**Exhibit 10.6**

 

*Vice-President and Above - Option*

 

**WATSON Pharmaceuticals, Inc.**

**AMENDMENT AND RESTATEMENT OF THE 2001INCENTIVE AWARD PLAN**

**NOTICE OF GRANT AND SIGNATUREPAGE**

 

Congratulations, you (“Holder”) have been granted an optionto purchase Common Stock of Watson Pharmaceuticals, Inc., a Nevadacorporation (the “Company”).  The Optionis subject to the terms and conditions of the Award Agreement and the Amendmentand Restatement of The 2001 Incentive Award Plan of Watson Pharmaceuticals, Inc.,as amended from time to time (the “Plan”), which are attached hereto as Exhibit 1-Aand 1-B, and of which this Notice of Grant and Signature Page is apart.  By signing this Notice of Grantand Signature Page, you represent and warrant to the Company that you have readthe Award Agreement and the Plan and agree to be bound by their terms.  Capitalized terms not otherwise defined inthis Notice of Grant and Signature Page shall be as defined in the Planand the Award Agreement.

 

Subject to the terms ofthe Award Agreement and the Plan, the terms of this Option are set forth below:

 
| Type of Option:  Incentive Stock Option        |   | Non-Qualified  Stock Option     |
|------------------------------------------------|--------|---------------------------------|
|                                           |   |                            |
| Holder’s Name: [First Name and Last Name] |   | Total Number of  Option Shares: |
|                                           |   |                            |
| Date of Grant: [Month,  Day, Year]             |   | Purchase Price  Per Share: $    |

 

 

 

Subjectto the terms of the Award Agreement and the Plan, this Option shall becomeexercisable in accordance with the following schedule: 

 
| ** **                 | ** ** | **This  Option Shall be Exercisable With Respect to** |
|----------------------------|------------|-------------------------------------------------------|
| ** **                 | ** ** | **the  Following Number of Shares in Each Period**    |
| **On and After This Date** | ** ** | **Becoming  Fully Vested on the Date Shown.**         |
| Month,  Day, Year          |       | Number                                                |
| Month,  Day, Year          |       | Number                                                |
| Month,  Day, Year          |       | Number                                                |
| Month,  Day, Year          |       | Number                                                |
| Total  Shares              |       | Total                                                 |

 

**NOTE, schedule does notreflect cumulative vesting.**

 

IN WITNESS WHEREOF, the Company has granted thisOption, subject to the terms set forth herein, on the date of grant specifiedabove.

 
|   | WATSON  PHARMACEUTICALS, INC.         |
|--------|---------------------------------------|
|   |                                  |
|   |                                  |   |
|   | Allen  Chao, Ph.D.,                   |
|   | Chairman  and Chief Executive Officer |

 
| ACCEPTED:                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|-----------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                          | **Note:***  This document constitutes the Company’s  offer to enter into an agreement under the terms set forth herein. This offer  will expire without further notice at 5 o’clock Pacific Time sixty daysafter the date of grant of the Option set forth above, unless this  offer is accepted by Holder by the delivery of this original Notice of Grant  and Signature Page, executed by Holder to the Company on or prior to the  offer’s expiration date.                              *GRANT  NO. 0000XXXX |
|                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **Holder**’s Signature                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
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| Holder’s  Taxpayer Identification Number |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

 

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**EXHIBIT 1-A**

 

**AWARD AGREEMENT**

 

THISAWARD AGREEMENT, dated as of the Date of Grant appearing on the Notice of Grantand Signature Page hereof, is made by and between Watson Pharmaceuticals, Inc.,a Nevada corporation (the “Company”), and the Employee whose name and signatureappear on the Notice of Grant and Signature Page hereof (“Holder”).

 

WHEREAS,the Company wishes to grant Holderan option (the “Option”)  to purchaseshares of its common stock, par value $.0033 per share (the “Common Stock”),pursuant to the terms of the Notice of Grant and Signature Page, this Agreementand the Amendment and Restatement of The 2001 Incentive Award Plan of WatsonPharmaceuticals, Inc., as amended from time to time (the terms of whichare hereby incorporated by reference and made a part of this Agreement, the “Plan”);and

 

WHEREAS,it has been determined that it would be to the advantage and best interest ofthe Company and its stockholders to grant Holder theOption as an inducement to enter into or remain in the service of the Companyor its Subsidiaries and as an incentive for increased efforts during suchservice.

 

NOW,THEREFORE, in consideration of the mutual covenants herein contained and othergood and valuable consideration, receipt of which is hereby acknowledged, theparties hereto do hereby agree as follows:

 

ARTICLE I

GRANT OF OPTION

 

Section 1.1- Grant of Option and Purchase Price. The Company grants to Holder theoption to purchase any part or all of an aggregate of that many shares ofCommon Stock as set forth on the Notice of Grant and Signature Page hereto,upon the terms and conditions set forth in this Agreement.  The per share purchase price of the shares ofCommon Stock covered by the Option shall be as set forth on the Notice of Grantand Signature Page hereto, without commission or other charge.

 

Section 1.2- Consideration to Company.  Inconsideration of the granting of this Option by the Company, Holder agrees torender faithful and efficient services to the Company or a Subsidiary, withsuch duties and responsibilities as the Company shall from time to timeprescribe, for a period of at least one (1) year from the date this Optionis granted.  Nothing in this Agreement orin the Plan shall confer upon Holder any right to continue in the employ orengagement of the Company or any Subsidiary, or shall interfere with orrestrict in any way the rights of the Company and its Subsidiaries, which arehereby expressly reserved, to discharge or terminate the engagement with Holderat any time for any reason whatsoever, with or without Cause.

 

ARTICLE II

PERIOD OF EXERCISABILITY

 

Section 2.1- Exercisability.  Subject to Section 2.2,Section 4.5 and the terms of any written agreement between the Company andHolder relating to the exercisability of the Option, the Option shall becomeexercisable as set forth in the Notice of Grant and Signature Page hereto.  No portion of the Option which isunexercisable at Termination of Employment shall thereafter becomeexercisable.  Each such installment whichbecomes exercisable pursuant to this Section 2.1 shall remain exercisableuntil it becomes unexercisable under Section 2.2 or the Plan.

 

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Section 2.2- Expiration of Option.  (a) Subjectto subsection (b), the Option may not be exercised to any extent by anyoneafter the first to occur of the following events:

 

(i)                                     Theexpiration of ten (10) years from the date the Option was granted;

 

(ii)                                  Exceptin the case of Holder’s disability (within the meaning of Section 22(e)(3) ofthe Code) or as set forth in Sections 2.2(a)(iv) and (v), the expirationof three (3) months from the date of Holder’s Termination of Employment,unless Holder dies within said three month period;

 

(iii)                               Inthe case of Holder’s disability (within the meaning of Section 22(e)(3) ofthe Code), the expiration of one (1) year from the date of Holder’sTermination of Employment by reason of Holder’s disability;

 

(iv)                              Theexpiration of one (1) year from the date of Holder’s death; or

 

(v)                                 UponHolder’s Termination of Employment, by the Company or a Subsidiary of theCompany for Cause, at the discretion of the Administrator effective uponwritten notice to Holder.

 

(b)                                 If,upon Holder’s Termination of Employment, Holder has completed five or moreyears of continuous service with the Company or a Subsidiary, subsection (a) shallnot apply, and the Option may not be exercised to any extent by anyone afterthe first to occur of the following events:

 

(i)                                     Theexpiration of ten (10) years from the date the Option was granted; or

 

(ii)                                  Theexpiration of two (2) years from the date of Holder’s Termination ofEmployment.

 

Section 2.3– Special Tax Consequences.  Holderacknowledges that, to the extent that the aggregate Fair Market Value of stockwith respect to which “incentive stock options” (within the meaning of Section 422of the Code, but without regard to Section 422(d) of the Code),including the Option, are exercisable for the first time by Holder during anycalendar year under the Plan and all other incentive stock option plans of theCompany, any Subsidiary and any parent corporation thereof (within the meaningof Section 422 of the Code)) exceeds $100,000, such options shall not betreated as “incentive stock options” to the extent required by Section 422of the Code.  Holder further acknowledgesthat the rule set forth in the preceding sentence shall be applied bytaking options into account in the order in which they were granted.  For purposes of these rules, the Fair MarketValue of stock shall be determined as of the time the option with respect tosuch stock is granted.

 

ARTICLE III

EXERCISE OF OPTION

 

Section 3.1- Person Eligible to Exercise. During the lifetime of Holder, only Holder may exercise the Option orany portion thereof.  After the death of Holder,any exercisable portion of the Option may, prior to the time when the Optionbecomes unexercisable under Section 2.2 or the Plan, be exercised by Holder’spersonal representative or by any person empowered to do so under the deceased Holder’swill or under the then applicable laws of descent and distribution.

 

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Section 3.2- Partial Exercise.  Anyexercisable portion of the Option or the entire Option, if then whollyexercisable, may be exercised in whole or in part as to whole shares only atany time prior to the time when the Option or portion thereof becomesunexercisable under Section 2.2 or the Plan.

 

Section 3.3- Manner of Exercise.  The Option,or any exercisable portion thereof, may be exercised solely by delivery to theSecretary of the Company, or such other person or entity designated by the Administrator,or his, her or its office, as applicable, of all of the following prior to thetime when the Option or such portion becomes unexercisable under Section 2.2or the Plan:

 

(a)                                  Awritten notice complying with the applicable rules established by the Administratorstating that the Option, or a portion thereof, is exercised.  The notice shall be signed by Holder or otherperson then entitled to exercise the Option or such portion; and

 

(b)                                 (i) Full cash payment to the Secretary of the Company for the shares with respectto which such Option or portion is exercised;

 

(ii)  With the consent of the Administrator(which consent may be withheld in its sole and absolute discretion), (A) sharesof the Company’s Common Stock owned by Holder, duly endorsed for transfer tothe Company, with a Fair Market Value on the date of delivery equal to theaggregate exercise price of the Option or exercised portion thereof, or (B) sharesof the Company’s Common Stock issuable to Holder upon exercise of the Option,with a Fair Market Value on the date of delivery equal to the aggregate exerciseprice of the Option or exercised portion thereof;

 

(iii)  With the consent of the Administrator(which consent may be withheld in its sole and absolute discretion), a noticethat Holder has placed a market sell order with a broker with respect to sharesof the Company’s Common Stock then issuable upon exercise of the Option, andthat the broker has been directed to pay a sufficient portion of the netproceeds of the sale to the Company in satisfaction of the Option exerciseprice; or

 

(iv)  With the consent of the Administrator(which consent may be withheld in its sole and absolute discretion), anycombination of the consideration provided in the foregoing subparagraphs (i), (ii) and(iii); and

 

(c) Full payment to the Company (or other employer corporation) of all amountswhich, under federal, state or local tax law, it is required to withhold uponexercise of the Option.  With the consentof the Administrator (which consent may be withheld in its sole and absolutediscretion), all or part of such payment may be made in the form of (i) sharesof the Company’s Common Stock owned by Holder, duly endorsed for transfer, witha Fair Market Value equal to the sums required to be withheld, or (ii) sharesof the Company’s Common Stock issuable to Holder upon exercise of the Optionwith a Fair Market Value equal to the sums required to be withheld; provided,that the number of shares of Common Stock which may be withheld with respect tothe issuance, vesting, exercise or payment of the Option (or which may be repurchasedfrom Holder within six months after such shares of Common Stock were acquiredby Holder from the Company) in order to satisfy Holder’s federal and stateincome and payroll tax liabilities with respect to the issuance, vesting,exercise or payment of the Option shall be limited to the number of shareswhich have a Fair Market Value on the date of withholding or repurchase equalto the aggregate amount of such liabilities based on the minimum statutorywithholding rates for federal and state tax income and payroll tax purposesthat are applicable to such supplemental taxable income; and

 

(d) In the event the Option or portion shall be exercised pursuant to Section 3.1by any person or persons other than Holder, appropriate proof of the right ofsuch person or persons to exercise the Option.

 

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Section 3.4- Conditions to Issuance of Stock Certificates.  The shares of stock deliverable upon theexercise of the Option, or any portion thereof, may be either previouslyauthorized but unissued shares or, to the extent applicable to the Company,issued shares which have then been reacquired by the Company.  Such shares shall be fully paid andnonassessable.  The Company shall not berequired to issue or deliver any certificate or certificates for shares ofstock purchased upon the exercise of the Option or portion thereof prior tofulfillment of all of the following conditions:

 

(a) The admission of such shares to listing on all stock exchanges on which suchclass of stock is then listed; and

 

(b) The completion of any registration or other qualification of such shares underany state or federal law or under rulings or regulations of the Securities andExchange Commission or of any other governmental regulatory body, which the Administratorshall, in its absolute discretion, deem necessary or advisable; and

 

(c) The obtaining of any approval or other clearance from any state or federalgovernmental agency which the Administrator shall, in its absolute discretion,determine to be necessary or advisable; and

 

(d) The lapse of such reasonable period of time following the exercise of theOption as the Administrator may from time to time establish for reasons ofadministrative convenience; and

 

(e) The receipt by the Company of full payment for such shares, including paymentof all amounts which, under federal, state or local tax law, the Company (orother employer corporation) is required to withhold upon exercise of theOption.

 

Section 3.5- Rights as Stockholder.  Holdershall not be, nor have any of the rights or privileges of, a stockholder of theCompany in respect of any shares purchasable upon the exercise of any part ofthe Option unless and until certificates representing such shares have beenissued by the Company to Holder.

 

ARTICLE IV

OTHER PROVISIONS

 

Section 4.1– Administration.  The Administratorshall have the power to interpret the Plan and this Agreement, and to adoptsuch rules for the administration, interpretation and application of thePlan as are consistent therewith, to interpret, amend or revoke any such rules andto amend this Agreement provided that the rights or obligations of Holder arenot affected adversely.  All actionstaken and all interpretations and determinations made by the Administrator ingood faith shall be final and binding upon Holder, the Company and all otherinterested persons.  No member of the Administratorshall be personally liable for any action, determination or interpretation madein good faith with respect to the Plan or the Option.

 

Section 4.2- Option Not Transferable. Neither the Option nor any interest or right therein or part thereofshall be sold, pledged, assigned or transferred in any manner other than bywill or the laws of descent and distribution or, subject to the consent of theAdministrator, pursuant to a DRO, unless and until the shares underlying suchOption have been issued.  Neither theOption nor any interest or right therein or part thereof shall be liable forthe debts, contracts or engagements of Holder or his successors in interest orshall be subject to disposition by transfer, alienation, anticipation, pledge,encumbrance, assignment or any other means whether such disposition bevoluntary or involuntary or by operation of law by judgment, levy, attachment,garnishment or any other legal or equitable proceedings (including

 

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bankruptcy), and anyattempted disposition thereof shall be null and void and of no effect, exceptto the extent that such disposition is permitted by the preceding sentence.

 

Duringthe lifetime of Holder, only he may exercise an Option (or any portion thereof)granted to him under the Plan, unless it has been disposed of with the consentof the Administrator pursuant to a DRO. After the death of Holder, any exercisable portion of an Option may,prior to the time when such portion becomes unexercisable under the Plan orthis Agreement, be exercised by his personal representative or by any personempowered to do so under the deceased Holder’s will or under the thenapplicable laws of descent and distribution.

 

Section 4.3– Notices.  Any notice to be givenunder the terms of this Agreement to the Company shall be addressed to theCompany in care of its Secretary, and any notice to be given to Holder shall beaddressed to him at the address given beneath his signature hereto.  By a notice given pursuant to this Section 4.3,either party may hereafter designate a different address for notices to begiven to him.  Any notice which isrequired to be given to Holder shall, if Holder is then deceased, be given to Holder’spersonal representative if such representative has previously informed theCompany of his status and address by written notice under this Section 4.3.  Any notice shall be deemed duly given whenenclosed in a properly sealed envelope or wrapper addressed as aforesaid,deposited (with postage prepaid) in a post office or branch post officeregularly maintained by the United States Postal Service.

 

Section 4.4– Titles and Construction.  Titlesare provided herein for convenience only and are not to serve as a basis forinterpretation or construction of this Agreement.  This Agreement shall be administered, interpretedand enforced under the internal laws of the State of California, without regardto conflicts of laws thereof.

 

Section 4.5- Conformity to Securities Laws.  Holderacknowledges that the Plan is intended to conform to the extent necessary withall provisions of the Securities Act and the Exchange Act and any and allregulations and rules promulgated by the Securities and ExchangeCommission thereunder, including without limitation Rule 16b-3.  Notwithstanding anything herein to thecontrary, the Plan shall be administered, and the Option is granted and may beexercised, only in such a manner as to conform to such laws, rules andregulations.  To the extent permitted byapplicable law, the Plan and this Agreement shall be deemed amended to theextent necessary to conform to such laws, rules and regulations.

 

ARTICLE V

DEFINITIONS

 

Wheneverthe following terms are used in this Agreement, they shall have the meaningspecified below.  The masculine pronounshall include the feminine and neuter, and the singular the plural, where thecontext so indicates.  All capitalizedterms used herein without definition shall have the meanings ascribed to suchterms in the Plan.

 

“Cause” shall mean (i) ”Cause”, as definedin the employment agreement, if any, between the Company or a Subsidiary of theCompany and Holder, as in effect from time to time, or (ii) in the absenceof such an employment agreement, as determined by the Administrator in its solediscretion, (A) Holder’s conviction of, or no contest plea to, a felony ora misdemeanor involving moral turpitude, or (B) Holder’s gross negligenceor misconduct, or material violation of the Company’s policies (includingwithout limitation the Company’s policy on insider trading), or a materialbreach of Holder’s duties or loyalty to the Company, or (C) Holder’sfraud, embezzlement or criminal conduct that is damaging to the Company, or (D) Holder’swillful or continued failure to substantially perform his or her duties to theCompany.

 

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**EXHIBIT 1-B**

 

**AMENDMENT AND RESTATEMENT OF THE 2001INCENTIVE AWARD PLAN**

 

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