Company notifies Executive in writing
prior to the expiration of such period that the Company desires to contest such
claim, Executive shall: (i) give the Company any information reasonably
requested by the Company relating to such claim; (ii) take such action in
connection with contesting such claim as the Company shall reasonably request in
writing from time to time, including, without limitation, engaging legal
representation with respect to such claim by an attorney selected by the Company
and reasonably acceptable to Executive; (iii) cooperate with the Company in good
faith in order to effectively contest such claim; and (iv) permit the Company to
participate in any proceedings relating to such claims; provided, however, that
the Company shall bear and pay directly all costs and expenses, including
attorneys’ fees (including additional interest and penalties) incurred in
connection with such contest and shall indemnify Executive for and hold
Executive harmless from, on an after-tax basis, any Excise Tax or income,
employment or other taxes (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of all related
costs and expenses.
               (f) Without limiting the foregoing provisions of this
Section 7.3, the Company shall control all proceedings taken in connection with
such contest and, at the Company’s sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the Internal
Revenue Service or other taxing authority in respect of such claim and may, at
the Company’s sole option, either direct Executive to pay the amount claimed and
sue for a refund or contest the claim in any permissible manner, and Executive
agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if the Company
directs Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to Executive, on an interest-free basis, and
shall indemnify Executive for and hold Executive harmless from, on an after-tax
basis, any Excise Tax or income, employment or other taxes (including interest
or penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance (including as a
result of any forgiveness by the Company of such advance); provided, further,
that any extension of the statute of limitations relating to the payment of
taxes, interest and penalties for the taxable year of Executive with respect to
which such contested amount is claimed to be due shall be limited solely to such
contested amount. Furthermore, the Company’s control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.

 

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               (g) The Gross-Up Payments provided for in this Section 7.3 shall
be paid to Executive as soon as practicable after the Accountants have
determined the amount of such payments, but not earlier than the date the
severance benefits are due to Executive under Section 4.4 of the Compensation
and Severance Terms Schedule, attached hereto as Exhibit A and in no event later
than the later of (i) the end of the calendar year following the date of
termination and (ii) the third calendar month following the date of termination,
as permitted under Code Section 409(A); provided, however, that if the amounts
of such Gross-Up Payments cannot be finally determined by the Accountants before
the end of this period, the Company shall pay to Executive as of the last day of
the period described above an estimate, as determined in good faith by the
Company, of the amount of such Gross-Up Payments. In the event that the amount
of the estimated payments exceeds the amount subsequently determined by the
Accountants to have been due to the Executive, such excess shall constitute a
loan by the Company to Executive, payable not later than 30 days after such
determination and demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
     8. Nonsolicitation. While employed by the Company, and for one (1) year
following the termination of Executive’s employment with the Company, Executive
agrees not to solicit, attempt to solicit, induce, or otherwise cause any
employee or independent contractor of the Company to terminate his or her
employment or contractual relationship in order to become an employee or
independent contractor to or for Executive or any other person or entity.
     9. Release. In exchange for the severance compensation and benefits
provided under this Agreement to which Executive would not otherwise be
entitled, Executive shall enter into and execute a release substantially in the
form attached hereto as Exhibit B, as may be revised and updated as determined
to be appropriate by the Company (the “Release”). Unless the Release is executed
by Executive following termination of employment, delivered to the Company
within twenty-one (21) days after the Release has been provided to Executive (or
forty-five (45) days following Executive’s receipt of the informational package
required in the event of a group termination), and not revoked, Executive shall
not receive any severance benefits provided under this Agreement, any vesting
acceleration of Executive’s Awards as provided in this Agreement shall not
apply, and Executive’s Awards in such event shall vest or, in the case of stock
options, be exercisable following the date of Executive’s termination only to
the extent provided under their original terms in accordance with the applicable
plan and Award agreements.
     10. General Provisions.
          10.1 Notices. Any notices provided hereunder must be in writing and
shall be deemed effective upon personal delivery (including, personal delivery
by facsimile transmission) or the third day after mailing by first class mail,
to the Company at its primary office location and to Executive at his address as
listed on the Company payroll (which address may be changed by written notice).
          10.2 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid or
unenforceable in any respect under any

 

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applicable law or rule in any jurisdiction, such invalidity or unenforceability
will not affect any other provision or any other jurisdiction, and such invalid
or unenforceable provision shall be reformed, construed and enforced in such
jurisdiction so as to render it valid and enforceable consistent with the intent
of the parties insofar as possible.
          10.3 Waiver. If either party should waive any breach of any provisions
of this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
          10.4 Entire Agreement. This Agreement, together with the Employee
Proprietary Information and Inventions Agreement, constitute the final,
complete, and exclusive embodiment of the entire agreement between Executive and
the Company regarding the subject matter hereof and supersede any prior
agreement, promise, representation, or statement, written or otherwise, between
Executive and the Company with regard to this subject matter. Without limiting
the foregoing, the parties expressly agree that the certain Key Employee
Agreement between Company and Executive dated December 21, 2000, as amended, is
of no further force or effect, and is superseded in its entirety by this
Agreement. This Agreement is entered into without reliance on any promise,
representation, statement or agreement other than those expressly contained or
incorporated herein, and it cannot be modified or amended except in a writing
signed by Executive and a duly authorized officer of the Company.
          10.5 Counterparts. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.
          10.6 Headings. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.
          10.7 Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive, the Company and their
respective successors, assigns, heirs, executors and administrators, except that
Executive may not assign any of his duties hereunder and he may not assign any
of his rights hereunder without the written consent of the Company, which shall
not be withheld unreasonably.
          10.8 Attorneys’ Fees. If either party hereto brings any action to
enforce his or its rights hereunder, the prevailing party in any such action
shall be entitled to recover his or its reasonable attorneys’ fees and costs
incurred in connection with such action.
          10.9 Arbitration. To provide a mechanism for rapid and economical
dispute resolution, Executive and the Company agree that any and all disputes,
claims, or causes of action, in law or equity, arising from or relating to this
Agreement (including the Release) or its enforcement, performance, breach, or
interpretation, will be resolved, to the fullest extent permitted by law, by
final, binding, and confidential arbitration held in Orange County, California
and conducted by Judicial Arbitration & Mediation Services/Endispute (“JAMS”),
under its then-existing Rules and Procedures. Nothing in this Section 10.9 or in
this Agreement

 

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is intended to prevent either Executive or the Company from obtaining injunctive
relief in court to prevent irreparable harm pending the conclusion of any such
arbitration.
          10.10 Remedies. Executive’s duties under Section 8 and the Employee
Proprietary Information and Inventions Agreement shall survive termination of
Executive’s employment with the Company. Executive acknowledges that a remedy at
law for any breach or threatened breach by Executive of the provisions of these
sections and the Employee Proprietary Information and Inventions Agreement would
be inadequate, and that such a breach would cause irreparable harm to the
Company; and Executive therefore agrees that the Company shall be entitled to
injunctive relief in case of any such breach or threatened breach.
          10.11 Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the law of the
State of California as applied to contracts made and to be performed entirely
within California.
          10.12 Section 409A. Notwithstanding anything contained in this
Agreement to the contrary, to the maximum extent permitted by applicable law,
severance amounts payable pursuant to this Agreement shall be made in reliance
upon Treas. Reg. Section 1.409A-1(b)(9) (Separation Pay Plans) or Treas. Reg.
Section 1.409A-1(b)(4) (Short-Term Deferrals). For this purpose each installment
payment to which Executive is entitled under the severance pay provisions of
this Agreement shall be considered a separate and distinct payment. In addition,
(i) Subject to Section 9 of this Agreement, all severance payments payable
pursuant this Agreement shall commence within sixty (60) days after the
Executive’s Separation from Service, (ii) no amount deemed deferred compensation
subject to Section 409A shall be payable pursuant to the severance pay
provisions of this Agreement unless your termination of employment constitutes a
Separation from Service, and (ii) if you are deemed at the time of your
separation from service to be a “specified employee” for purposes of
Section 409A(a)(2)(B)(i) of the Code, then to the extent delayed commencement of
any portion of the termination benefits to which you are entitled under this
Agreement is required in order to avoid a prohibited distribution under
Section 409A(a)(2)(B)(i) of the Code, such portion of your termination benefits
shall not be provided to you prior to the earlier of (A) the expiration of the
six-month period measured from the date of your Separation from Service with the
Company or (B) the date of your death. Upon the earlier of such dates, all
payments deferred pursuant to this paragraph shall be paid in a lump sum to you,
and any remaining payments due under this Agreement shall be paid as otherwise
provided herein. For purposes of this Agreement, Separation from Service shall
mean a “separation from service” within the meaning of Treasury
Regulation Section 1.409A-1(h). The determination of whether you are a
“specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of
the time of your separation from service shall be made by the Company in
accordance with the terms of Section 409A of the Code and applicable guidance
thereunder (including without limitation Treas. Reg. Section 1.409A-1(i) and any
successor provision thereto). The payment of any reimbursement of any expense
under this Agreement (including without limitation, any Gross-Up Payments
pursuant to Section 7.3 of this Agreement) shall be made no later than
December 31 of the year following the year in which the expense was incurred.
The amount of expenses reimbursed in one year shall not affect the amount
eligible for reimbursement in any subsequent year. The payment of any bonus
earned pursuant to this Agreement shall be made no later than two and one-half
months following the end of the fiscal year in which such bonus was earned.

 

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     In Witness Whereof, the parties have executed this Agreement effective as
of the Effective Date above written.
Watson Pharmaceuticals, Inc.

         
 
       
By:
  /s/ David A. Buchen     
 
 
 
Name: David A. Buchen    
 
  Title:  Senior Vice President and General Counsel    
 
       

Executive:

     
 
   
/s/ R. Todd Joyce
 
Name: R. Todd Joyce
   

 

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Exhibit A
COMPENSATION AND SEVERANCE TERMS SCHEDULE
1. BASE SALARY
     For services to be rendered under this Agreement, Executive shall receive
an initial base salary at an annualized rate of $425,000, payable in accordance
with the Company’s standard payroll practices, and subject to increases as set
forth in the Agreement.
2. BONUS
     Executive’s annual bonus, if granted, shall be at a target level of 50% or
greater of the Executive’s then current base salary.
3. LONG TERM INCENTIVE AWARDS
     As of the Effective Date, Executive shall be awarded 6,800 shares of
restricted stock in the Company.
     The terms of the restricted stock award, including the applicable vesting
periods of such Awards, shall be set forth in the applicable award agreements
and shall otherwise be subject to the terms and conditions of the applicable
plan documents.
4. SEVERANCE BENEFITS
     4.1 Termination By Company without Cause. If the Company terminates
Executive’s employment at any time without Cause, the Company shall provide to
Executive, within thirty (30) days after the Effective Date of the Release
attached hereto as Exhibit B (as “Effective Date” is defined in the Release), as
the only severance compensation and benefits all of the following:
          (a) A lump sum severance payment, subject to standard withholdings or
deductions, in an amount equal to the sum of: (i) twenty-four (24) months of
Executive’s then base salary; (ii) two times Executive’s target bonus to be
earned for the year in which termination occurs or two times the bonus amount
paid to the Executive in the prior year, whichever is greater; and
(iii) Executive’s prorated bonus for the year in which the termination occurs,
at the Company’s discretion.
          (b) Continued group health insurance benefits (e.g., medical, dental,
vision, etc.) at the Company’s expense for Executive and Executive’s eligible
dependents for a period of up to eighteen (18) months under COBRA; provided,
however, that in any event the Company’s obligation to provide any health
benefits pursuant to this sentence ends when Executive becomes eligible for
health insurance with a new employer or otherwise becomes eligible for health
insurance subsidized by a third party (and

 

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Executive agrees to promptly notify the Company in writing of any such event of
eligibility). To satisfy its obligations hereunder, the Company, at its
election, shall either (i) arrange commercial health care coverage for Executive
and Executive’s eligible dependents (which is (x) comparable to the health
benefits provided to Executive and his eligible dependents immediately prior to
commencement of such commercial health care coverage, (y) subject to change if
such coverage is no longer available, and (z) mutually agreeable to the Company
and Executive), (ii) provide Executive and his eligible dependents continued
coverage under the Company’s health plans, or (iii) upon Executive’s election of
COBRA benefits, make a lump sum payment to Executive in an amount equal to the
amount Executive would incur to enroll in COBRA for a period of eighteen
(18) months.
          (c) Outplacement services for one year with a nationally recognized
service selected by the Company.
     4.2 Executive’s Resignation for Good Reason. If Executive terminates his
employment with the Company for Good Reason in the absence of a Change of
Control, the Company shall provide to Executive, within thirty (30) days after
the Effective Date of the Release attached hereto as Exhibit B (as “Effective
Date” is defined in the Release), as the only severance compensation and
benefits, the same severance compensation and benefits provided in Section 4.1
hereof.
     4.3 Change of Control Termination. In the event of a Change of Control
Termination or if the Executive resigns for Good Reason within ninety (90) days
prior to or twenty-four (24) months following a Change of Control, the Company
shall provide to Executive, within thirty (30) days after the Effective Date of
the Release attached hereto as Exhibit B (as “Effective Date” is defined in the
Release), as the only severance compensation and benefits, (a) the same benefits
set forth in paragraphs 4.1 of this Exhibit A; and (b) any unvested Awards held
by Executive shall have their vesting accelerated in full so as to become one
hundred percent (100%) vested and immediately exercisable in full as of the date
of such termination.

 

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Exhibit B
RELEASE AGREEMENT
I understand that my position with Watson Pharmaceuticals, Inc. (the “Company”)
terminated effective                         (the “Separation Date”). The
Company has agreed that if I choose to sign this Release, the Company will,
within thirty (30) days after the Effective Date of this Release, pay me certain
severance benefits (minus the standard withholdings and deductions) pursuant to
the terms of the Key Employee Agreement (the “Agreement”) entered into as of
                        , between myself and the Company, and any agreements
incorporated therein by reference. I understand that I am not entitled to such
severance benefits unless I sign this Release. I further understand that,
regardless of whether I sign this Release, the Company will pay me all of my
accrued salary and paid time off through the Separation Date, to which I am
entitled by law.
In consideration for the severance benefits I am receiving under the Agreement,
I hereby release the Company and its officers, directors, agents, attorneys,
employees, shareholders, parents, subsidiaries, and affiliates (“Releasees”)
from any and all claims, liabilities, demands, causes of action, attorneys’
fees, damages, or obligations of every kind and nature, whether they are now
known or unknown, arising at any time prior to the date I sign this Release.
This general release includes, but is not limited to: all federal and state
statutory and common law claims, claims related to my employment or the
termination of my employment or related to breach of contract, tort, wrongful
termination, discrimination, harassment, defamation, fraud, wages or benefits,
or claims for any form of equity or compensation. Notwithstanding the release in
the preceding sentence, I am not releasing any right of indemnification I may
have for any liabilities and costs of defense (including without limitation
reasonable attorneys’ fees) arising from my actions within the course and scope
of my employment with the Company.
In releasing claims unknown to me at present, I am waiving all rights and
benefits under Section 1542 of the California Civil Code, and any law or legal
principle of similar effect in any jurisdiction: “A general release does not
extend to claims which the creditor does not know or suspect to exist in his
favor at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor.”
If I am forty (40) years of age or older as of the Separation Date, I
acknowledge that I am knowingly and voluntarily waiving and releasing any rights
I may have under the federal Age Discrimination in Employment Act of 1967, as
amended (“ADEA”). I also acknowledge that the consideration given for the waiver
in the above paragraph is in addition to anything of value to which I was
already entitled. I have been advised by this writing, as required by the ADEA
that: (a) my waiver and release do not apply to any claims that may arise after
my signing of this Release; (b) I should consult with an attorney prior to
executing this Release; (c) I have twenty-one (21) days (forty-five (45) days in
the event of a group termination) within which to consider this Release
(although I may choose to voluntarily execute this Release earlier); (d) I have
seven (7) days following the execution of this release to revoke the Release;
and (e) this Release will not be effective until the eighth day after this
Release has been signed both by me and by the Company (“Effective Date”).

 

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I acknowledge that I remain bound by the Employee Proprietary Information and
Invention Agreement which I signed in connection with my employment (“Invention
Agreement”) and that the provisions of the Invention Agreement shall remain in
full force and effect. In accordance with my existing and continuing obligations
under the Invention Agreement, I have returned to the Company all materials
required to be returned pursuant to the Invention Agreement, as well as any
other Company property in my possession. In consideration for the severance
benefits I am receiving hereunder, I agree that I will reasonably cooperate with
the Company after the Separation Date to assure the smooth transition of pending
matters and to answer questions which may arise from time to time regarding my
former duties and responsibilities. Effective as of the Separation Date, I
resign any and all offices and directorships with the Company and any of its
affiliates, and will execute all documents reasonably requested by the Company
or its affiliates to effectuate such resignations. Further, I agree that I will
not hereafter disparage the Company or any of the Releasees, either orally or in
writing, to any person or entity. The Company agrees that its officers and
directors will not disparage me, either orally or in writing, to any person or
entity.
Agreed:

         
 
       
 
       
Date
      [Employee]
 
       
 
       
Date
      WATSON PHARMACEUTICALS, INC.

 

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Exhibit C
EMPLOYEE PROPRIETARY INFORMATION AND INVENTION AGREEMENT