Exhibit 10.6


WATSON PHARMACEUTICALS, INC.


KEY EMPLOYEE AGREEMENT


This
Key Employee Agreement (“Agreement”) is entered into as of December 11, 2006
(the “Effective Date”), by and between Thomas Giordano (“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 Information 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 or a designee of the CEO (the “Designated Officer”); provided
that, a Designated Officer shall be either the Chief Operating Officer, President,
Chief Administrative Officer who reports to the CEO, or the President of the
Generics Division of the Company. 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 the terms
of this Agreement and subject to review and approval by the CEO and/or the
Designated Officer, as appropriate.


2.2          Bonus.  Executive shall be eligible to participate in
the Company’s bonus plan at the 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



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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 bonus is
subject to the approval of the CEO and/or the Designated Officer, 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 of Directors (the “Board”) of the Company or the Compensation
Committee of the Board, 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 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 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
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) other events or matters relating to your job
performance or conduct that would ordinarily cause an employer to seriously
consider the termination of an employee’s employment.


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 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) a
requirement that the Executive 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.


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 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.



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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


(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 



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(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.


(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.



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(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 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



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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.


(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).



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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 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 or any of its affiliates with regard to this subject
matter. Without limiting the generality of the foregoing, this Agreement
supersedes any and all  agreements,
written or otherwise, between Executive and Andrx Corporation concerning



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Executive’s
employment.  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 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.


 



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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/ Allen Chao

  	
   

  
	
   

  	
   

  	
  Name: Allen Chao

  
	
   

  	
   

  	
  Title: Chairman, President and Chief Executive
  Officer

  



 


EXECUTIVE:


	
  /s/ Thomas Giordano

  	
   

  
	
  Name: Thomas Giordano

  



 



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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
$345,000, payable in accordance with the Company’s standard payroll practices,
and subject to adjustments as set forth in the Agreement.  Additionally, Executive shall be eligible to
receive a car allowance of $8,400 per year, payable in accordance with the
Company’s standard practices.


2.             BONUS


Executive’s annual bonus, if granted, shall be at a target level of not
less than 40% of Executive’s then current base salary.  Executive’s annual bonus shall be based on
the attainment of certain goals and initiatives approved by the CEO and, as
applicable, the Compensation Committee.


Additionally, for calendar year 2007, Executive shall be eligible for
an additional special performance bonus of up to $70,000.  Such special performance bonus shall be based
on Executive’s achievement of certain specific goals during the 2007 calendar
year as set by the CEO and the Compensation Committee.


3.             LONG TERM
INCENTIVE AWARDS


As of the date of approval by the Compensation Committee (“Approval
Date”), Executive shall receive a stock option grant (“Option”) to purchase
22,500 shares of Company common stock (“Shares”), with an exercise price equal
to the closing price of the Company common stock immediately prior to the
Approval Date.  The Shares subject to the
Option shall vest ratably over a four year period in annual equal installments
upon each anniversary date of the date of grant.  All other terms of such options shall be as
set forth in the Plan or in the accompanying option agreements evidencing such
options.


As of the Approval Date, Executive shall be awarded 7,500 Shares of
Restricted Stock in the Company.  The
Shares of Restricted Stock shall vest as follows:


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


·                  the
remaining 50% of the Shares shall vest on the fourth anniversary of the
Approval Date.



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The terms of such foregoing 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 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.) 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 subsidized health insurance with a new employer or other third party (and
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), or (ii)
provide Executive and his eligible dependents continued coverage under the
Company’s health plans.


(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



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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 severance compensation and benefits provided in Section
4.1 hereof 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, in the case of stock options, immediately exercisable in full, as of the
date of such termination.


4.4          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 Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”) (as set forth in IRS Notice
2005-1, or successor Temporary or 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 of not less the prime interest rate,
as published in the Wall Street Journal, 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).



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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                          ,
2006, 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”).


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



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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 INVENTIONS
AGREEMENT


 



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