Exhibit 10.2


WATSON PHARMACEUTICALS, INC.


KEY EMPLOYEE AGREEMENT


This Key Employee Agreement (“Agreement”) is entered into as of August
1, 2007 (the “Effective Date”), by and between Paul M. Bisaro (“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. 
Executive’s employment under this Agreement shall commence on September
4, 2007 or such later date as shall be mutually agreed (the “Commencement Date”)
and end on the fifth anniversary of the Commencement Date, unless earlier
terminated or extended by the parties in writing in accordance with the
provisions hereof (the “Employment Term”). 
Subject to terms set forth herein, the Company agrees to employ Executive
in the position of President and Chief Executive Officer and Executive hereby
accepts employment effective as of the Commencement Date.  In this position, Executive shall perform
such duties as are assigned from time to time by Board of Directors of the
Company (the “Board”).  During the
Employment Term, Executive will devote his best efforts and substantially all
of his business time and attention (except for paid time off 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.  In connection with his appointment as Chief
Executive Officer of the Company, Executive shall also be appointed as a member
of the Board and shall be nominated by the Company for reelection to the Board
during the Employment Term unless such nomination is then contrary to
applicable law.  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 possible increases in base
salary in accordance with Company policy and the terms of this Agreement and
subject to review and approval by the Board or the Compensation Committee of
the Board (“Compensation Committee”), as appropriate.


2.2          Bonus.  Executive shall be eligible to participate in the Company’s 2007 Senior
Executive Compensation Program (“SECP”) and any successor plan thereto at the
executive level throughout the Employment Term. 
The Company shall have the sole discretion to determine whether 



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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 whole or 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.  Any bonus is subject to the approval of the Compensation
Committee.  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 of Directors (the “Board”) of the
Company or the Compensation Committee of the Board, as appropriate, which
approval shall be obtained prior to the Commencement Dated, Executive shall
receive the long term incentive awards 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 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 at the rate of nineteen (19) days per 12-month period during the
Employment Term.


2.5          Standard Company Benefits. 
Executive shall be entitled to all perquisites, 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 perquisites, 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 (including without limitation, a car allowance and financial
planning in accordance with the terms of the Company’s plans, policy or
arrangement in effect from time to time) on terms no less favorable than those
applicable to other senior executives of the Company.


2.6          Expenses.  The
Company will pay or reimburse Executive for all ordinary and reasonably
incurred business related expenses pursuant to the terms and conditions of the
Company’s expense reimbursement policies applicable, from time to time, to
senior executives of the Company generally.


2.7          Travel and Relocation Expenses.  The
Company will reimburse Executive for reasonable costs incurred in traveling
from New York to the Company’s corporate headquarters, including first class
airfare and, if necessary, rental expenses of an executive apartment for a
period of transition to be approved by the Board.  If, at any time during the Employment Term,
Executive shall be required by the Company to relocate from his current
residence in New York, he shall be reimbursed for all expenses incurred in
connection with such relocation pursuant to the Company’s then existing
relocation policy applicable to senior executives of the Company.  If no such policy shall then exist, the
parties hereto shall negotiate in good faith a reasonable relocation package
for Executive.



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3.             PROPRIETARY INFORMATION AND
INVENTIONS.


Executive agrees to execute and abide by the Employee Proprietary
Information and Inventions Agreement attached hereto as Exhibit C and made a
part hereof by this reference.


4.             OUTSIDE ACTIVITIES.


4.1          Activities. 
Except with the prior written consent of 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 and manage
his personal business affairs so long as such activities do not materially
interfere with the performance of his duties hereunder.


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
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.


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.  Executive shall have
the right to terminate his employment with the Company at any time with or
without Good Reason 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 the occurrence of any of the
following events upon written notice to Executive and a reasonable opportunity
for Executive to cure such event (which opportunity shall be thirty (30) days
unless the event is not susceptible to being cured, within the judgment of the
Board): (i) fraud, misappropriation, embezzlement or other act of material
misconduct against the Company or any of its affiliates; (ii) gross neglect,
willful malfeasance or gross misconduct in connection with his employment;
(iii) conviction or plea of guilty or nolo contendere to a felony or other
crime involving moral turpitude;



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(iv)
willful and knowing violation of any rules or regulations of any governmental
or regulatory body material to the business of the Company; (v) failure to
cooperate, if requested by the Board, with any investigation or inquiry into
Executive’s or the Company’s business practices, whether internal or external,
including, but not limited to Executive’s refusal to be deposed or to provide
testimony at any trial or inquiry unless such refusal is made upon the advice
of the Company’s general counsel or its external counsel; or (vi) substantial
and willful failure to render services in accordance with the terms of this
Agreement (other than as a result of illness, accident, or other physical or
mental incapacity) or other material breach of this Agreement).   For purposes of clauses (ii), (iv) and (vi)
of this definition, no act, or failure to act, on Executive’s part shall be
deemed “willful” unless done, or omitted to be done, by Executive not in good
faith and without reasonable belief that Executive’s act, or failure to act,
was in the best interest of the Company. 
Notwithstanding the foregoing, the Company shall not have “Cause” to
terminate Executive’s employment in connection with any of the foregoing events
to the extent that the Company shall have either consented to such event or to
the extent that ninety (90) days shall have elapsed following the date that the
Company becomes aware (or reasonably should have been aware) of such event
without delivering notice to the Executive (“Cause Notice”).


(b)           Executive shall have the right to appear
before the Board, with his counsel present if he so elects, prior to any final
determination by the Board to terminate his employment for Cause.  Executive may request a meeting with the
Board by submitting a written request to the Board within ten (10) days of
receipt of the Cause Notice.  Such
meeting shall be fixed and shall occur on a date selected by the Board (such
date being not less than five (5) nor more than twenty (20) days after the
Board receives the Executive’s written request).  Unless otherwise agreed by the parties, such
meeting shall take place at the executive offices of the Company and the
Executive shall have the right to address the Board for such period of time as
established by the Board, but in no event less than thirty (30) minutes.


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. 
For the avoidance of doubt, in the event Executive’s employment is
terminated on or after the expiration of the Employment Term, Executive shall
not be entitled to any severance benefits other than the Accrued Rights, as
defined in Exhibit A.


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 and provides the Company with a reasonable
opportunity to cure such event (which opportunity shall be thirty (30) days
unless the event is not susceptible to being cured, within the judgment of the
Board).  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 Commencement Date



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without
Executive’s consent:  (i) the failure to
elect or reelect Executive to the positions of President and Chief Executive
Officer; the removal of him from either such position; or any material diminution
in his duties or responsibilities, taken as a whole, in such positions; (ii)
the failure to appoint Executive as a member of the Board or to renominate him
for election to the Board upon the expiration of his initial term as a director
unless such renomination would violate any applicable law, rule or regulation;
(iii) the assignment to Executive of duties that are materially inconsistent
with, or that materially impair his ability to perform, the duties customarily
assigned to a President and Chief Executive Officer of a corporation of the
size and nature of the Company; or a change in the reporting structure so that
Executive reports to someone other than the Board or is subject to the direct
or indirect authority or control of a person or entity other than the Board;
(iv) any material breach by the Company of this Agreement; (v) conduct by the
Company occurs that would cause Executive to commit fraudulent acts or would
expose Executive to criminal liability; or (vi) the Company fails to obtain the
assumption in writing of its obligation to perform this Agreement by any
successor to all or substantially all of the Company’s business or assets of
the Company.  Notwithstanding the
foregoing, Executive shall not have “Good Reason” to terminate his employment
in connection with any of the foregoing events to the extent that Executive
shall have either consented to such event or to the extent that ninety (90)
days shall elapsed following the date that Executive becomes aware (or
reasonably should have been aware) of such event without delivering notice to
the Company.


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 (“Disability”).  The determination regarding whether Executive
is physically unable regularly to perform his duties shall be made by the Board
following examination by a certified physician mutually selected by the Board
and Executive.  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 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 receive the
benefits as set forth in Section 4.3 of Exhibit A, attached hereto.


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 Board, 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.


6.8          Expiration of the Employment
Term.  At least three months prior to
the expiration of the Employment Term, each party hereto shall notify the other
party of its intention whether to extend the Employment Term and of any
proposed changes to the terms and conditions contained in the Agreement
hereof.  If the Employment Term expires
and a new employment agreement (or amendment to this Agreement) has not been
executed, Executive shall continue in employment with the Company at the same
salary and bonus level as in effect prior to the expiration of the Employment
Term.  If the Company elects not to
continue Executive’s employment, Executive shall be paid all earned but unpaid
amounts, all unreimbursed expenses and a pro rata bonus (based on his then
current target bonus) for the year in which his employment is terminated.



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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


(e)           in the event that the individuals who, as of
the Commencement 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, in each case within ninety (90) days prior
to or twelve (12) months following a Change of Control (a “Change of Control
Termination”), then Executive shall be eligible for severance benefits as set
forth in Section 4.4 of the Compensation and Severance Terms Schedule, attached
hereto as Exhibit A.


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)



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(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.


(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



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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
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



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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.


(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 end of the calendar year following the calendar year
within which the taxes relating to the Gross-Up Payments are remitted to the
applicable taxing authorities, as permitted under Code Section 409A; 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.             PROTECTION OF TRADE SECRETS;
NON-SOLICITATION; NON-DISPARAGEMENT.


(a)           Executive acknowledges that he will become
familiar with the Company’s and its subsidiaries’ and affiliates’ trade secrets,
proprietary information and Intellectual Property.  Executive further acknowledges that his
services shall be of special, unique and extraordinary value to the Company and
its subsidiaries.  Without limiting any
other obligations of Executive pursuant to this Agreement, Executive
accordingly covenants and agrees with the Company and its subsidiaries that
during the Employment Term and the twelve (12) month period following his
termination of employment Executive shall not induce or attempt to induce any employee
or independent contractor of the Company or its subsidiaries to leave the
employ or services of the Company or its subsidiaries, as the case may be, or
in any way interfere with the relationship between the Company or its
subsidiaries and any employee or independent contractor thereof (other than
through general advertisements for employment not specifically directed at
employees of the Company or any of its subsidiaries).


(b)           Without limiting any other obligation of
Executive or the Company pursuant to this Agreement, each of Executive and the
Company hereby covenants and agrees that, except as may be required by
applicable law, during the Employment Term and the twenty-four (24) month
period following Executive’s termination of employment, each of Executive and
the Company shall not make any statement, written or verbal, in any forum or
media, or take any other action in disparagement of, (in the case of Executive)
the Company or its subsidiaries or affiliates or their



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respective
past or present products, officers, directors, employees or agents or (in the
case of the Company) the Executive.


(c)           If, at the time of enforcement of Section 8
of this Agreement, a court shall hold that the duration, scope or area
restrictions stated herein are unreasonable under circumstances then existing,
the parties agree that the maximum duration, scope or area reasonable under
such circumstances shall be substituted for the stated duration, scope or area
and that the court shall be allowed to revise the restrictions contained herein
to cover the maximum period, scope and area permitted by law.  Executive acknowledges that the restrictions
contained in Section 8 are reasonable and that he has reviewed the provisions
of this Agreement with his legal counsel.


(d)           In the event of the breach or a threatened
breach by Executive of any of the provisions of Section 8, the Company and its
subsidiaries would suffer irreparable harm, and in addition and supplementary
to other rights and remedies existing in its favor, the Company shall be
entitled to specific performance and/or injunctive or other equitable relief
from a court of competent jurisdiction in order to enforce or prevent any
violations of the provisions hereof (without posting a bond or other security).


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 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
 









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. 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 or other proceeding to enforce his or its
rights hereunder, the prevailing party in any such action or proceeding shall
be entitled to recover his or its reasonable attorneys’ fees and costs incurred
in connection with such action or proceeding. 
The Company shall reimburse Executive for his reasonable attorneys fees
incurred in connection with the negotiation and preparation of this Agreement,
not to exceed $7,500.


10.9        Arbitration.  To
provide a mechanism for rapid and economical dispute resolution, Executive and
the Company agree that except as provided in Section 8, 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 Los Angeles, California
(or such other major metropolitan region where the Company is then
headquartered) and conducted by Judicial Arbitration & Mediation
Services/Endispute (“JAMS”), under its then-existing Rules and Procedures.  Nothing in this Section 11.9 or in this
Agreement 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.



 11
 









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, General Counsel and
  Secretary

  
	
   

  
	
   

  
	
  EXECUTIVE:

  
	
   

  
	
   

  
	
              /s/
  Paul M. Bisaro

  	
   

  
	
  Name: Paul M. Bisaro

  
				



 



 12















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 $1,000,000, payable in
accordance with the Company’s standard payroll practices, and subject to
possible increases as set forth in the Agreement.


2.             BONUS


Executive’s fiscal year 2007 SECP target bonus shall be 100% of
Executive’s annual base salary, prorated for the portion of the calendar year
2007 during which Executive is employed by Company.  For subsequent fiscal years, Executive’s SECP
target bonus shall be determined by the Compensation Committee and shall be
based upon reasonable performance criteria established by the Compensation
Committee.


3.             LONG TERM INCENTIVE AWARDS


On the Commencement Date, subject to the approval by the Compensation
Committee, which approval shall occur prior to the Commencement Date, Executive
shall receive the following stock option grants (“Options”):


(1)           An option to purchase 127,200 shares of
Company common stock (“Shares”), with an exercise price equal to the closing
price of the Company common stock on the Commencement Date.  Assuming continued employment, this Option
will vest and become exercisable as follows:


·                                          The Option will vest and become exercisable
with respect to 25% of the Shares         subject thereto on each anniversary of the
Commencement Date


(2)           An option to purchase 400,000 Shares, with an
exercise price equal to the closing price of the Company common stock on the
Commencement Date.  Assuming continued
employment, this Option will vest and become exercisable as follows:


·                                          The Option will vest in three (3)
substantially equal annual installments commencing on the third anniversary of
the Commencement Date.


As of the Commencement Date, Executive shall be awarded 42,600 Shares
of Restricted Stock in the Company. 
Assuming continued employment, the Shares of Restricted Stock shall vest
as follows:


·                                          50% of the Shares shall vest on the second
anniversary of the Commencement Date



 1
 









·                                          The remaining 50% of the Shares shall vest on
the fourth anniversary of the Commencement Date


The terms of the stock option and restricted stock award shall be set
forth in and governed by the Company’s equity incentive plan and forms of award
agreements generally applicable to the Company’s senior executives.


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 the following:


(a)           Cash severance payments, subject to standard
withholdings or deductions, in an amount equal to the sum of:


(i)            (1) Executive’s base salary through the date
of termination (including accrued but unused vacation); (2) any earned but
unpaid portion of Executive’s SECP bonus for the fiscal year preceding the year
of termination; (3) reimbursement for any unreimbursed business expenses
properly incurred by Executive in accordance with Company policy before the
date of Executive’s date of termination and (4) such employee benefits, if any,
as to which Executive may be entitled under employee benefit plans in
accordance with their then-existing terms at the time of Executive’s
termination of employment (collectively, the “Accrued Rights”), payable in a
lump sump;


(ii)           a pro-rated bonus under the SECP for the year
of termination, as determined by the Board, considering the Company’s actual
performance for the entire year and the number of calendar months during the
fiscal year that Executive was employed before such termination (rounded up to
the next whole month), payable in a lump sum; and


(iii)          two (2) times the sum of Executive’s then
existing base salary and target annual bonus opportunity for the year of
termination (or, if higher, the annual bonus awarded in respect of the year
preceding the year of employment termination), payable in twenty-four (24)
equal monthly installments following termination of employment; and


(b)           Company paid coverage for Executive under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”)
for a period of 18 months following termination of employment (or such shorter
period that Executive is entitled to COBRA continuation coverage).


4.2          Executive’s Resignation for Good
Reason.  If Executive terminates his employment with
the Company for Good Reason, the Company shall provide to Executive, within
thirty (30) days after the Effective Date of the Release attached hereto as
Exhibit B (as



 2
 









“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          Death/Disability.  In
the event of Executive’s death or Disability, Executive or his estate or legal
representative shall be entitled to the Accrued Rights and a lump sum payment
equal to Executive’s pro-rated bonus under the SECP for the year of Executive’s
death or Disability based on the Company’s actual performance for the entire
year and the number of calendar months during the fiscal year that Executive
was employed before such termination (rounded up to the next whole month).


4.4          Change of Control Termination.  In
the event of a Change of Control Termination at any time during the Employment
Term, the Company shall provide to Executive, within ten (10) days after the
Effective Date of the Release attached hereto as Exhibit B (as “Effective Date”
is defined in the Release) or such later date as may be required pursuant to
Section 4.5, as the only severance compensation and benefits:


(a)           A lump sum severance payment, subject to
standard withholdings or deductions, equal to the sum of (i) 300% of Executive’s
base salary and (ii) 300% of Executive’s target SECP bonus for the year in
which Executive terminates employment.


(b)           Company paid coverage for Executive under the Company’s life and
disability insurance programs and Company paid coverage for Executive under
COBRA in either case for a period of 18 months following termination of
employment (or such shorter period that Executive is entitled to COBRA
continuation coverage) and thereafter until the earlier of (i) the thirty-six
(36) month anniversary of Executive’s termination or (ii) Executive becoming eligible
for comparable life, disability or group medical insurance coverage, as
applicable.


(c)           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.


4.5          Delayed Payments. 
Notwithstanding anything in this Section 4 to the contrary, if the
Company determines in good faith that any payment or benefit under this Section
4, that is payable to Executive on account of a termination of employment with
the Company, constitutes a “deferral of compensation” under Code Section 409A
(as set forth in IRS Notice 2005-1, or the Final Treasury Regulations), and
that Executive is a “specified employee” within the meaning of Code Section
409A(a)(2)(B)(i), then the Company shall delay commencement of any such payment
or benefit until six months after the Effective Date of the Release attached
hereto as Exhibit B (as “Effective Date” is defined in the Release) (the “409A
Suspension Period”).  With respect to any
benefits to be provided by the Company (such as continued health care benefits,
if any), Executive shall pay for such benefits directly during the 409A
Suspension Period.  Within 15 calendar
days after the end of the 409A Suspension Period, the Company shall pay to
Executive a lump sum payment in cash equal to any payments and benefits
(including interest on any such payments and benefits, at an interest rate
equal to the 120-month rolling average yield to maturity of the index called
the “Merrill Lynch U.S.



 3
 









Corporate,
A Rated, 15+ Years Index” as of December 31 of the year preceding the year of
termination, for the 409A Suspension Period) that the Company would otherwise
have been required to provide under this Section 4 but for the imposition of
the 409A Suspension Period.  Thereafter,
Executive shall receive any remaining payments and benefits due under this
Section 4 in accordance with the terms of this Section 4 (as if there had not
been any suspension period).


5.             INCENTIVE COMPENSATION RECOVERY.


Notwithstanding anything in the Agreement to the contrary, in the event
of a significant restatement of the Company’s financial results (as determined
by the Board in good faith), the Board will review all compensation that was
made to the Executive on the basis of having met or exceeded specific
performance targets for performance periods beginning after January 1, 2007
which occur during the restatement period. 
If a lower payment of performance-based compensation would have been
made to Executive based upon the restated financial results, the Board will, to
the extent permitted by applicable law, seek to recoup from Executive for the
benefit of the Company the amount by which Executive’s incentive compensation
for the relevant period exceeded the lower payment that would have been made
based on the restated financial results on a net after-tax basis, plus a
reasonable rate of interest; provided, however, that the Board shall not seek
to recoup incentive compensation paid more than three (3) years before the date
the applicable restatement is disclosed.


For the avoidance of doubt, this Section 5 shall not relate to the gain
recognized on any stock option, the compensation received in respect of any
restricted stock or restricted stock unit grant, or any other variety of
equity-based compensation, whether made on or after the Commencement Date, that
has a vesting schedule based on the passage of time and the continued
performance of services, and not on the achievement of any performance
objectives.  Similarly, this Section 5
shall not apply to any award that has or had alternative vesting criteria
unrelated to the performance objective affected by the restatement that have
otherwise been satisfied at the time of the restatement.


A “significant
restatement” shall mean a restatement of the Company’s financial statements for
2007 or any year thereafter which,
in the good faith opinion of the Company’s independent registered public
accounting firm, is required to be implemented pursuant to generally accepted
accounting principles, but excluding any restatement which is required with
respect to a particular year as a consequence of a change in generally accepted
accounting rules effective after the publication of the financial statements
for such year.  Notwithstanding the
immediately preceding sentence, a significant restatement shall not include any
restatement that (i) occurs more than three years following the date that the
Employment Term ends, (ii) is required due to a change in the manner in which
the Company’s auditors interpret the application of generally accepted
accounting principles (as opposed to a change in a prior accounting conclusion
due to a change in the facts upon which such conclusion was based), or (iii)
that the Board determines arose as a result of events, facts or changes in law
or practice that were beyond the control and responsibility of Executive or
which the Board determines occurred regardless of the Executive’s diligent and
thorough performance of his duties and responsibilities.  In addition, in determining the amounts, if
any, that Executive shall be required to reimburse the Company pursuant to this
Section 5 (or that would be payable to Executive in respect to any then in
progress awards), all effects, whether positive or negative, of any change in
the manner of reporting any transaction or class of transactions that the Audit
Committee shall specifically agree to exclude for this purpose shall be
disregarded.



 4














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                    ,
2007, 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 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 or her favor at the time of executing the release,
which if known by him or her 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”).


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



 1
 








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.

  



 



 2














EXHIBIT C


EMPLOYEE PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT