Exhibit 10.31

EMPLOYEE STOCK UNIT AGREEMENT

(Performance-Based Conditions)

Under The 2007 Equity Incentive Plan
of Forest Laboratories, Inc.
 
In consideration of services to be rendered by you (the “Grantee”) to Forest
Laboratories, Inc., a Delaware company (the “Company”), you have been awarded a
grant (the “Grant”) of Stock Equivalent Units (each Stock Equivalent Unit
awarded under the Grant, a “Stock Unit”) under the Company’s 2007 Equity
Incentive Plan (the “2007 Plan”), which is incorporated herein by reference,
covering a number of shares of Common Stock of the Company, par value $0.10 per
share (the “Shares”) as further described herein, subject to the terms and
conditions of this Agreement and the 2007 Plan.  Each capitalized term used
herein will have the meaning specified in the 2007 Plan, unless another meaning
is specified in this Agreement.  Certain terms and conditions of this Grant,
including the grant date and the number of Stock Units granted to you hereunder
(the “Targeted Stock Units”) are set forth on your equity award page (the
“Information Page”) on the website of the Stock Plan Administrator (as defined
in Section 13 below), and all such terms and conditions are incorporated herein
by reference.
 
1.  
PERFORMANCE TERMS.

 
a.  
Performance Period.  The Performance Period for your Stock Units will begin on
April 1, [__________] and end on March 31, [__________].

 
b.  
Payment of Shares.  Except to the extent Section 2 (Retirement, Disability or
Death of Grantee) or Section 3 (Change in Control) applies to the Stock Units,
after conclusion of the Performance Period, the Committee shall certify in
writing the number of Stock Units which have vested hereunder in accordance with
Section 1.c, and such Stock Units shall vest on the date of such certification
(the "Vested Stock Units").  Certification by the Committee shall be made within
ninety (90) days following the expiration of the Performance Period, but in any
event no later than July 30th of the year in which the Performance Period
ends.  Any Vested Stock Units will be due and payable in Shares at a ratio of
one Share per Stock Unit, subject to the provisions of Section 12(a) of the 2007
Plan.

 
c.  
Performance Condition.  The Committee will determine your Vested Stock Units by
multiplying your Targeted Stock Units by the “Performance Factor.”  The
Performance Factor means a percentage (from zero to [ ]%) which is the
arithmetic average of two other percentages, the Financial Performance Factor
and the Stock Performance Factor (each from zero to [ ]%), described in clauses
(i) and (ii) below:

 
i.  
Financial Performance Factor: The “Financial Performance Factor” will be the
percentage set forth under the heading Performance Factor that appears opposite
the achieved Percentile Rank on Table I of Exhibit A to this Agreement, in each
case subject to adjustment as set forth in the first footnote on Exhibit A. The
Percentile Rank will be determined by [ ].

 
ii.  
Stock Performance Factor: The “Stock Performance Factor” will be the percentage
set forth under the heading Performance Factor that appears opposite the
achieved Percentile Rank on Table 2 of Exhibit A to this Agreement, in each case
subject to adjustment as set forth in the first footnote on Exhibit A.  The
Percentile Rank will be determined by [ ].

 
2.  
RETIREMENT, DISABILITY, OR DEATH OF GRANTEE.

 
a.  
Retirement.  In the event of termination of the Grantee’s employment during the
Performance Period as a result of Grantee’s Retirement (as defined in the 2007
Plan), the Grantee will receive a pro rata portion of the Vested Stock Units
covered by this Grant in accordance with the terms set forth in Section 1 after
the conclusion of the Performance Period.  For purposes of this Section 2.a, the
pro rata portion shall equal the product of (i) the Vested Stock Units
multiplied by (ii) a fraction, the numerator of which is the number of days from
the beginning date of the Performance Period through the date of the Grantee’s
employment termination and the denominator of which is the total number of days
in the Performance Period.

 
b.  
Disability.  In the event of the termination of the Grantee’s employment during
the Performance Period as a result of Disability (as defined in the 2007 Plan),
each of the Financial Performance Factor and the Stock Performance Factor shall
be deemed satisfied at the 100% level on the date of such employment termination
as to a pro rata portion of the Stock Units covered by the Grant and such pro
rated portion of the Targeted Stock Units shall vest on such date.  For purposes
of this Section 2.b, the pro rata portion shall mean that number of Stock Units
equal to the product of (i) the Targeted Stock Units multiplied by (ii) a
fraction, the numerator of which is the number of days from the beginning date
of the Performance Period through the date of such employment termination and
the denominator of which is the total number of days in the Performance Period.

 
c.  
Death.  In the event of the termination of the Grantee’s employment as a result
of the Grantee’s death while an employee of the Company and during the
Performance Period, each of the Financial Performance Factor and the Stock
Performance Factor shall be deemed satisfied at the 100% level on the date of
such employment termination as to the Targeted Stock Units, and such Targeted
Stock Units shall vest on such date.

 
d.  
Payment.  Any Stock Units which vest pursuant to this Section 2 shall become due
and payable in Shares at a ratio of one Share per Stock Unit, subject to the
provisions of Section 12(a) of the 2007 Plan.  Following any vesting pursuant to
this Section 2, any Stock Units which have not vested shall be retired and the
Grantee shall have no further rights with respect to such Stock Units or the
underlying Shares.

 
3.  
CHANGE IN CONTOL.  If this Agreement does not continue to be outstanding
following the effective date of a Change in Control and has not been substituted
or replaced with a Qualified Substitute Award, each of the Financial Performance
Factor and the Stock Performance Factor shall be deemed satisfied at the 100%
level and the Targeted Stock Units shall automatically vest on the effective
date of the Change in Control.  The Targeted Stock Units which vest pursuant to
this Section 3 shall become due and payable in Shares at a ratio of one Share
per Stock Unit, subject to the provisions of Section 12(a) of the 2007 Plan.  In
addition, prior to the effectiveness of such Change in Control, the Board may in
its discretion cancel all or any portion of the Targeted Stock Units, and in
consideration of such cancellation, shall cause to be paid to each Grantee, upon
the effectiveness of such Change in Control for each of such Grantee’s Targeted
Stock Units so cancelled after giving effect to any adjustment pursuant to
Section 12(a) of the 2007 Plan, an amount in cash equal to the value of the
consideration (as determined by the Board) received by the stockholders of the
Company for a Share in the Change in Control.  Stock Units described in this
Section 3 that are not substituted or replaced with Qualified Substitute Awards
and are not cancelled prior to or upon a Change in Control shall be terminated
and the Grantee shall have no further rights with respect to such Stock Units or
the underlying Shares.

 
4.  
FORFEITURE OF UNVESTED STOCK UNITS UPON TERMINATION OF EMPLOYMENT.  Except to
the extent Stock Units have vested pursuant to Section 2 or 3, in the event that
the Grantee ceases to be an employee of the Company for any reason during the
Performance Period, all Stock Units subject to the Grant shall be forfeited by
the Grantee without compensation as of the date that such employment terminates
and the Grantee shall have no further rights with respect to such Stock Units or
the underlying Shares. In the event of the Grantee’s cessation of employment for
any reason, the Committee may, in its sole discretion and when it finds that
such an action would be in the best interests of the Company, waive the
Performance Conditions as to all or any portion of the Targeted Stock Units (and
any such Targeted Stock Units as to which the Performance Conditions have been
waived shall vest as of the date specified by the Committee) except in
connection with an employment termination for gross misconduct and except with
respect to a Grant which the Company intended to qualify as “performance-based
compensation” under Section 162(m) of the Code.

 
5.  
TIMING OF PAYMENT.  The Company will make payment to the Grantee of the Shares
as soon as reasonably practicable after such payment vests under this Agreement,
unless the Grantee shall have earlier deferred such payment in accordance with
arrangements offered to the Grantee for that purpose. If Shares are to be paid
to the Grantee pursuant to this Agreement, the Stock Plan Administrator will
instruct the Company’s transfer agent and stock registrar to deliver for the
account of the Grantee (and his or her permitted transferee) as designated on
the records of the Company such Shares. Notwithstanding anything to the contrary
contained in this Section 5, so long as a payment with respect to a Stock Unit
constitutes “non-qualified deferred compensation” for purposes of Section 409A
of the Code, no payment will be made with respect to any Stock Unit Award to any
Grantee on account of such Grantee’s Employment Termination Date if, on such
Date, the Grantee is a “specified employee” of the Company or its subsidiaries
(within the meaning of Section 409A(a)(2)(B)(i) of the Code and as determined by
the Committee) until the date which is six months after the Employment
Termination Date (or, if earlier than the end of such six month period, the date
of  such Grantee’s death).  In lieu of designating specified employees for
purposes of Section 409A of the Code, the Board in its discretion may identify
all employees of the Company and its subsidiaries as “specified employees” for
purposes of this provision.  The provisions of this Section 5 will not apply to
payments under a Stock Unit Award that occur pursuant to a Change in Control or
in connection with the dissolution of the Company.

 
6.  
RESTRICTIONS ON TRANSFER.  The Stock Units subject to the Grant shall not be
transferable during the Performance Period, other than by will or the laws of
descent and distribution, and except that the Grantee may transfer the Stock
Units by gift to one or more members of the Grantee's immediate family,
including trusts for the benefit of such family members and partnerships or
limited liability companies in which such family members are the only owners. In
the event the Grantee wishes to transfer the Stock Units during the Performance
Period by gift as permitted by this Section, the Grantee shall provide the Stock
Plan Administrator notice of any such transfer in form and substance reasonably
satisfactory to the Company and the Stock Plan Administrator, and no transferee
shall have any rights in the Stock Units until such notice has been accepted by
the Stock Plan Administrator. Transferred Stock Units shall be subject to all of
the same terms and conditions of the 2007 Plan and this Agreement as if such
Stock Units had not been transferred. More particularly (but without limiting
the generality of the foregoing), during the Performance Period the Stock Units
may not be assigned, transferred (except as provided above), pledged or
hypothecated in any way, shall not be assignable by operation of law and shall
not be subject to execution, attachment, pledge, hypothecation or other
disposition contrary to the provisions hereof, and the levy of any execution,
attachment or similar process upon the Stock Units shall be null and void and
without effect.

 
7.  
EMPLOYMENT.  In consideration of the awarding of the Grant and regardless of
whether the Performance Conditions shall be satisfied, the Grantee will fulfill
all the duties and obligations of his or her employment by the Company or its
subsidiaries. Nothing in this Agreement shall confer upon the Grantee any right
to similar grants in future years or any right to be continued in the employ of
the Company or its subsidiaries or shall interfere in any way with the right of
the Company or any such subsidiary to terminate or otherwise modify the terms of
the Grantee's employment.

 
8.  
EFFECT ON OTHER BENEFITS.  In no event shall the value of the Stock Units
covered by the Grant awarded under this Agreement at any time be included as
compensation or earnings for purposes of determining any other compensation,
retirement benefit or other benefit offered to employees of the Company or its
subsidiaries under any benefit plan of the Company unless otherwise specifically
provided for in such benefit plan.

 
9.  
AVAILABLE SHARES; LEGAL COMPLIANCE.  The Company shall pay all original issue
and transfer taxes with respect to the issuance of the Stock Units and the
underlying Shares and all other fees and expenses necessarily incurred by the
Company in connection therewith and will use its best efforts to comply with all
laws and regulations which, in the opinion of counsel for the Company, shall be
applicable thereto.

 
10.  
TAXES.  Except as provided below, the Grantee must pay the Company in cash upon
demand any and all amounts due for the purpose of satisfying the Company’s
liability under applicable law to withhold or deduct federal, state, or local
income tax, employment tax, pension plan contributions and any and all other
withholdings or deductions (plus interest or penalties thereon, if any, caused
by a delay in making such payment) required by reason of the receipt of the
Grant, the vesting of the Stock Units or the issuance of Shares hereunder.  By
accepting this Grant, the Grantee consents and directs that the Stock Plan
Administrator may, but is not obligated to, withhold the number of Shares having
an aggregate fair market value as of the date preceding the required withholding
sufficient to satisfy the Grantee’s obligations hereunder and to deliver such
Shares to the Company. In addition, the Company shall, to the extent permitted
by law, have the right to deduct such withholding amount from any payment of any
kind otherwise due to the Grantee.

 
11.  
CONDITION PRECEDENT TO GRANT.  In the event that the award of the Grant shall be
subject to, or shall require, any prior exchange listing, shareholder approval
or other condition or act, pursuant to the applicable laws, regulations or
policies of any stock exchange, federal or local government or its agencies or
representatives, then the Grant hereunder shall not be deemed awarded until the
fulfillment of such condition.

 
12.  
NO RIGHTS AS A STOCKHOLDER PRIOR TO ISSUANCE OF SHARES.  Neither the Grantee nor
any other person shall become the beneficial owner of any Shares that may become
payable with respect to the Stock Units subject to this Grant, nor have any
rights to dividends or other rights as a stockholder with respect to any such
Shares (including voting rights), until and after such Shares, if any, are
issued to the Grantee, in the time and manner specified in Section1, 2, 3 or 4.

 
13.  
ADMINISTRATION.  The Compensation Committee (the “Committee”) shall have full
authority and discretion, subject only to the express terms of the 2007 Plan, to
decide all matters relating to the administration and interpretation of the 2007
Plan and this Agreement and the Grantee agrees to accept all such Committee
determinations as final, conclusive and binding. The Company may retain a
third-party plan administrator or may designate an internal department to assist
in the administration of the 2007 Plan. The term “Stock Plan Administrator” as
used herein shall mean such third-party plan administrator or such internal
department as designated by the Company from time to time.

 
14.  
COSTS.  The Company shall not charge any Grantee for any part of the Company’s
cost to administer and operate the 2007 Plan. If the Company retains a
third-party plan administrator to assist in the administration of the 2007 Plan,
the Grantee may be charged fees by such third-party plan administrator in
connection with any transactions which the Grantee effects through such
third-party plan administrator.

 
15.  
AMENDMENT.  This Agreement shall be subject to the terms of the 2007 Plan, as
may be amended by the Company from time to time, except that no amendment of the
2007 Plan adopted after the date of this Agreement shall impair the Grantee’s
rights hereunder without his or her consent. In addition to the foregoing, this
Agreement may be amended by the Committee, provided that no such amendment shall
impair the Grantee’s rights hereunder without his or her consent.

 
16.  
DATA PRIVACY.  By entering into this Agreement, the Grantee (a) authorizes the
Company and its subsidiaries and the Stock Plan Administrator or any agent of
the Company providing recordkeeping services for the 2007 Plan to disclose to
each other such information and data as either of them shall request in order to
facilitate the awarding of Grants and the administration of the 2007 Plan; (b)
waives any data privacy rights the Grantee may have with respect to such
information; and (c) authorizes the Company and the Stock Plan Administrator or
any agent of the Company providing recordkeeping services for the 2007 Plan to
store and transmit such information in electronic form.

 
17.  
NOTICES.  All notices and communications by the Grantee in connection with this
Agreement or the Stock Units granted hereunder shall be delivered to the Stock
Plan Administrator and to the Company. Notices to the Stock Plan Administrator
shall be delivered in accordance with its established procedures as set forth on
the website of the Stock Plan Administrator and notices to the Company shall be
delivered in writing by electronic mail, nationally recognized overnight courier
or certified mail, postage prepaid to the attention of Ms. Rita Weinberger,
Finance Department, Forest Laboratories, Inc., 909 Third Avenue, New York, New
York 10022 (e-mail: rita.weinberger@frx.com). All notices and communications by
the Stock Plan Administrator or the Company to the Grantee in connection with
this Agreement shall be given in writing and shall be delivered electronically
to the Grantee's e-mail address appearing on the records of the Company, or by
nationally recognized overnight courier or certified mail, postage prepaid to
the Grantee's residence or to such other address as may be designated in writing
by the Grantee.

 
18.  
ENTIRE AGREEMENT AND WAIVER.  This Agreement and the 2007 Plan contain the
entire understanding of the parties and supersede any prior understanding and
agreements between them representing the subject matter hereof. To the extent
that there is an inconsistency between the terms of the 2007 Plan and this
Agreement, the terms of the 2007 Plan shall control. There are no other
representations, agreements, arrangements or understandings, oral or written,
between the parties hereto relating to the subject matter hereof which are not
fully expressed herein or in the 2007 Plan. Any waiver or any right or failure
to perform under this Agreement shall be in writing signed by the party granting
the waiver and shall not be deemed a waiver of any subsequent failure to
perform.

 
19.  
SEVERABILITY AND VALIDITY.  The various provisions of this Agreement are
severable and any determination of invalidity or unenforceability of any one
provision shall have no effect on the remaining provisions.

 
20.  
GOVERNING LAW.  The interpretation, enforceability and validity of this
Agreement shall be governed by the substantive laws (but not the choice of law
rules) of the State of New York.

 
21.  
HEADINGS.  Section and other headings contained in this Agreement are for
reference purposes only and are in no way intended to describe, interpret,
define or limit the scope, extent or intent of the Grant or any provision
hereof.

 
22.  
SUBSIDIARY.  As used herein, the term “subsidiary” shall mean any present or
future corporation which would be a “subsidiary corporation” of the Company, as
that term is defined in Section 424(f) of the Code.

 
 
 
 

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Exhibit A
 
Table 1
Financial Performance Factor
 
Performance Level
 
Percentile Rank
 
Performance Factor*
         

Table 2
Stock Performance Factor
 
Performance Level
 
Percentile Rank
 
Performance Factor*
       
 
 

 

 
*  [____________]